HE HAD THE POWER – Hirshfeld Decisions Stand

By Alison Ibendahl and Joe Beauchamp –

A panel of the Federal Circuit has again held that Commissioner Drew Hirshfeld had the requisite authority to act on requests for Director review of PTAB decisions during which the office of Director was vacant.  Fall Line Pats., LLC v. Unified Pats., LLC, No. 2019-1956, 2022 WL 17747862 at *2 (Fed. Cir. Dec. 19, 2022)  The Federal Circuit denied a prior challenge to Commissioner Hirshfeld’s authority during this period.

The latest decision has its roots in an IPR filed against a data management patent owned by Fall Line Patents, LLC.  The decision resulted in the Board invalidating several claims.  Fall Line’s appeal of the Board decision was working its way through the PTAB and Federal Circuit behind Arthrex, the Supreme Court case holding that the USPTO Director has discretion to review PTAB final written decisions.  After remand to the PTAB, Arthrex’s request for Director review was denied by Commissioner for Patents Drew Hirshfeld, in his interim performance of the functions and duties of the Under Secretary of Commerce for Intellectual Property and Director of the USPTO.  Arthrex again appealed to the Federal Circuit, this time arguing Hirshfeld in interim acting capacity did not have the authority to make Director review decisions.  The Federal Circuit held that Commissioner Hirshfeld did not act beyond his authority because an inferior officer can perform the duties of a principal officer on a temporary acting basis.  Arthrex, Inc. v. Smith & Nephew, Inc., 35 F.4th 1328 (Fed. Cir. 2022) (Arthrex II).

Meanwhile in Fall Line, The Supreme Court granted cert to vacate judgment and remand to the Federal Circuit, who then remanded to the PTAB to allow Fall Line to request review from the Director.  Fall Line, like Arthrex, was remanded to the PTAB during the interim period between when former Director Andrei Iancu stepped down and before Director Kathi Vidal took over.  Fall Line requested Director review of the PTAB decision but the request was denied by Commissioner Hirshfeld.  Fall Line appealed the decision to the Federal Circuit, arguing that Hirshfeld’s exercise of the Director’s authority violated the Appointments Clause and the Federal Vacancies Reform Act.

After Fall Line had submitted briefing on its challenge to Commissioner Hirshfeld’s authority, the Federal Circuit rejected Arthrex’s challenge in Arthrex II.  Fall Line then submitted that it had an additional argument not considered in Arthrex II—that the Patent Act does not authorize delegations to the commissioners despite authorizing delegation to other inferior officers.  Fall Line argued that Director authority cannot be delegated to the Commissioner because the ability to delegate is established by a different subsection of the Patent Act than the subsection that establishes the office of Commissioner.

The Federal Circuit held that Commissioner Hirshfeld’s authority to grant or deny Director review had been properly granted to him based on two of its precedents.  First, the Court explained that its holding in Arthrex II forecloses a finding to the contrary, quoting the Arthrex II decision “[t]here is nothing in the Patent Act indicating that the Director may not delegate this rehearing request review function.”  Fall Line Pats., 2022 WL 17747862 at *2.  Second, the Court explained that it had already considered and rejected Fall Line’s delegation of authority argument in Ethicon Endo-Surgery, Inc. v. Covidien LP.  812 F.3d 1023 (Fed. Cir. 2016)  In Ethicon, the Federal Circuit held that “§ 3(b)(3) cannot be read to limit the ability of the Director to delegate tasks to agency officials not mentioned in § 3(b)(3).”  Id. at 1033.

The Federal Circuit’s decision in Fall Circuit provides an additional level of certainty to parties who requested Director review and received decisions prior to Kathi Vidal taking over as Director of the USPTO in April 2022.  The decision also provides more clarity to parties who may be considering a request for Director review during the next inevitable period for which the USPTO is between leaders.  Because the Court addressed the broader issue of delegation, not just Director review decisions, there could be implications for other decisions and actions taken by an inferior officer in the absence of a USPTO Director.  This provides practitioners further certainty that the business of the USPTO will continue on even during the interim time periods between Directors.