No. 20-74
`
`IN THE
`Supreme Court of the United States
`_________
`UNITED STATES OF AMERICA,
`Petitioner,
`
`v.
`
`IMAGE PROCESSING TECHNOLOGIES LLC, ET AL,
`Respondents.
`
`_________
`On Petition for a Writ of Certiorari to the
`United States Court of Appeals
`for the Federal Circuit
`_________
`MEMORANDUM FOR RESPONDENT MERCK
`SHARP & DOHME CORP.
`_________
`
`CATHERINE E. STETSON
`Counsel of Record
`HOGAN LOVELLS US LLP
`555 Thirteenth St., N.W.
`Washington, DC 20004
`(202) 637-5491
`cate.stetson@hoganlovells.com
`KRISTINA ALEKSEYEVA
`HOGAN LOVELLS US LLP
`390 Madison Avenue
`New York, NY 10017
`
`Counsel for Respondent Merck Sharp & Dohme Corp.
`
`
`
`IN THE
`Supreme Court of the United States
`_________
`UNITED STATES OF AMERICA,
`Petitioner,
`
`v.
`
`IMAGE PROCESSING TECHNOLOGIES LLC, ET AL,
`Respondents.
`
`_________
`On Petition for a Writ of Certiorari to the
`United States Court of Appeals
`for the Federal Circuit
`_________
`MEMORANDUM FOR RESPONDENT MERCK
`SHARP & DOHME CORP.
`_________
`
`CATHERINE E. STETSON
`Counsel of Record
`HOGAN LOVELLS US LLP
`555 Thirteenth St., N.W.
`Washington, DC 20004
`(202) 637-5491
`cate.stetson@hoganlovells.com
`KRISTINA ALEKSEYEVA
`HOGAN LOVELLS US LLP
`390 Madison Avenue
`New York, NY 10017
`
`Counsel for Respondent Merck Sharp & Dohme Corp.
`
`
`
`QUESTIONS PRESENTED
`1. Whether, for purposes of the Appointments
`Clause, administrative patent judges of the U.S.
`Patent and Trademark Office are principal officers
`who must be appointed by the President with the
`Senate’s advice and consent, or inferior officers
`whose appointment Congress has permissibly vested
`in a department head.
`2. Whether the court of appeals erred by
`adjudicating Appointments Clause challenges that
`had not first been presented to the agency.
`
`(i)
`
`
`
`ii
`
`RULE 29.6 DISCLOSURE STATEMENT
`Respondent Merck Sharp & Dohme Corp. is a sub-
`sidiary of Merck & Co., Inc., which owns 10% or more
`of respondent’s stock.
`
`
`
`iii
`TABLE OF CONTENTS
`
`Page
`QUESTIONS PRESENTED ........................................ i
`RULE 29.6 DISCLOSURE STATEMENT ................. ii
`TABLE OF AUTHORITIES ....................................... iv
`INTRODUCTION ........................................................ 1
`STATEMENT .............................................................. 3
`ARGUMENT ............................................................... 6
`I. THIS PETITION RAISES THE SAME
`QUESTIONS AS ARTHREX ........................... 6
`II. THIS COURT SHOULD REVERSE
`THE FEDERAL CIRCUIT’S
`JUDGMENT IN ARTHREX, AND
`THEN GRANT, VACATE, AND
`REMAND THIS CASE ..................................... 8
`CONCLUSION .......................................................... 11
`
`
`
`iv
`TABLE OF AUTHORITIES
`
`Page(s)
`
`CASES:
`Arthrex, Inc. v. Smith & Nephew, Inc.,
`941 F.3d 1320 (Fed. Cir. 2019) .................... passim
`Bedgear, LLC v. Fredman Bros. Furniture
`Co.,
`783 F. App’x 1029 (Fed. Cir. 2019) ........................ 7
`Edmond v. United States,
`520 U.S. 651 (1997) ................................................ 8
`Fairbank v. United States,
`181 U.S. 283 (1901) ................................................ 7
`In re DBC,
`545 F.3d 1373 (Fed. Cir. 2008) .............................. 9
`NLRB v. Noel Canning,
`573 U.S. 513 (2014) ................................................ 9
`Polaris Innovations Ltd. v. Kingston
`Technology Co.,
`792 F. App’x 820 (Fed. Cir. 2020) ................ passim
`Regan v. Time, Inc.,
`468 U.S. 641 (1984) ................................................ 7
`Trading Techs. Int’l, Inc. v. IBG LLC,
`771 F. App’x 493 (Fed. Cir. 2019), cert. de-
`nied, 140 S. Ct. 955 (2020) ................................... 10
`United States v. L. A. Tucker Truck Lines,
`Inc.,
`344 U.S. 33 (1952) ................................................ 10
`STATUTES:
`5 U.S.C. § 7513(a) ..................................................... 3
`35 U.S.C. § 1(a) ......................................................... 3
