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No Do-Overs: Federal Circuit Denies Unsuccessful IPR Petitioner’s Request for a New Hearing in Light of Arthrex

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Ciena Corp. v. Oyster Optics, LLC, Appeal No. 2019-2117 (Fed. Cir. Jan. 28, 2020)

The Federal Circuit has held that a party that petitioned for inter partes review before the Patent Trial Appeal Board and subsequently obtained an unfavorable ruling cannot now invoke Arthrex, Inc. v. Smith & Nephew, Inc. to vacate and remand the Board’s decision for a new hearing before a differently constituted panel.

In 2016, Ciena Corporation was sued for patent infringement in district court by Oyster Optics, LLC. Ciena petitioned the PTAB for inter partes review of the asserted patents, and at Ciena’s request, the district court stayed the litigation. In May 2018, the Board instituted an IPR of U.S. Patent No. 8,913,898, and following proceedings, it issued a final written decision in May 2019 concluding that Ciena had failed to demonstrate by a preponderance of the evidence that any of the challenged claims are unpatentable.

Ciena appealed to the Federal Circuit, citing the court’s October 2019 decision in Arthrex, Inc. v. Smith & Nephew, Inc. Arthrex held that Administrative Patent Judges (APJs) are principal officers—as opposed to inferior officers—and, as such, were unconstitutionally appointed. (Under the Appointments Clause of Article II, principal officers are appointed by the President with the advice and consent of the Senate; APJs, however, are appointed by the Secretary of Commerce, in consultation with the Director of the USPTO.) To remedy the problem, the court severed the portion of the Patent Act that limited the USPTO’s ability to remove APJs from the PTAB, thereby reclassifying them as inferior officers. The court then ordered that the PTAB’s decision in that case be vacated and reheard in front of a new panel of APJs.

Citing Arthrex, Ciena argued that the Board’s decision in its case must similarly be vacated and remanded for a new hearing before a differently constituted panel because the APJs that issued the decision were not constitutionally appointed. The Federal Circuit panel of Circuit Judges Moore, O’Malley, and Stoll rejected this argument. According to the court, Ciena forfeited its Appointments Clause challenge because “unlike the patent owner in Arthrex, Ciena sought out the Board’s adjudication, knew or at least should have known of this structural defect, and was content to have the assigned Board judges adjudicate its invalidity challenges until the Board ruled against it.”

Further, the court held that this was not the rare situation in which forfeiture should be excused. The panel concluded that U.S. Supreme Court cases cited by Ciena were distinguishable and noted its concern with Ciena and other litigants “remaining silent about [their] objection and belatedly raising the error only if the case does not conclude in [their] favor,” particularly where there exists “a perfectly good alternative forum” (e.g., the district court) where their invalidity arguments could have been pursued.

Implications for Patent Law Litigation

While the holding of this case appears narrow because Ciena itself sought relief from the PTAB despite the availability of the district court and belatedly raised concerns with the forum, this case appears to foreclose the availability of Arthrex to a non-patent owner appellant.