N OTE : This disposition is nonprecedential.


# United States **Court of Appeals**  **for the Federal Circuit**

______________________
BEDGEAR, LLC, Appellant

v.

FREDMAN BROS. FURNIT URE COMPANY, INC., Appellee

______________________

2018

- 2082, 2018

- 2083, 2018

- 2084

______________________ Appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No s . IPR2017

- 00350, IPR2017

- 00351, IPR2017

- 00352.

______________________

Decided: November 7, 2019

______________________

K. L EE M ARSHALL
, Bryan Cave Leighton Paisner LLP, San Francisco, CA, argued for appellant. Also represented by J OSEPH J. R ICHETTI
, A LEXANDER D AVID W ALDEN , New York, NY.

J ASON R. M UDD
, Erise IP, P.A., Overland Park, KS, argued for appellee. Also represented by E RIC A LLAN B URESH

.

______________________BEDGEAR
, LLC v. FREDMAN BROS

. FURNITURE CO

. 2

Before N EWMAN
, D YK
, and S TOLL
, Circuit Judges.

Op inion for the court filed P ER C URIAM

. Opinion concurring in the judgment filed by Circuit Judge
D YK , in which Circuit Judge N EWMAN joins.

P ER C URIAM

. In its opening brief, Bedgear, LLC argues that the three final written decisions at issue in this appeal e xceed the scope of the Patent Trial and Appeal Board’s authority and violate the Constitution’s Appointments Clause

. See Appellant’s Br. 66 (citing U.S. Const. art. II, § 2, cl. 2). Th is court recently decided this issue in Arthrex, Inc. v. Smith & Nephew, Inc. , No. 18

- 2140 (Fed. Cir. Oct. 31, 2019) . Accordingly, the Board’s decision s in Nos. IPR2017

- 00350, IPR2017

- 00351, and IPR2017

- 00352 are vacated and the case is remanded to the Boar d for proceedings consistent with this court’s decision in Arthrex

. VACATED AND REMANDED

C OSTS

No c osts.N OTE : This disposition is nonprecedential.


# United States **Court of Appeals**  **for the Federal Circuit**

______________________
BEDGEAR, LLC, Appellant

v.

FREDMAN BROS. FURNIT URE COMPANY, INC., Appellee

______________________

2018

- 2082, 2018

- 2083, 2018

- 2084

______________________ Appeals from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No s . IPR2017

- 00350, IPR2017

- 00351, IPR2017

- 00352.

______________________

D YK
, Circuit Judge

, with whom Circuit Judge N EWMAN joins, concurring in the judgment.

I agree that the panel here is bound to follow Arthrex, Inc. v. Smith & Nephew, Inc ., No. 2018

- 2140, 2019 WL 5616010 (Fed. Cir. Oct. 31, 2019)

. But, even putting to one side the question of whether Administrative Patent Judges (“APJs”) would have been improperly appointed (if not subject to at will removal)

, it seems to me that the remedy aspect of Arthrex (requiring a new hearing before a new

p anel) is not required by Lucia v. S.E.C. , 138 S. Ct. 2044 (2018) , imposes large and unnecessary burdens on the system of inter partes review, requiring potentially hundredsBEDGEAR
, LLC v. FREDMAN BROS

. FURNITURE CO

. 2

of new proceedings, and involve s unconstitutional prospective decision

- making.

I

In Arthrex, the panel held that the appointment of Administrative Patent Judges (“APJs”) would be unconstitutional if subject to the removal provisions of title 5 . The panel avoids this result by holding that those removal provisions are unconstitutional as applied to APJs , and that the unconstitutional removal provision may be severed from the remainder of the statute “ to render the APJs inferior officers and remedy the constitutional appointment problem .” Arthrex

, 2019 WL 5616010 , at *1

. I nstead of holding past actions by APJs valid, the Arthrex majority held those past actions invalid and remanded for a new hearing before a new panel “[b] ecause the Board’s decision in this case was made by a panel of APJs that were not constitutionally app ointed at the time the decision was rendered .” Arthrex

, 2019 WL 5616010 , at *11

. This holding is in part constitutional interpretation and part statutory construction. In essence, the panel improperly makes the application of its decision prospective

o nly

, so that only PTAB decisions after the date of thepanel’s opinion are rendered by a constitutionally appointed panel. In my view, the panel improperly declined to make its ruling retroactive so that the actions of APJs in the past were compl ia nt with the constitution and the statute. In this respect, I think that the p anel in Arthrex ignore d governing Supreme Court authority.

