Judge Timothy Dyk of the U.S. Court of Appeals for the Federal Circuit.

The U.S. Court of Appeals for the Federal Circuit keeps raising the stakes on its big Arthrex appointments clause decision.

On Tuesday the court applied the reasoning of last fall's Arthrex v. Smith & Nephew beyond America Invents Act proceedings and reexaminations to the other primary portion of the Patent Trial and Appeal Board's caseload: appeals from PTO decisions rejecting patents in the first instance.

"We see no principled reason to depart here from the resulting remedy applied in Arthrex and VirnetX," Judge Timothy Dyk wrote for a unanimous panel in In re Boloro Global Limited.

Boloro is trying to patent systems and methods for secure purchase and payment transactions. A PTO examiner disallowed its three applications on Section 101 patent eligibility grounds. Boloro appealed to the PTAB, which affirmed by 2-1 votes in April of last year.

In October, the Federal Circuit ruled in Arthrex that the PTAB's 270-some administrative patent judges are principal officers of the United States, whose appointments should have been made by the president and confirmed by the Senate. The Federal Circuit remedied the problem by reading the APJs' civil service protections out of the Patent Act, which the court said would render them inferior officers, properly appointed by the secretary of commerce.

The Federal Circuit has ordered new hearings before a different panel for most of the 100 or so America Invents Act (AIA) trials that were pending appeal when it issued Arthrex. It's also been expanding the reach of the decision, first to inter partes reexaminations (a forerunner of AIA trials) and then to ex parte reexaminations.

Boloro moved to terminate its appeal in January and send the case back to the PTAB for a new hearing, saying the same logic should apply to ex parte appeals. "The APJs who presided over the hearings in the ex parte appeals and issued the final decisions in those applications were 'principal officers' under the Appointments Clause, yet were neither appointed by the president nor confirmed by the Senate," Oblon, McClelland, Maier & Neustadt partner Michael Casey argued in Boloro's motion.

The PTO argued that the director has absolute control over the patent examination process, with the authority to direct that a patent be allowed at any time. "Where a Senate-confirmed officer such as the director has always been able to unilaterally make decisions during the administrative proceeding—and can in no way have been stymied by an inadequately controlled board—there is no need for such a remand," the PTO argued.

Ropes & Gray partner Matthew Rizzolo, who's not involved in the case, said it's too bad the Federal Circuit didn't engage further with the PTO's argument. But with the court having already wrestled with the appointments clause in multiple panel opinions and concurrences and dissents from the denial of en banc review, it may simply be the Federal Circuit is ready to defer to a higher authority at this point.

"It's fully teed up for the Supreme Court," he said, with cert petitions last week from the government, patent owners and AIA petitioners. "You're going to have petitions raising it for inter partes reexaminations, ex parte reexaminations and ex parte appeals."

The PTAB decides many ex parte appeals. Even if most new hearings were to end in the same result, it could create a lot of new work for the PTO even as it continues trying to reduce its backlog of pending applications, Rizzolo said.

And if the Supreme Court were ultimately to agree with Arthrex Inc. that only Congress—not the Federal Circuit—can remedy the appointments clause problem? "This is something that could throw a wrench into things," Rizzolo said.