It was a tiny change, hidden in an omnibus bill Congress enacted in 1999. But nine years later it is threatening to create havoc for the U.S. patent system.

At the time, the legislative provision seemed unimportant. It slightly altered the process for appointing administrative law judges to serve on the PTO's Board of Patent Appeals and Interferences (BPAI), which hears appeals of the decisions made by patent examiners. The 1999 law provided that as of March 2000, new BPAI judges would no longer be appointed by the Secretary of Commerce.

They would be appointed instead by the head of the PTO. There's just one problem with this change. The new appointment process may be unconstitutional.

This problem was first raised in a July 2007 article by John Duffy, who teaches patent and administrative law at George Washington University Law School.

There is now widespread agreement among legal experts that Duffy is correct: The process for appointing BPAI judges runs afoul of the Constitution's little known Appointments Clause.

The issue may soon come before the U.S. Supreme Court. The appellant in Translogic Technology Inc. v. Dudas has filed a certiorari petition seeking to invalidate an adverse BPAI ruling on the grounds that one of the judges on the panel was unconstitutionally appointed.

The fallout from Translogic could be huge. The Court could invalidate every BPAI decision handed down throughout the past eight years in which an unconstitutionally appointed judge sat on the three-judge panel. This would cast “a cloud over many thousands of board decisions … unsettling the expectations of patent holders and licensees across the nation,” according to a court paper filed by the Justice Department.

Clause for Concern
For the framers of the Constitution, the issue of who could appoint government officers was no mere technicality. They knew, from the country's colonial experience, the danger of a powerful government bureaucracy that had no popular check on its actions. “[T]he power of appointment to [government] offices was deemed the most insidious and powerful weapon of 18th century despotism,” the Supreme Court has stated.

Thus, Article II of the Constitution contains a provision that makes all important government appointments subject to political control. The Appointments Clause specifies that the most important executive and judicial positions are appointed by the president, subject to advice and consent from the Senate. The clause goes on to state, “Congress may by law vest the Appointment of such inferior Officers, as they think proper, in the President alone, in the Courts of Law, or in the Heads of Departments.”

BPAI judges seem to be “inferior officers,” based on the criteria set down in the Supreme Court's 1991 decision in Freytag v. Commissioner of Internal Revenue.

In that case, the Court held that “special tax judges” of the U.S. Tax Court were inferior officers subject to the Appointments Clause, and not merely employees of the Tax Court, because their office was established by statute; they performed “more than ministerial tasks”; they “take testimony, conduct trials, rule on the admissibility of evidence, and have the power to enforce compliance with discovery orders”; and they “exercise significant discretion.” BPAI judges meet all these criteria, and they exercise greater power than the tax judges at issue in Freytag.

Patent Problems
The Director of the PTO is not constitutionally empowered to appoint inferior officers, according to most legal experts. They point to the Supreme Court's ruling in Freytag that, for purposes of the Appointments Clause, departments are “executive divisions like Cabinet-level departments.” The PTO, by contrast, is merely an agency within the Department of Commerce.

“There is no doubt,” says John McGinnis, who teaches constitutional law at Northwestern University Law School. “The unconstitutionality of these [BPAI] appointments is clear.”
This creates a huge problem for the nation's patent system. Of the BPAI's 74 judges, at least 47 have been appointed since March 2000. If their appointments are indeed unconstitutional, they would be unable to hear new cases, and this would slow future PTO patent appeals to a crawl (at least until the 1999 law was changed and new judges could be appointed to BPAI panels). “The remaining judges couldn't handle the volume of cases,” Duffy says.

Even more importantly, if most BPAI judges' appointments were unconstitutional, this would throw into question tens of thousands of BPAI rulings made since March 2000. Patent applications approved by the Board could be attacked on constitutional grounds. Patent applications rejected by the BPAI could get another bite at the apple. Settled expectations could go out the window.

“It would be chaotic,” says Carl Davis, a partner at Baker, Donelson, Bearman Caldwell & Berkowitz.

Chaotic Consequences
Translogic thus puts the Supreme Court in an awkward position. The Court needs to uphold the Constitution, but it doesn't want to throw the patent system into chaos.

Many legal observers expect the Supreme Court to walk a fine line in Translogic. They predict the Court will rule the BPAI judges are unconstitutional but limit the retroactive effects of this ruling. Translogic itself is arguing for a constitutional ruling that would affect only those BPAI decisions in which a party's right to appeal has not yet elapsed. This would protect the vast majority of BPAI rulings since 2000.

Even a Supreme Court ruling that has largely prospective effects, however, would create complications for ongoing or recently decided BPAI cases. There's at least an 83 percent chance, based on data from March 2007 to March 2008, that a current BPAI panel will contain at least one judge appointed after March 2000.

Because of constitutional infirmity, the results in these cases may not be worth the paper they are printed on.

So businesses are now facing the prospect of spending large amounts of time and money to obtain BPAI verdicts that may well be useless. And they have no good options.
“Companies are litigating cases worth hundreds of millions of dollars before an unconstitutional board, and the decisions are subject to attack,” Duffy says. “It is an intolerable situation.”