`35 U.S.C. § 2(a)(1) ..................................................... 3
`
`
`
`v
`TABLE OF AUTHORITIES—Continued
`Page(s)
`35 U.S.C. § 3(c) ......................................................... 3
`35 U.S.C. § 6(a) ......................................................... 3
`35 U.S.C. § 6(b) ......................................................... 3
`35 U.S.C. § 103 ......................................................... 3
`35 U.S.C. § 141(c) ...................................................... 3
`35 U.S.C. § 144 ......................................................... 3
`35 U.S.C. § 319 ......................................................... 3
`RULE:
`Sup. Ct. R. 12.4 ......................................................... 5
`
`
`
`No. 20-74
`
`IN THE
`Supreme Court of the United States
`_________
`UNITED STATES OF AMERICA,
`Petitioner,
`
`v.
`
`IMAGE PROCESSING TECHNOLOGIES LLC, ET AL,
`Respondents.
`
`_________
`On Petition for a Writ of Certiorari to the
`United States Court of Appeals
`for the Federal Circuit
`_________
`MEMORANDUM FOR RESPONDENT MERCK
`SHARP & DOHME CORP.
`_________
`
`INTRODUCTION
`In Arthrex, Inc. v. Smith & Nephew, Inc., the Fed-
`eral Circuit held that the Administrative Patent
`Judges of the United States Patent and Trademark
`Office—who number more than 200—are “principal
`officers” under the Constitution, and therefore must
`be appointed by the President with the advice and
`consent of the Senate. 941 F.3d 1320, 1325 (Fed. Cir.
`2019), petitions for cert. pending, Nos. 19-1434 (filed
`June 25, 2020), 19-1452 (filed June 29, 2020), and
`19-1458 (filed June 30, 2020). That ruling has led
`the Federal Circuit to vacate more than 100 deci-
`sions in administrative patent proceedings. See Pet.
`24. Both the United States and the private parties
`
`(1)
`
`
`
`2
`in Arthrex have petitioned this Court for certiorari to
`review the Federal Circuit’s decision, and another
`similar petition has been
`filed,
`see Polaris
`Innovations Ltd. v. Kingston Technology Co., 792 F.
`App’x 820 (Fed. Cir. 2020) (per curiam), petition for
`cert. pending, No. 19-1459 (filed June 30, 2020).
`In this case, Merck Sharp & Dohme Corp. success-
`fully challenged numerous patent claims owned by
`Pfizer Inc. before the Patent Trial and Appeal Board.
`Pfizer had not raised an Appointments Clause chal-
`lenge before the Board. The Federal Circuit never-
`theless granted Pfizer’s motion to vacate the Board’s
`decision after Arthrex issued. This case thus pre-
`sents the same questions that the parties in Arthrex
`and Polaris have already urged this Court to consid-
`er: whether APJs are inferior officers whose ap-
`pointment Congress has permissibly vested in a
`department head; if not, what the proper remedy is;
`and whether patent owners forfeit Appointments
`Clause challenges they do not present to the Patent
`Trial and Appeal Board. See Pet. I; see also Petition
`for Writ of Certiorari at I, No. 19-1434, supra.
`The United States has now petitioned for certiora-
`ri in Merck’s case, as well as a host of other cases
`involving those same issues. The United States has
`asked this Court to hold the cases, and then to grant,
`vacate, and remand in light of the Court’s disposition
`of Arthrex and Polaris. Merck agrees: A hold and
`GVR in this case would be the proper course.1
`
`1 In the event that this Court resolves the Appointments
`Clause challenge to the Board in a case other than Arthrex or
`Polaris, Merck respectfully requests that this Court hold and
`
`
`
`3
`STATEMENT
`1. The United States Patent and Trademark Office
`(USPTO) is an executive agency within the Depart-
`ment of Commerce “responsible for the granting and
`issuing of patents and the registration of trade-
`marks.” 35 U.S.C. § 2(a)(1); see id. § 1(a). The
`Patent Trial and Appeal Board (PTAB) is an admin-
`istrative tribunal within the USPTO that conducts
`several types of patent-related proceedings, including
`inter partes reviews. Id. § 6(a)-(b). The PTAB’s final
`decisions may be appealed to the Federal Circuit. Id.
