Holding: The USPTO has discretion to deny a request for Director review on PTAB decisions made before Arthrex when an Appointments Clause challenge was not timely presented upon appeal.
Odyssey was the applicant for US Patent Application No. 11/678,021, a patent application directed to online logistics for freight shipments by trucking companies. Claims 3-21 of the ‘021 Application were rejected by the Examiner and this rejection was affirmed by the PTAB on appeal, and this appeal was affirmed by the Federal Circuit.
The Appointments Clause of Article II of the Constitution states that:
[The President] shall nominate, and by and with the Advice and Consent of the Senate, shall appoint . . . Officers of the United States . . . but the Congress may by Law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.
In its Arthrex decision issued on October 31, 2019, the Federal Circuit found the PTAB judges to be principal officers under the Appointments Clause and required to be appointed by the President and confirmed by the Senate. The Supreme Court granted certiorari and issued its Arthrex decision on June 21, 2021, agreeing that the PTAB judges are principal officers and holding that their unreviewable authority in IPRs violated the Appointments Clause. To resolve this violation, the Supreme Court gave the Director of the USPTO authority to provide methods of final review for PTAB decisions.
Odyssey’s initial appeal to the Federal Circuit was decided on May 15, 2020, over 6 months after the Federal Circuit’s decision in Arthrex finding an Appointments Clause violation. However, Odyssey failed to bring an Appointments Clause challenge during its initial appeal. Instead, Odyssey waited until one week after the Supreme Court’s decision in 2021 to file a request for Director review of the 2018 PTAB decision rejecting the claims of the ‘021 Application. The request for Director review was denied, so Odyssey filed a complaint in the Eastern District of Virginia requesting that the district court require the Director to review the 2018 PTAB decision. The district court dismissed the case for lack of subject matter jurisdiction citing that the Director’s decision is left to the USPTO’s discretion and judicial review would be improper.
The Federal Circuit agreed with the district court and holds that the USPTO did not abuse its discretion in denying the request for Director review. An administrative agency has inherent authority to reconsider their decisions, regardless of whether they have explicit statutory authority to do so. Rule 60(b) of the Federal Rules of Civil Procedure provides a guide for determining the scope of an agency’s inherent power to reconsider decisions. Under Rule 60(b), a district court may reopen final judgment, as long as the relief does not fall within the scope of the appellate mandate. That applies in this case, since the initial Federal Circuit case did not address the Appointments Clause issue.
Reconsideration also must come within a reasonable time, and intervening developments in the law do not typically qualify as extraordinary circumstances to allow a final judgment to be reopened. When a Rule 60(b) motion is based on a change in law, timeliness is measured from the point in time when the moving party had grounds to make the motion. Odyssey had notice of the Appointments Clause issue during the pendency of its initial appeal, but chose not to raise this challenge and provided no justification for its delay. In other cases, the Federal Circuit has found the failure to raise an Appointments Clause challenge in an opening brief constitutes forfeiture, even when the argument was the later raised before the termination of the appeal. Odyssey did not even bring its Appointments Clause challenge before the termination of its appeal. Therefore, the USPTO did not abuse its discretion by denying the request for Director review.
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