Case: 19-1671 Document: 50 Page: 1 Filed: 05/13/2020
United States Court of Appeals
for the Federal Circuit
______________________
VIRNETX INC.,
Appellant
v.
CISCO SYSTEMS, INC.,
Appellee
ANDREI IANCU, UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY
AND DIRECTOR OF THE UNITED STATES
PATENT AND TRADEMARK OFFICE,
Intervenor
______________________
2019-1671
______________________
Appeal from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in No. 95/001,679.
______________________
ON PETITIONS FOR PANEL REHEARING
______________________
NAVEEN MODI, Paul Hastings LLP, Washington, DC,
for appellant. Also represented by STEPHEN BLAKE
KINNAIRD, JOSEPH PALYS, IGOR VICTOR TIMOFEYEV,
MICHAEL WOLFE, DANIEL ZEILBERGER.
DAVID L. MCCOMBS, Haynes & Boone, LLP, Dallas, TX,
filed a combined petition for panel rehearing and rehearing
Case: 19-1671 Document: 50 Page: 2 Filed: 05/13/2020
2 VIRNETX INC. v. CISCO SYSTEMS, INC.
en banc for appellee. Also represented by THEODORE M.
FOSTER, DEBRA JANECE MCCOMAS.
MELISSA N. PATTERSON, Appellate Staff, Civil Division,
United States Department of Justice, Washington, DC,
filed a combined petition for panel rehearing and rehearing
en banc for intervenor. Also represented by COURTNEY
DIXON, SCOTT R. MCINTOSH; THOMAS W. KRAUSE, JOSEPH
MATAL, BRIAN RACILLA, FARHEENA YASMEEN RASHEED, Of-
fice of the Solicitor, United States Patent and Trademark
Office, Alexandria, VA.
______________________
Before MOORE, O’MALLEY, and CHEN, Circuit Judges.
O’MALLEY, Circuit Judge.
ORDER
The Director of the United States Patent and Trade-
mark Office and Cisco Systems, Inc. have petitioned for re-
hearing to argue that we erred in extending Arthrex, Inc.
v. Smith & Nephew, Inc., 941 F.3d 1320 (Fed. Cir. 2019)
beyond the context of inter partes reviews to this appeal
from a decision of the Patent Trial and Appeal Board in an
inter partes reexamination. Specifically, they assert that
administrative patent judges (“APJs”) should be deemed
constitutionally appointed officers at least when it comes
to their duties reviewing appeals of inter partes reexami-
nations. We issue this order for the purpose of more fully
explaining our rationale for rejecting this argument.
In Freytag v. Commissioner, 501 U.S. 868 (1991), the
Supreme Court addressed a similar contention. That case
dealt with an assignment of a special trial judge by the
Chief Judge of the United States Tax Court to a case in
which the special trial judge was authorized to prepare pro-
posed findings for a judge of the Tax Court. While conced-
ing that special trial judges were inferior officers when
assigned under the same governing statute to other
Case: 19-1671 Document: 50 Page: 3 Filed: 05/13/2020
VIRNETX INC. v. CISCO SYSTEMS, INC. 3
proceedings in which the trial judge was authorized to ren-
der the final decision, the Commissioner of the Internal
Revenue Service argued that the special trial judge was
acting as an employee in cases when he merely proposes
findings. The Court rejected the Commissioner’s argu-
ment, finding that the special trial judges were “not infe-
rior officers for purposes of some of their duties under” the
statute “but mere employees with respect to other respon-
sibilities.” Id. at 882. The Court explained that “[t]he fact
that an inferior officer on occasion performs duties that
may be performed by an employee not subject to the Ap-
pointments Clause does not transform his status under the
Constitution.” Id. Instead, “[i]f a special trial judge is an
inferior officer for purposes of” some responsibilities, then
“he is an inferior officer within the meaning of the Appoint-
ments Clause and he must be properly appointed.” Id.
Freytag indicates that we should “look not only to the
authority exercised in [an appellant]’s case but to all of that
appointee’s duties” when assessing an Appointments
Clause challenge. Lucia v. SEC, 832 F.3d 277, 284 (D.C.
Cir. 2016), rev’d on other grounds, 138 S. Ct. 2044 (2018);
Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd.,
684 F.3d 1332, 1338 (D.C. Cir. 2012) (“Even though the
[Copyright Royalty Judges] affect Intercollegiate only in re-
gard to webcasting, Freytag calls on us to consider all the
powers of the officials in question in evaluating whether
their authority is ‘significant,’ not just those applied to the
litigant bringing the challenge.”). The Director acknowl-
edges that once appointed to the Board, the APJs’ duties
include both conducting inter partes reviews and reviewing
appeals of inter partes reexaminations. Director’s Pet. at
3 (“In addition to conducting inter partes review (IPR) pro-
ceedings, the Board hears appeals from inter partes reex-
aminations[.]”). Thus, if these APJs are unconstitutionally
appointed principal officers because of their inter partes re-
view duties in light of Arthrex, it would appear that under
Freytag vacatur would be appropriate for all agency actions
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4 VIRNETX INC. v. CISCO SYSTEMS, INC.
rendered by those APJs regardless of the specific type of
review proceeding on appeal. Freytag, 501 U.S. at 882; Col-
lins v. Mnuchin, 938 F.3d 553, 591 (5th Cir. 2019) (“If by
statute he performed at least some duties of an Officer of
the United States, his appointment must accord with Arti-
cle II.” (citation omitted)); id. at 593 (noting that an agency
action by an unconstitutionally appointed official is voida-
ble whenever the officer is vested with “authority that was
never properly theirs to exercise”).