I I

I first address the Arthrex panel’s claim that Lucia mandat es remanding for a new hearing

. In Lucia , the issue was whether Securities and Exchange Commission (“SEC”) Administrative Law Judges (“ ALJs ”) were inferior officers that had to be appointed by an agency head

— the SEC. Lucia

, 138 S. Ct. at 205 1 & n.3 (2018)

. The SupremeBEDGEAR
, LLC v. FREDMAN BROS

. FURNITURE CO

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Court held that “[t]he Co mmission’s ALJs are ‘Officers of the United States,’ subject to the Appointments Clause.” Id. at 2055. The ALJs were found to be unconstitutionally appointed as “Officers of the United States” because they were appointed by “[o] ther staff members, rather than the Commission proper

. ” Id. at 2046, 205 1

. While the case was pending, “ the SEC issued an order

‘ ratif[ying] ’ the prior appointments of its ALJs

, ” thus curing the constitutional defect

. 1 Id. at 2055 n.6 (alteration in original) (quoting SEC Order

, In re: Pending Administrative Proceedings (Nov. 30, 2017), https://www.sec.gov/litigation/opinions/2017/33

- 10440.pdf ). The Supreme Courtnevertheless held that “the ‘appropriate’ remedy for an adjudication tain ted with an appointments violation is a new ‘hearing before a properly appointed’ official.” Id. at 2055 (quoting Ryder v. United States , 515 U.S. 183, 188 (1995)).

The difference between Lucia and Arthrex is that the fix in Lucia was an agency fix, whe reas the fix in Arthrex is a judicial fix. Agencies and legislatures generally act only prospectively, while a judicial construction of a statute or a holding that a part of the statute is unconstitutional and construing the statute to permit severance ar e necessarily retrospective as well as prospective.

II I

As the Supreme Court concluded in Rivers v. Roadway Exp., Inc. , 511 U.S. 298 (1994) , “[i] n construing a statute,

courts are ‘ explaining [their] understanding of what the statute has meant continuously since the date when it became law. ’ ” Id . at 313 n.12 (emphasis added). The same is

true a s to constitutional decisions , as Harper v. Virginia Dep ’ t of Taxation, 509 U.S. 86 (1993 ) confirmed : “‘ [B] oth

1 The Court declined to decide whether the agency cured the defect when it “ratified” the a ppointments. Lucia

, 138 S. Ct. at 2055 n.6.BEDGEAR
, LLC v. FREDMAN BROS

. FURNITURE CO

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the common law and our own decisions’ have ‘recognized ageneral rule of retrospective effect for the constitutional decisions of this Court.’” Id. at 94 (alteration in original) (quoting Robinson v. Neil , 409 U.S. 505, 507 (1973)). As Justice Scalia put it in his concurrence in the later Reynoldsville decision :In fact, what a court does with regard to an unconstitutional law is simply to ignore it. It decides the case “ disregarding the [unconstitutional] law

, ” Marbury v. Madison , 1 Cranch 137, 178 (1803) (emphasis added), because a law repugnant to the Constitution “is void, and is as no law,” Ex parte Siebold , 100 U.S. 371, 376 (1880).

Reynoldsville Casket Co. v. Hyde , 514 U.S. 749 , 760 (1995) (Scalia, J., concurring) ( alterations in original)

. In other words, “[w]hen [a c]ourt applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open on direct revi ew and as to all events, regardless of whether such events predate or postdate [the court’s] announcement of the rule.” Harper , 509 U.S. at 97 (1993). 2
The requirement for retroactivity applies to remedies as well , such as the remedy in this case

. In R eynoldsville Casket Co. v. Hyde , 514 U.S. 749 (1995), the Court reversed an Ohio Supreme Court decision declining to apply a constitutional decision as to a limitations period retroactively.

2 Harper overruled prior caselaw that provided for exceptions allowing prospective app lication of a new rule of law in constitutional and other cases. Reynoldsville Casket Co. v. Hyde , 514 U.S. 749, 752 (1995) (“ Harper overruled [a prior Supreme Court decision] insofar as the [prior] case (selectively) permitted the prospective

- only appli cation of a new rule of law.”).BEDGEAR
, LLC v. FREDMAN BROS

. FURNITURE CO

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The Court rejected the respondent’s argument that the Ohio Supre me Court’s decision was based on “remedy” rather than “non

