Notice & Comment

Limiting Agency Head Review in the Design of Administrative Adjudication, by Rebecca Eisenberg and Nina Mendelson

*This is the sixth post in a symposium on the decisional independence of administrative adjudicators. For other posts in the series, click here.

United States v. Arthrex is an Appointments Clause case that reads like a Vesting Clause case. Its shifting analytical frames and splintered alliances leave an important question unresolved: will the Court now require that administrative tribunal decisions generally be subject to unconstrained agency head review? We think that would take Arthrex too far and inappropriately constrain the political branches that design executive institutions. Although political appointee review may improve accountability in some agency adjudication contexts, it can open the door to corruption and cronyism in others. The Arthrex Court failed to recognize the history and background considerations informing congressional design of patent adjudication, raising concerns that in future cases the Court might resort reflexively to de novo review by an agency head removable at will by the President to ensure political accountability for executive branch decisions. This is neither constitutionally required nor wise. The Court should recognize the constitutional role, institutional advantages, and political accountability of Congress in making appropriate design choices, and acknowledge other mechanisms for achieving political accountability and faithful execution of the laws.

The Limits of Arthrex

As an Appointments Clause case, Arthrex ostensibly concerns the lack of presidential appointment and Senate confirmation for administrative patent judges (APJs) who serve on the Patent Trial and Appeal Board (PTAB). Yet Chief Justice Roberts’s majority opinion reads more like a Vesting Clause case, repeatedly invoking the need for presidential authority over the administrative state. The Appointments Clause, which constrains Presidential authority through Senate confirmation, is a dubious anchor for this analysis. Rather than asking whether APJs were properly appointed given their statutory duties, the majority infers from Congress’s assignment of APJ appointments to the Commerce Secretary that they must be “inferior officers” and then asks “whether . . . their responsibilities [are] consistent” with such appointments. This reframing shifts attention from the appointment process to the design of the administrative adjudication system. In the merits portion of the decision, a five-Justice majority states that agency head review of adjudication decisions is “standard,” hinting that it may be critical for political accountability for executive branch decisions through a chain of command reaching up to the president. Ultimately, the Court found a constitutional violation only in the failure to allocate the final decision on patent challenges in inter partes review proceedings (IPRs) to a properly appointed principal officer.

But the merits majority could not agree upon the proper remedy. Instead, a different majority chose to fix the violation by declining to enforce a statutory limitation on review, thus making IPR decisions subject to de novo review by the presidentially-appointed, Senate-confirmed Director of the Patent and Trademark Office (PTO). With this judicial modification, APJs who adjudicate IPRs as PTAB members would qualify as “inferior” officers, making presidential nomination and Senate confirmation unnecessary and avoiding an immediate crisis over the effectiveness of decisions rendered by improperly appointed APJs. Three vehement dissenters on the merits joined only this part of the opinion to supply a majority for the remedy, perhaps to avoid a more lethal blow to the system. Given the split opinions and sharp disagreements among these strange bedfellows, the Arthrex ruling does not clearly portend a constitutional requirement of de novo agency head review for other administrative adjudications. Indeed, the majority pointedly declined even to address the Director’s authority to review other adjudications within the PTO.

Although Justice Roberts mistakenly blames the lack of oversight of APJs on the Leahy-Smith America Invents Act of 2011 (AIA) that created IPRs, the statutory language the Court “severs” has been in the statute for almost a century. The now unenforceable post-AIA section 6(c) of the Patent Act provides, “Only the Patent Trial and Appeal Board may grant rehearings,” while Congress in 1927 [1] gave the same authority to a predecessor “Board of Appeals.” Beginning with the first Patent Act in 1790, Congress has repeatedly assigned final decision authority to 3-member boards. Nor is the APJ appointments process new. Since 1975 Congress has delegated appointment of individual APJs (previously “examiners-in-chief”) to either the PTO Director (previously “Commissioner”) or the Secretary of Commerce. The adjudicatory proceedings introduced in the AIA differ from prior board proceedings in significant ways, provoking multiple challenges that the Court has repeatedly rejected. But the absence of Director review of board decisions (and the appointment of board members outside the Appointments Clause process for principal officers) long predates the AIA. In now requiring Director review for such decisions it is the Court, not Congress, that is plowing new ground.

The limitation of the Arthrex holding to IPR decisions matters, because IPR proceedings are not Congress’s first effort to adjust administrative mechanisms to review patent validity challenges and will not be its last. It is worth considering why Congress has repeatedly declined to provide for agency head review in this context, both to guide future legislative reform and to caution courts against ill-considered extensions of Arthrex.

