Arthrex's Fallout – How is the Supreme Court Decision Affecting Appeals?

The Supreme Court rendered its decision in Arthrex v. Smith & Nephew back in June and now the impact of that decision is becoming more clear. Arthrex had challenged the constitutionality of the appointment of administrative patent judges (APJs) who make up the Patent Trial and Appeal Board (PTAB). The Court determined that, in order for the appointment of APJs to be constitutional, the decisions rendered by APJs must be subject to review by the Director of the USPTO.

To comply with the decision, the USPTO created an interim procedure through which parties may petition to have a case reheard by the Director.¹ The interim guidance allows for a party in an IPR to petition the Director within 30 days of the entry of a final written decision. The Director may also initiate a review sua sponte. A party in an appeal before the CAFC may request the court to remand the case to the USPTO to request a rehearing before the Director, so long as the party properly preserved the issue in its appeal. According to the guidance given by the USPTO, Director review is performed de novo and may address any issue, either of fact or of law.

Cases that had been stayed awaiting the Arthrex decision are beginning to move forward again, and are providing an early indication on what effect the Arthrex decision may have in practice. So far, it appears that Arthrex will have less impact than many had hoped. Though official statistics are unavailable at this time, requests for rehearing have largely been denied.² 

Two Examples

The first example of how the guidance is playing out comes from the Arthrex case itself.  Prior to the Supreme Court decision, the CAFC had vacated and remanded the final written decision of the PTAB. After the Supreme Court decision, the CAFC issued a per curiam order reinstating the appeal.³ The court also remanded the case to the USPTO for the limited purpose of requesting a rehearing from the Director—this case is still pending before the USPTO.

Next, in Teva Pharmaceuticals v. Eli Lilly and Co., the Federal Circuit limited the options of an appellant seeking relief under Arthrex.⁴ Here, Teva had appealed a final written decision by the PTAB that found several claims of three challenged Teva patents invalid. Upon the request of Teva, the court stayed the case to await the decision in Arthrex. When the case resumed, Teva argued that the court should decide the appeal on the merits with the caveat that, if the court decided to not reverse or remand the case to the PTAB, the court should remand for the limited purpose of allowing Teva to request rehearing from the Director.

Instead, the court asked Teva to select which of the two forms of relief to pursue: either remand to the USPTO to seek a rehearing before the Director or continue the appeal before the CAFC. Forced to choose between the two, Teva elected to waive its right to a request rehearing and pursued the appeal, which it then lost.⁵

An Unsatisfactory Ending?

Even for those who properly preserved the issue in appeal, it’s looking as though the Arthrex decision is not providing the opportunity many patentees had hoped it would. The right to request rehearing from the Director will be of little comfort to patentees already involved in an appeal before the CAFC if the patentees may have to choose between continuing with the appeal process or withdrawing in order to seek a rehearing. And requesting rehearing from the Director has thus far been unsuccessful. However, it is possible that requests for rehearing from the Director will have a higher chance of success once a new Director is appointed—because the Director has considerable discretion in how to handle such requests, it is possible that a new Director will be more likely to grant requests for rehearing.

Please check the PTAB Trial Insights Blog for additional insights in the months to come.