Court Opinion

ID: 4453818
Source: CourtListenerOpinion
Date Created: 2019-11-07 16:01:04.837496+00
Date Added: 2024-06-11T14:25:24.087795
License: Public Domain

NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                ______________________

                   BEDGEAR, LLC,
                      Appellant

                           v.

 FREDMAN BROS. FURNITURE COMPANY, INC.,
                  Appellee
           ______________________

            2018-2082, 2018-2083, 2018-2084
                ______________________

    Appeals from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in Nos. IPR2017-
00350, IPR2017-00351, IPR2017-00352.
                 ______________________

               Decided: November 7, 2019
                ______________________

   K. LEE MARSHALL, Bryan Cave Leighton Paisner LLP,
San Francisco, CA, argued for appellant. Also represented
by JOSEPH J. RICHETTI, ALEXANDER DAVID WALDEN, New
York, NY.

   JASON R. MUDD, Erise IP, P.A., Overland Park, KS, ar-
gued for appellee. Also represented by ERIC ALLAN
BURESH.
               ______________________
2               BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.

     Before NEWMAN, DYK, and STOLL, Circuit Judges.
          Opinion for the court filed PER CURIAM.
Opinion concurring in the judgment filed by Circuit Judge
      DYK, in which Circuit Judge NEWMAN joins.
PER CURIAM.
    In its opening brief, Bedgear, LLC argues that the
three final written decisions at issue in this appeal exceed
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). This
court recently decided this issue in Arthrex, Inc. v. Smith
& Nephew, Inc., No. 18-2140 (Fed. Cir. Oct. 31, 2019). Ac-
cordingly, the Board’s decisions in Nos. IPR2017-00350,
IPR2017-00351, and IPR2017-00352 are vacated and the
case is remanded to the Board for proceedings consistent
with this court’s decision in Arthrex.
                VACATED AND REMANDED
                             COSTS
    No costs.
        NOTE: This disposition is nonprecedential.

  United States Court of Appeals
      for the Federal Circuit
                 ______________________

                    BEDGEAR, LLC,
                       Appellant

                            v.

 FREDMAN BROS. FURNITURE COMPANY, INC.,
                  Appellee
           ______________________

            2018-2082, 2018-2083, 2018-2084
                ______________________

    Appeals from the United States Patent and Trademark
Office, Patent Trial and Appeal Board in Nos. IPR2017-
00350, IPR2017-00351, IPR2017-00352.
                 ______________________

DYK, Circuit Judge, with whom Circuit Judge NEWMAN
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 sub-
ject to at will removal), it seems to me that the remedy as-
pect of Arthrex (requiring a new hearing before a new
panel) is not required by Lucia v. S.E.C., 138 S. Ct. 2044
(2018), imposes large and unnecessary burdens on the sys-
tem of inter partes review, requiring potentially hundreds
2              BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.

of new proceedings, and involves unconstitutional prospec-
tive decision-making.
                              I
    In Arthrex, the panel held that the appointment of Ad-
ministrative Patent Judges (“APJs”) would be unconstitu-
tional if subject to the removal provisions of title 5. The
panel avoids this result by holding that those removal pro-
visions 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 infe-
rior officers and remedy the constitutional appointment
problem.” Arthrex, 2019 WL 5616010, at *1. Instead 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 appointed at the time the decision was ren-
dered.” Arthrex, 2019 WL 5616010, at *11.
    This holding is in part constitutional interpretation
and part statutory construction. In essence, the panel im-
properly makes the application of its decision prospective
only, so that only PTAB decisions after the date of the
panel’s opinion are rendered by a constitutionally ap-
pointed panel. In my view, the panel improperly declined
to make its ruling retroactive so that the actions of APJs in
the past were compliant with the constitution and the stat-
ute. In this respect, I think that the panel in Arthrex ig-
nored governing Supreme Court authority.
                             II
     I first address the Arthrex panel’s claim that Lucia
mandates remanding for a new hearing. In Lucia, the is-
sue 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 2051 & n.3 (2018). The Supreme
BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.                  3

Court held that “[t]he Commission’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, 2051.
     While the case was pending, “the SEC issued an order
‘ratif[ying]’ the prior appointments of its ALJs,” thus cur-
ing the constitutional defect. 1 Id. at 2055 n.6 (alteration in
original) (quoting SEC Order, In re: Pending Administra-
tive Proceedings (Nov. 30, 2017), https://www.sec.gov/liti-
gation/opinions/2017/33-10440.pdf). The Supreme Court
nevertheless held that “the ‘appropriate’ remedy for an ad-
judication tainted 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, whereas 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 are neces-
sarily retrospective as well as prospective.
                              III
    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 be-
came law.’” Id. at 313 n.12 (emphasis added). The same is
true as 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 appointments. Lucia,
138 S. Ct. at 2055 n.6.
4              BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.

the common law and our own decisions’ have ‘recognized a
general rule of retrospective effect for the constitutional de-
cisions 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 Reyn-
oldsville decision:
    In fact, what a court does with regard to an uncon-
    stitutional 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 review 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 Reynoldsville
Casket Co. v. Hyde, 514 U.S. 749 (1995), the Court reversed
an Ohio Supreme Court decision declining to apply a con-
stitutional decision as to a limitations period retroactively.

