Skip to main content
SearchLoginLogin or Signup

Patents & Politics Don’t Mix: Why the Supreme Court’s Decision in Arthrex Fails to Fix an Underlying Problem

Published onAug 19, 2021
Patents & Politics Don’t Mix: Why the Supreme Court’s Decision in Arthrex Fails to Fix an Underlying Problem

In a split 5-4 decision in Arthrex Inc. v. Smith & Nephew, Inc, the Supreme Court determined that the structure of Administrative Patent Judge (“APJs”) appointments—or lack thereof—was unconstitutional and took it upon itself to restructure the Patent Office’s chain of command. This case is another example of the Court striving to preserve the inter partes review (IPR) system, which allows anyone to file a petition requesting that the Patent Office cancel another’s patent. The contention in Arthrex originates from an ideological battle over how much certainty should be afforded to intellectual property (“IP”) under the law. The underlying problem is that industrial titans are taking advantage of the politically influenceable IPR process to remove the patent protections of another’s inventions in order to eliminate technological competition.

The America Invents Act (“AIA”), signed into law in September 2011, established the Patent Trial and Appeal Board (“PTAB”) under 35 U.S.C §6(a), as well as the APJs who sit on the PTAB and adjudicate issues of patent validity. Congress gave the PTAB authority to determine the validity of an issued patent without the statutory presumption of validity afforded to patents in federal courts and without an absolute right to amend claims if issues arise. This makes removing patents far easier. A claim’s validity can be challenged under either §102 (novelty) or §103 (obviousness) grounds through IPR.

The purported reason Congress created IPRs in the AIA was to “increase patent quality” by allowing rapid adjudication of “[p]atents of low quality and dubious validity” and to “curb abusive behaviors” that cause large companies to settle “frivolous cases.” The AIA’s co-sponsor, Representative Lamar Smith (R-TX), stated that the intent of the AIA was to fight against “patent trolls [that] hurt small businesses and independent inventors.” Congress’s proclamations about IPR aiding small businesses and inventors stand inapposite when juxtaposed with the fact that out of the 12,000 IPRs filed, only 1.4% percent were by small or medium-sized entities against a non-practicing individual—the proverbial “patent troll”—while large organizations against a non-practicing individual accounted for approximately 6% of all IPRs filed.

Considering that the filing fee for an IPR is $22,500 and the subsequent litigation at the PTAB can cost upwards of $500,000, IPR proceedings are often cost-prohibitive for small businesses and independent inventors. Instead, large corporations are able to attack patents for a cheaper cost than challenging the patent in Federal Court, which can cost roughly 1.7 million for a medium-sized case. Of all the IPRs filed so far in 2021, most are directed toward patents in the tech industry owned by non-practicing entities such as individuals. With an 80% patent claim kill rate for instituted petitions with final written decisions (“FWDs”) and institution rates hovering around 60% over the past several years, IPR is not only cheaper than litigating in federal court but also has a strong likelihood of invalidating at least one of the defendant’s patent claims. In essence, the AIA reduces the certainty of patent protection under the guise of limiting frivolous lawsuits. In 2020 alone, Samsung, Apple, and Google’s filings accounted for over 40% of all IPRs filed for the purpose of killing the patents of inventors which threatened their operations. This certainly begs the question of who the actual “patent trolls” are. The AIA created a system where those with powerful interests or political clout can influence which patented inventions will be protected.

This contention is supported by the fact that Administrative Patent Judges are politically influenceable and are not always the impartial arbitrators found in Article III courts. In his dissent in Arthex, Justice Neil Gorsuch even alluded to some of the egregious instances of ethical impropriety within PTAB. Consider APJ Stacy Beth Margoles, a former Apple attorney who conveniently remained on a panel when Apple sought to invalidate a competitor’s patent—seemingly raising major conflict of interests questions. Another more dubious example of APJs having complete disregard for ethical conflicts occurred when APJ Matt Clements, a former Apple representative, was invited to the PTAB. Remarkably, Apple had a high success rate at the PTAB of over 96% of removing patents that threatened Apple’s economic interests when APJ Clements was on the panel. Fortunately for APJ Clements, after moving on from his APJ position, Apple seemingly thanked him for his years of government service at PTAB by hiring him as in-house council.

The pattern of APJs being influenced by corporate titans is even more troubling when one considers that it is the executive—not judicial—branch of government that is stripping patents, which the Patent Office itself issued, from inventors. This newfound ability for the PTAB and the Director to remove patents—after issuance based on ex post facto “policy changes” without giving the patent owner a chance to amend his claims—does not comport with any notion of due process. In 1898, the Supreme Court published an opinion that opined that when a patent has issued, “it has passed beyond the control and jurisdiction of that office, and is not subject to be revoked or canceled by the president, or any other officer of the government.”

More than one century later, in 2017, the Supreme Court confirmed in Oil States Energy Service, LLC, v. Greene’s Energy Group LLC that under 35 U.S.C. § 261, Congress gave patents the attributes of personal property. The ability of influenced APJs to deprive individuals of their personal property based on pressure from politics or large businesses creates glaring separation of power and due process concerns, turning the patent system into a modern form of crony capitalism. Most importantly, the Court’s fix in Arthrex of giving the Director of the Patent Office the final review could potentially mitigate the impact of a rogue APJ but would not protect against potential abuse of the executive branch, where it could unilaterally remove an issued patent that proved to be politically unpopular.

It is unsurprising that the AIA’s PTAB has been polarizing. In Arthrex, the medical technology company challenged an FWD by a PTAB panel invalidating one of Arthrex’s patent claims. The basis of the challenge was that the APJs who sit on the PTAB are not appointed “principal officers,” and therefore are unconstitutional under the Appointments Clause of the Constitution. The majority (Justices Roberts, Alito, Kavanaugh, Barrett, and Gorsuch) focused on the touchstone that APJs are able to render final decisions regarding the validity of a patent and held that APJ’s are principal officers. Interestingly, the Court (with Justice Gorsuch dissenting) decided to take it upon itself to rewrite the AIA and allow the Director of the Patent Office to have final review of the PTAB. However, the way the Court rewrites the AIA appears to be inconsistent with Congress’s intent when Congress intentionally withdrew the proposed severability clause in the AIA. Additionally, the Court presumes that Congress, within the next decade, would have wanted final reviewability by the Director even though it “expressly withheld [from the Director] … the power to cancel patents through the IPR process.”

Some might contend that it is unsurprising that the Court preserved IPRs and swept the problem of allowing powerful interest groups to essentially control the fate of another’s patent under the rug. Yet, in many ways, the “fix” makes the problem worse. Instead of panels of politically influenceable executive branch arbitrators, there is now one non-elected individual who unilaterally determines the validity of one’s personal property. The point of the patent system is to level the playing field so that even a small inventor can protect their inventions from infringement from even the largest corporations or even the government itself.  Congress needs to amend the AIA to re-instill confidence that the patent system will protect inventors and their innovations. At the end of the day, it is the job of the Patent Office to grant patents, not eviscerate them when it becomes personally or politically convenient to do so.

Benjamin Suslavich is a second-year law student at Wake Forest University School of Law. He is a certified Chemical Engineer EIT and holds a Masters of Science in Metallurgical and Process Engineering as well as a Bachelors of Science in Materials Engineering from Montana Technological University.

Comments
0
comment
No comments here
Why not start the discussion?