Supreme Court’s new patent power for PTO director likely limited, attorneys say

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The United States Patent and Trademark Office in Alexandria, Virginia. REUTERS/Andrew Kelly

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  • Chief Justice Roberts' decision allows PTO director to review PTAB rulings
  • Patent attorneys say director unlikely to wield power extensively
  • Biden yet to nominate new PTO director

(Reuters) - In a much-anticipated patent decision, the U.S. Supreme Court ruled Monday that administrative judges for the U.S. Patent and Trademark Office’s Patent Trial and Appeal Board - which hears challenges to patent validity through the inter partes review (IPR) process - were appointed unconstitutionally, but concluded that giving the PTO’s director authority to review their decisions solved the problem.

Patent attorneys say the director is likely to use this new power sparingly, if at all, and that the decision won't affect the PTAB's day-to-day operations.

U.S. Chief Justice John Roberts' majority decision in United States v. Arthrex Inc was a "surgical" way to "not throw the IPR baby out with the bathwater," said Aziz Burgy, a patent partner at Axinn Veltrop & Harkrider.

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"I don't think that you're going to have a director that's going to kind of color outside the lines," Burgy said.

Roberts noted in his opinion that "billions of dollars can turn on a Board decision." The PTAB determines the validity of hundreds of patents per year, and is used often by companies seeking to escape infringement cases.

Roberts said that PTAB judges had too much power without being subject to review by a presidentially appointed officer, and that the PTO director "need not review every decision of the PTAB," but must "have the discretion to review decisions."

The decision was a blow to some PTAB critics who had wanted to "essentially pull the whole system down," said Scott McKeown, a partner at Ropes & Gray and head of the firm's PTAB practice group.

McKeown said while the decision theoretically gives the PTO director a bigger role in influencing IPR proceedings, its actual impact on the process will probably be limited.

According to McKeown, the decision likely wouldn't favor one side in the "tug of war" between parties considered broadly pro-patent, like pharmaceutical companies, and others with whom the IPR process is popular, like tech companies.

President Joe Biden hasn't yet chosen a permanent PTO director to replace Andrei Iancu, who stepped down in January and was generally seen as favoring patent owners. Drew Hirshfeld is the office's acting director.

"If a director wanted to play favorites, I think they would have to dive into the facts" for a reasonable rationale that would withstand Federal Circuit appeal, McKeown said. "Aside from actual mistakes by the panel, I don't really see much wiggle room for a director to have a real impact."

Imron Aly, a patent partner at Schiff Hardin, also said in an email that Arthrex "doesn't mean the director will actually review any IPR decision," and that the director "as a practical matter would not want to insert themselves into individual cases very often."

It's also unclear under Arthrex what a director's review would look like - whether they would "issue a decision along the lines that the board would" or just give "a thumbs up or thumbs down," McKeown said.

And "if you're going to have the director review hundreds if not thousands of IPR decisions a year by him or herself alone, it's going to be very difficult, practically, for the director to do that on a case-by-case basis," Burgy said.

The U.S. Court of Appeals for the Federal Circuit had found in 2019 that PTAB judges were unconstitutionally appointed, but fixed the issue by removing certain job protections instead.

The case is United States v. Arthrex, U.S. Supreme Court, No. 19–1434.

For Arthrex: Jeffrey Lamken of MoloLamken LLP

For respondent Smith & Nephew Inc: Mark Perry of Gibson Dunn & Crutcher

Read more:

U.S. Supreme Court reins in power of patent tribunal judges

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Blake Brittain reports on intellectual property law, including patents, trademarks, copyrights and trade secrets. Reach him at blake.brittain@thomsonreuters.com