While it seems that, on this point, Freytag sweeps
broadly and would apply to all Board proceedings, we need
not go so far. The Director and Cisco have provided no ba-
sis to disturb our prior determination that the relevant
analysis requires similar treatment of appeals from these
post-grant proceedings. Although no discovery is held and
no trial conducted in inter partes reexaminations, the na-
ture of the two proceedings are otherwise similar. Both in-
volve third-party challenges to the claims of an issued
patent and, importantly, in both, APJs exercise significant
authority on behalf of the government by issuing final de-
cisions that decide the patentability of the challenged
claims. The Director’s authority over the Board’s decisions
is not meaningfully greater in the context of inter partes
reexaminations than in inter partes reviews, moreover, be-
cause, by statute, only the Board may grant rehearing in
reexaminations, Pre-AIA 35 U.S.C. § 6(b), 1 and only a party
to the inter partes reexamination, not the Director, has the
power to appeal the decision to this court, Pre-AIA 35
U.S.C. § 141. Thus, as is the case in inter partes reviews,
“[i]f no party appeals the APJs’ decision, the Director’s
1 When it enacted the Leahy-Smith America Invents
Act, Congress made clear that provisions of sections 6, 134,
and 141 of title 35 that were in existence before enactment
would still govern inter partes reexamination proceedings.
AIA § 7(e)(2).
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VIRNETX INC. v. CISCO SYSTEMS, INC. 5
hands are tied.” Arthrex, 941 F.3d at 1329; Pre-AIA 35
U.S.C. § 316(a) (stating that the Director “shall issue and
publish a certificate canceling any claim of the patent fi-
nally determined to be unpatentable”). 2
The Director’s and Cisco’s arguments to the contrary
are unpersuasive. They primarily argue that the Director
has significant control over inter partes reexamination pro-
ceedings before a case reaches the Board. In this regard,
Cisco contends that—acting through the examiners—the
Director can control the findings of fact and conclusions of
law that are present in the reexamination at the start of
the appeal process. Cisco’s Pet. at 5–6. The Director adds
that he “acting alone has authority to make a decision fa-
vorable to a patent owner” before a case ever gets to the
Board for review. Director’s Pet. at 10. That cited author-
ity offers “no actual reviewability of a decision issued by a
panel of APJs.” Arthrex, 941 F.3d at 1329. As this court
explained in Arthrex, “[t]he relevant question is to what ex-
tent th[e final written] decisions are subject to the Direc-
tor’s review.” Id. at 1330. And, like the Director’s ability
to decide whether to institute inter partes review proceed-
ings, the Director’s cited powers here provide no form of re-
view authority or supervision over the APJs’ final
decisions. Id.
We also reject Cisco’s argument that “[i]n stark con-
trast to inter partes reviews, inter partes reexamination ap-
peals allow for the Director’s direct involvement [in Board
2 Additionally, the same appointment and removal
statutory provisions govern all APJs. Before curing the de-
fect, we explained in Arthrex that “[u]nder the current Title
35 framework, both the Secretary of Commerce and the Di-
rector lack unfettered removal authority.” 941 F.3d at
1332. Neither the Director nor Cisco contend that a differ-
ent conclusion is warranted with respect to reexamina-
tions.
Case: 19-1671 Document: 50 Page: 6 Filed: 05/13/2020
6 VIRNETX INC. v. CISCO SYSTEMS, INC.
proceedings] through a petition process.” Cisco’s Pet. at. 6.
The regulations cited only allow a party to petition the Di-
rector in an action “which is not subject to appeal to the
Patent Trial and Appeal Board or to the court.” 37 C.F.R.
§ 1.181(a)(1). Those “petitions involving action of the Pa-
tent Trial and Appeal Board” must instead be “addressed
to the Chief Administrative Patent Judge.” 37 C.F.R.
§ 41.3(a); 37 C.F.R. § 1.181(a)(3) (“petitions involving ac-
tions of the Patent Trial and Appeal Board” must be ad-
dressed pursuant to § 41.3(a)). Cisco is left to argue that,
under 37 C.F.R. § 1.183, the Director can in extraordinary
circumstances sua sponte waive requirements of the regu-
lations that are not required by the statutes. But even
then, Cisco provides no mechanism by which the Director
could, on his own, review the APJs’ decision.
Cisco’s remaining arguments are also unconvincing.
Cisco contends that the Director has the authority to prom-
ulgate regulations governing the conduct of inter partes
reexamination appeals; has the power to provide policy di-
rectives and management supervision of the Office; has the
authority to designate Board opinions as precedential; has
the authority to decide whether to institute an inter partes
reexamination in the first place; and controls the selection
of judges to hear each inter partes reexamination appeal.
Cisco’s Pet. at. 4–5. Arthrex recognized this same oversight
authority in the context of inter partes reviews, 941 F.3d
at 1331–32, but concluded that “control and supervision of
the APJs is not sufficient to render them inferior officers,”
given “the lack of any presidentially-appointed officer who
can review, vacate, or correct decisions by the APJs com-
bined with” the Director’s “limited removal power” over
APJs, id. at 1335. That precedent compels that we reach
the same conclusion in the context of inter partes reexam-
inations.
Upon consideration thereof,
IT IS ORDERED THAT:
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VIRNETX INC. v. CISCO SYSTEMS, INC. 7
The petitions for panel rehearing are denied.
May 13, 2020
Date