Use It Or Lose It – Second Appeal Appointments Clause Challenge Deemed Forfeited

by | May 4, 2021 | Federal Circuit Appeal

By Alison Ibendahl and Albert Liou –

An April 13, 2021 decision by the Federal Circuit denied a motion to vacate and remand PTAB decisions based on the Federal Circuit’s October 2019 decision in Arthrex v. Smith & Newman, Inc., et al., 941 F.3d 1320 (Fed. Cir. 2019), because the appellant, Vivint, had forfeited its Appointments Clause challenge by not raising it in an earlier appeal of the case to the Federal Circuit where Vivint was also an appellant.  Vivint v. Alarm.com Inc., No. 2019-2438, 2019-2439 (Fed. Cir. Apr. 13, 2021).  Arthrex held that Administrative Patent Judges (“APJs”) are principal officers under the Appointments Clause and therefore must be appointed by the President and confirmed by the Senate.  In a 2-1 decision, the panel majority held that Vivint had forfeited its Appointments Clause challenge when it had failed to raise the issue in their first appeal, and that the Arthrex decision was not a change in law sufficient to create an exception to that forfeiture.  Vivint adds to a number of earlier Federal Circuit holdings finding parties had forfeited application of Arthrex.  It also reiterates that a party must raise an Appointment Clause challenge, if at all, before the first court who can provide it relief.

This appeal arose of out of IPR petitions filed on two Vivint patents by Alarm.com that were instituted by the PTAB.  The PTAB found that some but not all of the challenged claims were unpatentable.  Vivint appealed the unpatentability findings and Alarm.com cross-appealed the patentability findings.  Vivint did not make a challenge under the Appointments Clause.  The Federal Circuit affirmed all findings of unpatentability and some of the findings of patentability.  The remaining findings of patentability were remanded to the PTAB for further proceedings.  On remand, the PTAB found the remaining claims unpatentable.  Vivint then appealed the PTAB’s finding on remand to the Federal Circuit.  About six weeks after Vivint filed this second appeal, the Federal Circuit’s decision in Arthrex was issued.  Vivint subsequently filed a motion to vacate and remand the PTAB’s decision, arguing the APJs had been unconstitutionally appointed.  The Federal Circuit denied Vivint’s motion, finding Vivint had forfeited the argument by failing to raise an Appointments Clause challenge in its first appeal.  The Court also rejected Vivint’s argument that Arthrex represented a change in law.

During its second appeal, Vivint raised the same arguments it made in support of its motion to vacate and remand, and additionally argued forfeiture should not apply to the first appeal because they partially prevailed on the claims before the PTAB.  Vivint attempted to argue that this case was distinguishable from prior cases where the Court found the Appointments Clause challenge had been waived when it was not raised in the opening brief.  Rejecting that argument, the Court cited back to Arthrex explaining that the challenge has to be raised “before the first court who could have provided it relief.”

Vivint then attempted to rely upon a 2020 Federal Circuit case, Steuben Foods, Inc. v. Nestle USA, Inc., No. 20-1082 (Fed. Cir. Mar. 30, 2021), where the Federal Circuit vacated and remanded a PTAB decision based on Arthrex despite the case being on appeal for the second time.  The Court rejected Vivint’s argument, finding Steuben was distinguishable because Steuben had been the prevailing party on all claims in the first appeal and had no reason to bring an Appointments Clause challenge as the appellee.  Making an Appointments Clause challenge in the first appeal would have been entirely against Steuben’s interest.  In contrast, Vivint, as the loser of some issues, sought affirmative relief in its first appeal.

Last, the Federal Circuit rejected Vivint’s argument that Arthrex was a change of law.  The Court reasoned that Arthrex was the first time the Federal Circuit had addressed Appointments Clause issues related to the PTAB APJs.  The “change of law” exception only applies when there is strong precedent indicating that the opposite of the new ruling was the law.  Prior to Arthrex, there was no settled Federal Circuit law on point.  Additionally, Arthrex followed established Supreme Court precedent and existing academic discussion on the issue.  As a result, Vivint waived its Appointments Clause challenge without a viable exception to waiver.

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Matthew Johnson

Partner at Jones Day
Matt Johnson is one of the Firm's primary contacts on practice before the PTAB. Currently co-chairing the Firm's PTAB subpractice and involved in proceedings at the Board since the first day of their availability in September 2012, Matt regularly represents clients as both petitioners and patent owners at the Board. He further works as an advocate for clients in appeals from Board proceedings at the Federal Circuit.