Addressing whether a party can waive a challenge to the constitutionality of Administrative Patent Judges’ (APJs’) appointment, the US Court of Appeals for the Federal Circuit found that the issue is non-jurisdictional and therefore waivable. Ciena Corp. v. Oyster Optics, LLC, Case No. 19-2117 (Fed. Cir. Jan. 28, 2020) (O’Malley, J.) (reissued as precedential May 5, 2020).
Oyster filed an infringement action against Ciena in district court. In response, Ciena filed an inter partes review (IPR) petition challenging the asserted claims of Oyster’s patent. In May 2018, the Patent Trial and Appeal Board (PTAB) instituted review on Ciena’s Petition, and Ciena moved for and received a stay of the district court action pending resolution of the IPR proceeding. Ultimately, the PTAB issued a final written decision finding that Ciena had failed to demonstrate that any of the challenged claims was unpatentable. Ciena appealed.
Shortly after Ciena filed its appeal, the Federal Circuit issued its landmark decision in Arthrex, Inc. v. Smith & Nephew (IP Update, Vol. 22, No. 11), concluding that APJs had been appointed unconstitutionally because the US Patent and Trademark Office (USPTO) did not have unfettered discretion to remove an APJ. As a result, the Court modified the AIA to give the USPTO independent authority to remove APJs, vacated the PTAB’s final written decision in Arthrex as unconstitutional and remanded the case for a new panel of APJs to render a new decision.
In light of the intervening Arthrex decision, Ciena filed a motion to vacate the PTAB’s final written decision. Ciena argued that because the PTAB issued its final decision before Arthrex had cured the defects in the AIA’s appointments clause, the PTAB’s final written decision in Ciena’s IPR was rendered by unconstitutionally appointed APJs and must be vacated.
The Federal Circuit disagreed, finding that appointments clause challenges are waivable. In this case, the Court found Ciena had forfeited its constitutional challenge to the AIA’s appointments clause because—as the petitioner in the IPR proceeding—it had affirmatively requested that the USPTO adjudicate its Petition, regardless of how the APJs had been appointed. In fact, Ciena explicitly selected the USPTO as its chosen forum by asking the district court to defer to the USPTO on invalidity, even though the district court would have been an adequate alternative forum to adjudicate its claims—free from any appointments clause concerns. The Court distinguished Ciena’s situation from Arthrex, where the patent owner had raised the appointments clause challenge, not the petitioner. Although Ciena cited a series of Supreme Court cases that had forgiven a party’s waiver of a constitutional challenge due to structural concerns regarding separation of powers, the Court characterized forgiveness in those cases as discretionary, not mandatory, and explained that exercising such discretion should only occur in rare circumstances. Ciena’s case did not present any such rare circumstances, and no actual structural concerns existed where Ciena had chosen to defer to the USPTO in lieu of the district court.
Practice Tip: Only final written decisions that issued prior to Arthrex are appointments clause violations. In Caterpillar Paving Products v. Wirtgen America, Inc., Case No. 20-1261 (Fed. Cir. May 6, 2020) (Dyk, J.), the Federal Circuit reiterated that Arthrex forecloses appointments clause appeals for final written decisions that issued after Arthrex. Caterpillar Paving argued that even if APJs became constitutional after Arthrex, decisions that issued immediately after Arthrex would still be infected with “a year’s worth of constitutional violations” that would have influenced the PTAB’s final written decision. The Court disagreed, stating that Arthrex had considered and rejected this argument, expressly limiting its finding “to those cases where final written decisions were issued.”