`§§ 141(c), 144, 319.
`The PTAB comprises the Director, the Deputy Di-
`rector, the Commissioners for Patents and Trade-
`marks, and more than 200 Administrative Patent
`Judges (APJs). Id. § 6(a). APJs must be “persons of
`competent legal knowledge and scientific ability who
`are appointed by the Secretary [of Commerce], in
`consultation with the Director.” Id. And they are
`“subject to the provisions of title 5, relating to Feder-
`al employees,” id. § 3(c), which means they may be
`removed “only for such cause as will promote the
`efficiency of the service,” 5 U.S.C. § 7513(a).
`2. In the proceedings below, Merck, Sanofi, and SK
`Chemicals challenged claims 1-45 of U.S. Patent No.
`9,492,559 (owned by Pfizer) in an inter partes review
`before the PTAB. The PTAB found all of the chal-
`lenged claims unpatentable as obvious under 35
`U.S.C. § 103, and Pfizer appealed. At no point
`
`GVR this case in light of whatever other vehicle the Court
`chooses.
`
`
`
`4
`during the PTAB proceedings did Pfizer raise an
`Appointments Clause challenge.
`While Pfizer’s appeal was pending, the Federal
`Circuit decided Arthrex, which held that APJs were
`appointed in violation of the Appointments Clause
`and “sever[ed] the portion of the Patent Act restrict-
`ing removal of the APJs” to remedy that constitu-
`tional violation. 941 F.3d at 1325. The Federal
`Circuit further held that “[b]ecause the Board’s
`decision in [Arthrex] was made by a panel of APJs
`that were not constitutionally appointed at the time
`the decision was rendered,” a remand to the PTAB
`was necessary for a new hearing before “a new panel
`of APJs.” Id. at 1338, 1340. The Court also
`announced that its ruling and remedy would extend
`to all cases “where final written decisions were
`issued [by the PTAB] and where litigants present an
`Appointments Clause
`challenge
`appeal,”
`on
`regardless of whether such a challenge had been
`asserted during the agency proceedings. Id. at 1340
`(emphasis added).
`After the Arthrex decision, Pfizer filed a motion to
`vacate and remand rather than appealing the merits
`of the PTAB decision. Merck, Sanofi, and SK Chemi-
`cals all opposed. Pet. App. 6a. The USPTO inter-
`vened and argued that en banc reconsideration of
`Arthrex was likely and that to shunt this case back to
`the PTAB would be “inefficient and burdensome.”
`See Intervenor-USPTO Director’s Opposition to
`Appellant’s Motion to Remand in Light of the Ar-
`threx Decision at 3, Pfizer, Inc. v. Merck Sharp &
`Dohme Corp., No. 19-1871 (Fed. Cir. Dec. 27, 2019).
`In a summary, unpublished order, the Federal
`Circuit granted Pfizer’s motion, vacated the Board’s
`
`
`
`5
`decision, and remanded the case to the Board “for
`proceedings consistent with * * * Arthrex.” Pet. App.
`6a. The Federal Circuit subsequently denied en banc
`reconsideration of Arthrex, see Pet. 22, and of Pfizer’s
`appeal, Pet. App. 93a-94a.
`3. The United States and private parties peti-
`tioned for certiorari in Arthrex and the related Pola-
`ris case (which raises the same basic constitutional
`question as Arthrex, but does not include the same
`waiver issue as Arthrex and this case). The various
`petitions in those cases raise both the underlying
`constitutional merits question, as well as questions
`regarding waiver and remedy. The United States
`has also sought this Court’s review of the judgment
`below, along with 38 other judgments of the Federal
`Circuit that “involve identical or closely related
`questions.” Pet. 11 (quoting Sup. Ct. R. 12.4). The
`Government requests that this case be held pending
`this Court’s disposition of the Arthrex petition. See
`Petition for Writ of Certiorari, No. 19-1434, supra.
`
`
`
`6
`ARGUMENT
`This case presents the same questions as Arthrex
`and Polaris: whether APJs are inferior officers whose
`appointment Congress has permissibly vested in a
`department head; if not, what the proper remedy is;
`and whether patent owners forfeit Appointments
`Clause challenges they do not present to the PTAB.
