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
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 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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 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.
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 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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    The petitions for panel rehearing are denied.




         May 13, 2020
            Date
