ARTHREX, INC. v. SMITH & NEPHEW, INC.

Arthrex sued Smith & Nephew (S&N) alleging infringement of U.S. Patent No. 9,179,907 relating to a surgical device for attaching soft tissue to bone without requiring the surgeon to tie suture knots. Shortly before trial, S&N petitioned for inter partes review (IPR), and the Board ultimately found that prior art anticipated certain claims. In a previous appeal, Arthrex argued, and the CAFC agreed that the Board lacked constitutional authority to issue the agency’s final decision, but the Supreme Court vacated and remanded. On remand, Arthrex requested rehearing by the Director, but because the office of the Director was vacant, responsibility fell to the Commissioner who denied rehearing and ordered that the Board’s decision is the final decision of the agency. Arthrex appeals the Board’s decision and challenges the Commissioner’s denial of its request for the Director to review the Board’s decision and grant rehearing.  Arthrex argues it never got the remedy the Supreme Court ordered because no presidentially appointed, Senate-confirmed principal officer decided Arthrex’s petition for rehearing, in violation of (1) the Appointments Clause; (2) the Federal Vacancies Reform Act (FVRA); and (3) the Constitution’s separation of powers.  The CAFC finds that Arthrex’s Appointments Clause challenge is contrary to United States v. Eaton, 169 U.S. 331 (1898) and the Supreme Court’s prior decision in this case, and therefore concludes that the Commissioner’s exercise of the Director’s authority while that office was vacant did not violate the Appointments Clause. The CAFC also holds that the Commissioner’s order denying Arthrex’s rehearing request on the Director’s behalf did not violate the FVRA, which does not restrict who may perform the delegable functions and duties (such as deciding requests for rehearing Board decisions) of an absent PAS officer. Finally, because the President has unfettered power under the FVRA to strip the Commissioner of his temporary PAS-officer authority, the CAFC finds that the Commissioner’s exercise of that authority does not violate the Constitution’s separation of powers. With respect to the merits, the CAFC finds that substantial evidence supports the Board’s anticipation finding, and that the Board has the authority to resolve priority issues during IPR. Accordingly, the CAFC affirms the Board’s decision.

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