Time now for an update.
In an earlier article, we explored whether the recent Supreme Court decision in United States v. Arthrex, Inc. affected whether or not parties should forego arbitration of patent disputes in favor or going to the Patent Office in an inter partes proceeding put in place by the American Invents Act. Proceedings take place before Administrative Patent Judges (APJs) at the Patent Trial and Appeal Board (PTAB). Those proceedings have become very popular. They are faster and cheaper than patent litigation in federal court.
Patent Office or Arbitrate?
But the proceedings at the Patent Office can resolve only a limited number of issues likely to be at play in a patent dispute. The PTAB Judges can’t help the parties resolve infringement issues, license coverage and compliance issues, and other critical issues likely to come up. Essentially, the PTAB’s APJs decide whether the patent should have been granted in the first place.
Of course, in some cases, a finding that the patent is invalid will resolve the dispute. But in many cases, validity isn’t the issue. And even then, there may be issues as to what effect a validity determination has under the parties’ contract and related issues. Arbitration can resolve those issues. And the parties could still agree in their arbitration clause to preserve the right use inter partes proceedings to revolve validity issues.
We also noted, though, that there was a further concern about inter partes proceedings in the Patent Office: they might be unconstitutional. The claim was that the way the Administrative Patent Judges were appointed was unconstitutional because they were “inferior officers,” but were exercising the powers of principal officers.
The Supreme Court in Arthrex indeed found the appointments unconstitutional. But it had a relatively easy fix. It invalidated as unconstitutional the portion of the America Invents Act that insulated the decisions of the APJs from the Director’s review. Thus, the concern that PTAB decisions were not made constitutionally, and therefore would be of no effect, was alleviated. But some uncertainty remained about the procedures for obtaining review by the Director and the time this could add to the process. Some commentators even wondered whether the review process could be put in place because the Patent Office had only an acting Director.
We have more information about that, which brings us to the update.
The new measure
Not long after the Supreme Court decided Arthrex, the Patent Office announced the mechanism to achieve review by the Director. A party must enter a request through the Patent Office and give notice of the request to the Director and opposing party. This must be done within 30 days of the entry of a final written decision or a decision granting rehearing by a PTAB panel. Parties cannot request both Director review and a rehearing by the original PTAB panel. They must choose.
The Director can also initiate sua sponte review of any decision.
The Director’s review may address any issue, including issues of fact and issues of law, and will be de novo.
Further information and clarification can be expected. For more information, please visit: https://www.uspto.gov/patents/patent-trial-and-appeal-board/procedures/arthrex-qas
So, some of the mystery about the PTAB process for Director review has been quickly removed. But how exactly this all will play out in practice remains to be seen. We don’t know, for example, how often the Director will grant review, what the exact nature of the review will be, or how often he or she will grant review sua sponte.
But we do know that a constitutional challenge to a PTAB decision based on the method of appointing the APJs is no longer in the cards.