- retroactivity” and held that accepting the Ohio Supreme Court’s “remedy” would “create what amounts to an ad hoc exemption from retroactivity.” Id. at 758. The Court noted only four circumstances where retroactive application of a constitutional ruling is not outcome

- determinative. 3 None is remotely relevant to Arthrex

. Thus, to be consistent with Harper

, the statute here

must be read as though the PTAB judges had always been constitutionally appointed , “disregarding” the unconstitutional removal provisions

. Marbury v. Madison , 1 Cranch 137, 178, 2 L.Ed. 60 (1803)

. Since n o Congressional or agency action is required in order to render the appo intment of the PTAB judges constitutional

, w hen the PTABjudges decided cases in the past, they did not act improperly. Thus, the past opinions rendered by the PTAB should be reviewed on the merits, not vacated for a new hearing before a different panel

.

3 Namely, where there is: “ (1) an alternative way ofcuring the constitutional violation, or (2) a previously existing, independent legal basis (having nothing to do with retroactivity) for denying relief, or (3) as in the law of qualified immunity, a well

- established general legal rule thattrumps the new rule of law, which general rule reflects both reliance interests and other significant policy justifications, or (4) a principle of law, such as that of ‘ finality ’

. . . , that limits the principle of retroactivity itself. ” Reynoldsville , 514 U.S. at 759

.BEDGEAR
, LLC v. FREDMAN BROS

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I V

While the Circuits appear to be divided as to the retroactivity issue in Appointments Clause and similar cases , 4

t he very Supreme Court decisions relied on in Arthrex havegiven retroactive effect to statutory constructions or constitutional decisions that remedied potential Appointment

4 In Collins v. Mnuchin , 938 F.3d 553 (5th Cir. 2019)

, the en banc Fifth Circuit found that the Federal Housing Finance Agency (“FHFA”) was unconstitutionally structured because Congress “[g] rant [ed] both removal protection and full agency leadership to a single FHFA Director .” 938 F.3d at 591. It declined to invalidate prior agency actions. Id. at 592. It concluded that the only appropriate remedy, and one that “fixes the

. . . purported injury,” is a declaratory judgment “removing the ‘for cause’ provision found unconstitutional.” Id. 59 5

. I n Intercollegiate Broadcasting and Kuretski , the D.C. Circuit reached the opposite result. See Intercollegiate Broad. Sys., Inc. v. Copyright Royalty Bd. , 684 F.3d 1332 (D.C. Cir. 2012) ; Kuretski v. Comm’r , 755 F.3d 929 (D.C. Cir. 2014)

. In Intercollegiate Broadcasting , the D.C. Circuit found that the appointments of the Copyright RoyaltyJudges in the Library of Congress violated the Appointments Clause because they could be removed only for

cause. Intercollegiate Broad. Sys., Inc. , 684 F.3 d at 1334. The court invalidated the for

- cause restriction on the removal of the judges, rendering them “validly appointed inferior officers.” Id. at 1340

– 41. Yet, the D.C. Circuitdeclared that “[b]ecause the Board’s structure was unconstitutional at the time it issued its determination, we vacate and remand the determination.” Id. at 1342. T hese

two cases were not based on Supreme Court precedent, did not consider the Supreme Court precedent suggesting a different result, and were an apparent depar ture from the Court’s rulings in similar circumstances

.BEDGEAR
, LLC v. FREDMAN BROS

. FURNITURE CO

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Clause violations . In Free Enter prise Fund v. Pub lic Co. Accounting Oversight Bd. , 561 U.S. 477 (2010) , the SEC’sPublic Company Accounting Oversight Board had instituted an investigation against an accounting firm, Beckstead and Watts (“B&W”). Id. at 487. B&W and another affiliated organization, Free Enterprise Fund, filed suit,asking the district court to enjoin the investigation as improperly instituted because members of the Board had not been constitutionally appointed. Id. The Supreme Court found that the statutory removal protections afforded to members of the Board were unconstitutional. Id. at 484.“By granting the Board executive power without the Executive’s oversight [i.e., by limiting removal], this Act subverts the President ’ s ability to ensure that the laws are faithfully executed

— as well as the public ’ s ability to pass judgment on his efforts.” Id. at 498. But the Court severedthe unconstitutional removal provisions from the remainder of the st atute, leaving the rest of relevant act fully operational and constitutional. Id. at 509.