    2    Harper overruled prior caselaw that provided for
exceptions allowing prospective application 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 application of a
new rule of law.”).
BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.                      5

The Court rejected the respondent’s argument that the
Ohio Supreme Court’s decision was based on “remedy” ra-
ther 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 ret-
roactive application of a constitutional ruling is not out-
come-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 unconstitu-
tional removal provisions. Marbury v. Madison, 1 Cranch
137, 178, 2 L. Ed. 60 (1803). Since no Congressional or
agency action is required in order to render the appoint-
ment of the PTAB judges constitutional, when the PTAB
judges decided cases in the past, they did not act improp-
erly. 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 of
curing the constitutional violation, or (2) a previously ex-
isting, independent legal basis (having nothing to do with
retroactivity) for denying relief, or (3) as in the law of qual-
ified immunity, a well-established general legal rule that
trumps the new rule of law, which general rule re-
flects both reliance interests and other significant policy
justifications, or (4) a principle of law, such as that of ‘fi-
nality’ . . . , that limits the principle of retroactivity itself.”
Reynoldsville, 514 U.S. at 759.
6              BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.

                             IV
    While the Circuits appear to be divided as to the retro-
activity issue in Appointments Clause and similar cases, 4
the very Supreme Court decisions relied on in Arthrex have
given retroactive effect to statutory constructions or consti-
tutional 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 struc-
tured because Congress “[g]rant[ed] both removal protec-
tion and full agency leadership to a single FHFA Director.”
938 F.3d at 591. It declined to invalidate prior agency ac-
tions. 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. 595.
    In 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. Cir-
cuit found that the appointments of the Copyright Royalty
Judges in the Library of Congress violated the Appoint-
ments Clause because they could be removed only for
cause. Intercollegiate Broad. Sys., Inc., 684 F.3d at 1334.
The court invalidated the for-cause restriction on the re-
moval of the judges, rendering them “validly appointed in-
ferior officers.” Id. at 1340–41. Yet, the D.C. Circuit
declared that “[b]ecause the Board’s structure was uncon-
stitutional at the time it issued its determination, we va-
cate and remand the determination.” Id. at 1342. These
two cases were not based on Supreme Court precedent, did
not consider the Supreme Court precedent suggesting a dif-
ferent result, and were an apparent departure from the
Court’s rulings in similar circumstances.
BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.                 7

Clause violations. In Free Enterprise Fund v. Public Co.
Accounting Oversight Bd., 561 U.S. 477 (2010), the SEC’s
Public Company Accounting Oversight Board had insti-
tuted an investigation against an accounting firm, Beck-
stead 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 im-
properly 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 Exec-
utive’s oversight [i.e., by limiting removal], this Act sub-
verts 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 severed
the unconstitutional removal provisions from the remain-
der of the statute, leaving the rest of relevant act fully op-
erational 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 Constitu-
tion, . . . 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 ex-
plained that Plaintiffs are only “entitled to declaratory re-
lief 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 re-
lief not specifically granted by this judgment is hereby
8              BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.

    So too in Edmond, past actions by the Coast Guard
Court of Criminal Appeals were not set aside. The criminal
defendants’ convictions had been affirmed by the Coast
Guard Court of Criminal Appeals. Edmond v. United
States, 520 U.S. 651, 655 (1997). The defendants con-
tended that the Coast Guard Court of Criminal Appeals
judges had not been properly appointed, rendering the con-
victions invalid. See id. The issue was “whether Congress
ha[d] authorized the Secretary of Transportation to ap-
point civilian [judges to] the Coast Guard Court of Criminal
Appeals, and if so, whether this authorization [wa]s consti-
tutional under the Appointments Clause of Article II [be-
cause the judges were inferior officers].” Id. at 653.
     The Court construed the relevant statutes so that “Ar-
ticle 66(a) d[id] not give Judge Advocates General author-
ity to appoint Court of Criminal Appeals judges; [and] that
§ 323(a) d[id] give the Secretary of Transportation author-
ity 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 power to ‘appoint’ even infe-
rior officers of the United States.” Id. The Court then
found that the judges of the Coast Guard Court of Criminal
Appeals are inferior officers and that “[their] judicial ap-
pointments [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 were rendered invalid.
   In Appointments Clause cases, the 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. FURNITURE CO.                9

defect had not been cured 6 or where the cure was the result
of non-judicial action. 7 The contrary decision in Arthrex is
inconsistent 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 un-
constitutionally composed panel); N.L.R.B. v. Noel Can-
ning, 573 U.S. 513, 519, 520 (2014) (affirming the DC
Circuit in vacating an NLRB order finding a violation be-
cause the Board lacked a quorum as “the President lacked
the power to make the [Board] recess appointments here at
issue”); see also Bandimere v. Sec. & Exch. Comm’n, 844
F.3d 1168, 1171, 1188 (10th Cir. 2016) (setting aside opin-
ion of an improperly appointed SEC ALJ where “the SEC
conceded the ALJ had not been constitutionally ap-
pointed”).
    7    See 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 de-
spite Mine Commission’s attempt to cure the improper ap-
pointment during judicial review).
    8    The difficulty of identifying at what point in time
the appointments became effective is evident. Is it when
then panel issues the decision, when the mandate issues,
when en banc review is denied, when certiorari is denied,
or (if there is an en banc proceeding) when the en banc
court affirms the panel, or (if the Supreme Court grants
review) when the Supreme Court affirms the court of ap-
peals decision?
10            BEDGEAR, LLC v. FREDMAN BROS. FURNITURE CO.

    I respectfully suggest that Arthrex was wrongly de-
cided on the issue of remedy. As a result of the Arthrex
construction, APJs were properly appointed by the PTO Di-
rector/Under-Secretary of Commerce and their prior deci-
sions are not invalid.