`Compare Pet. I, with Petition for Writ of Certiorari
`at I, No. 19-1434, supra. Merck agrees with the
`United States that the Court should hold this
`petition pending the disposition of Arthrex and
`Polaris. If the Court grants certiorari in Arthrex and
`vacates or reverses the Federal Circuit’s judgment
`there, it should grant this petition, vacate the
`Federal Circuit’s decision below, and remand for
`further consideration.
`I. THIS PETITION RAISES THE SAME
`QUESTIONS AS ARTHREX.
`1. This case presents the same questions raised by
`the various petitions in Arthrex and Polaris. See
`Petitions for Writs of Certiorari, Nos. 19-1434, 19-
`1452, 19-1458 & 19-1459, supra. If the Court grants
`these petitions and ultimately reverses or modifies
`the Federal Circuit’s judgment, it will undercut the
`ruling below, which vacated and remanded the
`PTAB’s decision solely on the basis of Arthrex. Pet.
`App. 6a. The Court should therefore hold this peti-
`tion pending resolution of the Arthrex cases.
`2. The underlying Arthrex decision meets the tra-
`ditional criteria for certiorari: It modifies the struc-
`ture of a key federal agency, deems a federal statute
`unconstitutional as written, and imposes substantial
`“burdens on the system of inter partes review, requir-
`ing potentially hundreds of new proceedings” before
`
`
`
`7
`newly constituted panels of APJs. Bedgear, LLC v.
`Fredman Bros. Furniture Co., 783 F. App’x 1029,
`1030 (Fed. Cir. 2019) (Dyk, J., concurring in the
`judgment); see also Petition for Writ of Certiorari at
`14-15, No. 19-1434, supra.
`Any decision invalidating an Act of Congress on
`constitutional grounds warrants review. See Regan
`v. Time, Inc., 468 U.S. 641, 652 (1984) (“[A] federal
`court should act cautiously” when declaring a federal
`statute unconstitutional as doing so “frustrates the
`intent of the elected representatives of the people.”);
`Fairbank v. United States, 181 U.S. 283, 285 (1901)
`(“The constitutionality of an act of Congress is a
`matter always requiring the most careful considera-
`tion.”). And review is particularly appropriate where
`that decision strikes down a statutory framework
`that governs more than 200 agency adjudicators—
`ones who administer intellectual-property rights
`worth billions of dollars to boot. Accord Petition for
`Writ of Certiorari at 15, No. 19-1434, supra.
`The Federal Circuit’s waiver ruling—a categorical
`exception to ordinary rules of administrative exhaus-
`tion—is also problematic. If allowed to stand, it will
`force the prevailing parties in more than 100 cases to
`undergo duplicative proceedings unlikely to yield any
`meaningful public benefits. All the while, many
`patent claims that the PTAB has found unpatentable
`will remain in force, creating uncertainty in numer-
`ous industries.
`Unsurprisingly, all sides in the underlying Arthrex
`and Polaris litigations agree on the need for this
`Court’s review. See Petitions for Writs of Certiorari,
`Nos. 19-1434, 19-1452, 19-1458 & 19-1459, supra,
`and all briefs and memoranda in response (all urging
`
`
`
`8
`the Court to consolidate the cases and direct the
`parties to address a common set of questions that
`encompass all of the issues the parties have raised).
`II. THIS COURT SHOULD REVERSE THE
`FEDERAL CIRCUIT’S JUDGMENT
`IN
`ARTHREX, AND THEN GRANT, VACATE,
`AND REMAND THIS CASE.
`1. As explained in detail in the petitions filed in
`Arthrex, APJs are inferior officers under this Court’s
`precedent. “Generally speaking, the term ‘inferior
`officer’ connotes a relationship with some higher
`ranking officer or officers below the President,”
`because “[w]hether one is an ‘inferior’ officer depends
`on whether he has a superior.” Edmond v. United
`States, 520 U.S. 651, 662 (1997). Whether an officer
`“has a superior” does not turn on titles or formalities.