Over two centuries Congress has designed and revised patent institutions to address the growing challenge of evaluating increasingly complex technological inventions for patentability. Congress created a professional patent office in 1836 to improve confidence in patents following unsuccessful systems that relied first on cabinet officers and then on generalist courts to determine patentability. In the last 40 years Congress has authorized new procedures for expert patent professionals within the PTO to resolve patent validity disputes, most recently in administrative adjudications before 3-member PTAB panels. Technical determinations of how a claimed invention compares to technology disclosed in prior patents and printed publications are in the wheelhouse of the APJs on PTAB, but difficult for courts and juries without technical training.

Congressional concern for technical expertise is manifest in the longstanding statutory requirement that APJs (and their predecessors) “shall be persons of competent legal knowledge and scientific ability.” Under PTAB‘s Standard Operating Procedures, the technology discipline preferences of APJs are matched to the technology disciplines involved in particular cases. Review of panel decisions by the Director, required only to have “patent or trademark law” background, not relevant technology expertise, threatens to replace an expert assessment with an inexpert one.

Another Congressional goal threatened by de novo agency head review is speed. Patents are wasting assets with finite terms. Statutory provisions require the parties and PTAB to act briskly, generally providing far quicker resolution than litigation. This requirement is particularly striking for post grant review proceedings, which must be commenced within 9 months of patent issuance. Prompt determinations minimize economic uncertainty for the parties as well as reducing costs. Although Arthrex may now require Director review for IPRs, extension of Director review to other PTAB proceedings would delay finality, increase costs, and prolong uncertainty.

Agency Head Review Beyond Arthrex

Agency head review has been anything but “standard” for patent adjudications, where Congress instead prioritizes expertise, independence, and speed. The Arthrex Court’s ostensible justification for agency head review is political accountability. But this off-the-shelf rationale is insufficiently sensitive to Congress’s distinctive concerns in this context. The technical character and generally low visibility of administrative patent adjudications call into question the purported political accountability benefits. These decisions are generally obscure to public monitors, receive little media coverage, and are unlikely to matter to a voter choosing a presidential candidate.

Although opaque to voters, they can nonetheless have dramatic and concentrated economic implications for the parties. That combination threatens pernicious political influence. Imagine a wealthy corporate patent holder anticipating a validity challenge (or bringing one) who finds it advantageous to bundle presidential campaign contributions, fund a super PAC, or commit to throw a lavish inaugural ball. The combination of technical complexity, low public visibility, and high stakes to the parties makes political control of these decisions distinctively vulnerable to corruption, while political accountability benefits are dubious at best. Similar concerns arise for other agency tribunals, including the Civilian Board of Contract Appeals within GSA, authorized to resolve individual government contract disputes with major corporations such as Dell, McKesson, and Xerox.

Certainly, political oversight sometimes has clear benefits. Professors Chris Walker and Melissa Wasserman have argued that agency head supervision, mentioned in the Administrative Procedure Act’s formal adjudication provisions, facilitates valuable political control over policy decisions. Consider, for example, the FCC decision—really a policy—on whether fleeting expletives are “indecent” under the Broadcast Act. In such high-visibility, value-laden decisions, political oversight of adjudication resembles rulemaking oversight and supports consistent, accountable policy development.

As Professor Emily Bremer notes, however, adjudication schemes vary widely, partly due to congressional attention to differing subject matters. This variety has important implications for agency head review. Although APA-specified procedures are normative for rulemaking, comparatively few adjudication schemes follow the APA model. And in existing formal adjudication schemes, agency head review may be more theoretical than real. Bremer seeks uniformity, but variation has advantages too. While political oversight of individual adjudications can sometimes be helpful, it serves other frameworks poorly, supplying few accountability benefits but presenting significant risks. Even without overseeing individual adjudication decisions, an agency director may still control policy, as the PTO Director does for PTAB adjudications through relatively visible rulemaking decisions and by selecting precedential PTAB decisions, with only minor costs to the customary agency ability to choose between adjudication and rulemaking.

Arthrex leaves many issues around the structure of administrative adjudication unresolved. Even when a principal officer must now have final decision authority, it would ill serve political accountability goals to force all administrative adjudications into a constitutional straitjacket of de novo agency head review. Such a structure could significantly threaten adjudicator independence and the function and integrity of an adjudication framework. Congress and the Court should remain open to other principal officer arrangements that are responsive to the varying complexities and challenges of particular adjudication regimes across the government. Possibilities include deferential review by a Senate-confirmed principal officer or panel, or review by a principal officer who is insulated from at-will removal. Most importantly, the Court should give Congress more room to design these institutions and to revise them in light of experience and new challenges.

[1] Act of March 2, 1927, ch. 273, § 3, 44 Stat. 1335.

Rebecca S. Eisenberg is the Robert and Barbara Luciano Professor of Law at the University of Michigan Law School. She specializes in patent law and the regulation of biopharmaceutical innovation. Nina A. Mendelson is the Joseph L. Sax Collegiate Professor of Law at the University of Michigan Law School. She teaches and conducts research in the areas of administrative law, environmental law, statutory interpretation, and the legislative process.

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