The Court did not view this action as fixing the problem only prospectively. It refused to invalidate or enjoin the prior actions of the Board in instituting the investigation,explaining that “properly viewed, under the Constitution

, . . . the Board members are inferior officers” and “have been validly appointed by the full Commission.” Id. at 510,513. The Court remanded for further proceedings, but explained t hat Plaintiffs are only “entitled to declaratory relief sufficient to ensure that the reporting requirements and auditing standards to which they are subject will be enforced only by a constitutional agency accountable to the Executive.” Id. at 513. 5

5 On remand, the parties agreed that the Supreme Court’s decision did not require invalidating the Board’s prior actions. The agreed

- upon judgment stated : “[a] ll relief not specifically granted by this judgment is herebyBEDGEAR
, LLC v. FREDMAN BROS

. FURNITURE CO

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So too i n Edmond

, past actions by the Coast Guard Court of Criminal Appeals were not set aside. T he criminal defendants’ conviction s had been affirmed by the Coast Guard Court of Criminal Appeals. Edmond v. United States , 520 U.S. 651, 655 (1997). The de fendants contended that the Coast Guard Court of Criminal Appealsjudges had not been properly appointed, rendering the convictions invalid. See id. The issue was “whether Congress ha [d] authorized the Secretary of Transportation to appoint civilian [jud ges to] the Coast Guard Court of Criminal Appeals, and if so, whether this authorization [wa] s constitutional under the Appointments Clause of Article II [because the judges were inferior officers].” Id. at 653.

The Court construed the relevant statute s so that “Article 66(a) d [id] not give Judge Advocates General authority to appoint Court of Criminal Appeals judges; [and] that § 323(a) d [id] give the Secretary of Transportation authority to do so.” Id. at 658. The Court explained that “no other way to interpret Article 66(a) that would make it consistent with the Constitution” because “Congress could not give the Judge Advocates General pow er to ‘appoint’ even inferior officers of the United States.” Id. The Court then found that the judges of the Coast Guard Court of CriminalAppeals are inferior officers and that “[their] judicial appointments [by the Secretary]

. . . are therefore valid .” Id. at 666. Most significantly, the Court did not remand for a new hearing but rather “affirm[ed] the judgment of the Court of Appeals for the Armed Forces.” Id. Nowhere did the Court suggest that the actions taken before the Court’s construction we re rendered invalid.

In Appointments Clause cases, t he Supreme Court has required a new hearing only where the appointment’s

DENIED. ” See Judgment Order, Free Enter. Fund v. Pub. Co. Accounting Oversight Bd.

, C.A. No. 06

- 0217

- JR (D.D.C. Feb. 23, 2011), ECF No. 66.BEDGEAR
, LLC v. FREDMAN BROS

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defect had not be en cured 6 or where the cure was the result of non

- judicial action. 7 The contrary decision in Arthrex is inconsis tent with binding Supreme Court precedent and creates a host of problems in identifying the point in time when the appointments became valid

. 8

***

6 See Ryder v. United States , 515 U.S. 177, 182

– 83 (1995) (declining to apply the de facto officer doctrine to

preserve rulings made by an unconstitutionally appointed panel); Nguyen v. United States , 539 U.S. 69, 77, 83 (2003)(declining to leave “undisturbed” the judgments of an unconstitutionally composed panel); N.L.R.B. v. Noel Canning , 573 U.S. 513, 519, 520 (2014) (affirming the DCCircuit in vacating an NLRB order finding a violation because the Board lacked a quorum as “the President lacked the power to make the [Board] rece ss appointments here at issue”) ; see also Bandimere v. Sec. & Exch. Comm’n , 844F.3d 1168, 1171, 1188 (10th Cir. 2016) (setting aside opinion of an improperly appointed SEC ALJ where “the SECconceded the ALJ had not been constitutionally appointed”).

7 S ee Lucia , 138 S. Ct. at 2055 n.6 ; see also Jones Bros., Inc. v. Sec’y of Labor , 898 F.3d 669, 679 (6th Cir.2018) (improperly appointed ALJ’s decision vacated despite Mine Commission’s attempt to cure the improper appointment during judicial review).

8 Th e difficulty of identifying at what point in time the appointment s bec ame effective is evident . Is it when then panel issues the decision, when the mandate issues, when en banc review i s denied , when certiorari is denied,

or (if there is an en banc procee ding) when the en banc court affirms the panel

, or (if the Supreme Court grants review) when the Supreme Court affirms the court of appeals decision ?BEDGEAR
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I respectfully suggest that Arthrex was wrongly decided on the issue of remedy. As a result of the Arthrex construction, APJs were properly appointed by the PTO Director/Under

- Secretary of Commerce and their prior decisions are not invalid.