`Id. at 662-663. Instead, the key question is whether
`the officer’s “work is directed and supervised at some
`level by others who were appointed by Presidential
`nomination with the advice and consent of the Sen-
`ate.” Id. at 663. And to answer that question, courts
`must look at the cumulative effect of the supervisory
`mechanisms available to the various superior offic-
`ers. Thus, in Edmond, judges of the Coast Guard
`Court of Criminal Appeals were deemed inferior
`officers because the Coast Guard Judge Advocate
`General—a Senate-confirmed department head—
`could “prescribe uniform rules of procedure” for that
`court, “formulate policies and procedure[s]” for
`reviewing cases, and “remove a Court of Criminal
`Appeals judge from his judicial assignment without
`cause.” Id. at 664 (internal quotation marks omit-
`ted).
`
`
`
`9
`APJs are “directed and supervised” to at least the
`same degree. Id. at 663. The Director of the
`USPTO—who is appointed by the President and
`confirmed by the Senate—has unfettered discretion
`to decide whether to institute proceedings, whether
`(and to what extent) individual APJs actually serve
`on decisional panels, whether APJs’ decisions are
`binding on other panels, and whether particular
`cases should be reheard.
`In ruling that APJs were principal officers, the
`Federal Circuit not only ignored that precedent, it
`also failed to give proper weight to understandings of
`the political branches as to the status of APJs. Cf.
`NLRB v. Noel Canning, 573 U.S. 513, 524 (2014)
`(“[l]ong settled and established practice” of the co-
`equal branches is entitled to “great weight” in the
`separation-of-powers context (alteration in original;
`internal quotation marks omitted)). In 2008, the
`Patent Act was specifically amended to address
`Appointments Clause concerns raised in the context
`of inter partes reexaminations, authorizing the
`appointment of APJs by a Head of Department. See
`In re DBC, 545 F.3d 1373, 1380 (Fed. Cir. 2008)
`(Congress “redelegated the power of appointment to
`the Secretary” to “eliminat[e] the issue of unconstitu-
`tional appointments going forward.”). That amend-
`ment leaves no doubt that Congress and the Presi-
`dent understand APJs to be inferior officers. And
`the Federal Circuit erred when it gave no weight to
`the views of the political branches.
`2. Separately, the court of appeals erred in holding
`that a party’s failure to raise its Appointments
`Clause challenge before the USPTO should be ex-
`cused merely because the issue implicates the sepa-
`ration of powers and may have significant economic
`
`
`
`10
`consequences. This Court has long recognized that
`“[s]imple fairness to those who are engaged in the
`tasks of administration, and to litigants, requires as
`a general rule that courts should not topple over
`administrative decisions unless the administrative
`body not only has erred but has erred against objec-
`tion made at the time appropriate under its prac-
`tice.” United States v. L. A. Tucker Truck Lines, Inc.,
`344 U.S. 33, 37 (1952).
`That principle should have been dispositive in Ar-
`threx. If Arthrex (or any other patent owner) had
`raised its Appointments Clause challenge before the
`agency, it would not have been futile: The Director
`could have avoided any potential constitutional
`violation by declining to institute an inter partes
`review, or even vacating a prior institution decision,
`before the agency and the parties invested time and
`resources into determining patentability.
` That
`course would have accorded Arthrex complete relief.
`Indeed, the Federal Circuit had previously declined
`to address the very Appointments Clause challenge
`that is presented here when that challenge was
`raised for the first time on appeal. See Trading
`Techs. Int’l, Inc. v. IBG LLC, 771 F. App’x 493 (Fed.
`Cir. 2019) (per curiam) (mem.), cert. denied, 140 S.
`Ct. 955 (2020) (No. 19-522). Nothing warrants a
`different conclusion here.
`
`
`
`11
`CONCLUSION
`The petition for a writ of certiorari should be held
`pending this Court’s disposition of the petitions for a
`writ of certiorari in Arthrex and Polaris. If the Court
`disagrees with the Federal Circuit on the merits, the
`remedy, or forfeiture, then this petition should be
`granted, the
`judgment vacated, and the case
`remanded for further consideration.
`
`Respectfully submitted,
`
`CATHERINE E. STETSON
`Counsel of Record
`HOGAN LOVELLS US LLP
`555 Thirteenth St., N.W.
`Washington, DC 20004
`(202) 637-5491
`cate.stetson@hoganlovells.com
`KRISTINA ALEKSEYEVA
`HOGAN LOVELLS US LLP
`390 Madison Avenue
`New York, NY 10017
`
`Counsel for Respondent Merck Sharp & Dohme Corp.
`
`AUGUST 2020
`
`
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