Does the Arthrex Ruling Answer This Question About the CASE Act’s Constitutionality?
This alert was originally published by Phelps on July 16, 2021, and was expanded for additional publication by Law360.
The Copyright Alternative in Small-Claims Enforcement, or CASE, Act[1] creates a new small claims copyright court that is housed within the Library of Congress.
Such a court is unusual and potentially vulnerable to a number of potential challenges. For instance, there are questions about whether this small claims court violates the Constitution's separation of powers requirements or impermissibly deprives defendants of their rights to due process and jury trials.
One aspect of the unusual nature of the CASE Act is that it creates a tribunal that is housed in the legislative branch rather than the executive or judicial branches of government. That structure adds a level of complexity to an analysis of whether the Constitution allows for the creation of such a court.
One of the constitutional questions that is likely to arise concerning the CASE Act is whether it complies with the appointments clause.[2] The Constitution requires that officers of the U.S. be appointed by the president with the advice and consent of the Senate. So-called inferior officers, however, may be appointed by department heads, who were themselves appointed by the president with the approval of the Senate.
While many citizens may assume that the Constitution would want to keep politics out of courts, one of the purposes of the appointments clause is to ensure that politics remains a factor in administrative courts. The appointments clause is a check on the bureaucratic state, meant to empower the president with appropriate oversight from Congress.
In U.S. v. Arthrex Inc.,[3] the U.S. Supreme Court held in June that the appointment of administrative patent law judges who oversee patent inter partes review cases violated the appointments clause. Instead of striking down the law allowing appointment of those judges, the Supreme Court rewrote the statute to allow inter partes review to continue.
The Supreme Court's decision in Arthrex means that the Copyright Claims Board created by the CASE Act almost certainly will not be struck down for violating the appointments clause, but the court's decision leaves many unresolved questions about how the appointments clause might reshape the new copyright small claims court.
Are the copyright claims officers high officers of the U.S.?
Following Supreme Court precedent, Arthrex looked at three main factors to determine whether administrative patent law judges were high officers of the U.S.:
1. The ability to issue final decisions;
2. The level of oversight presidential appointees exercise over the officer; and,
3. Presidential appointees' power to remove the officer without cause.
A closely divided Supreme Court found that the patent law judges were high officers. As high officers lacking presidential appointment and Senate confirmation, their appointments were unconstitutional.
The Arthrex decision illuminates how the court is likely to view the CASE Act's copyright claims officers. There is little doubt copyright claims officers can issue final decisions and the statutory framework governing their work provides for minimal oversight.
Whether the copyright claims officers can be removed without cause is less clear. The CASE Act allows the Librarian of Congress to "sanction or remove a Copyright Claims Officer."[4] There is, however, no definition for that "sanction or remove."
In general, administrative law judges can only be fired for good cause. Pursuant to statute, an agency may remove or discipline administrative law judges only for good cause.[5]
However, that statute applies only to administrative law judges appointed pursuant to Title 5 of the U.S. Code, which includes executive departments and agencies as well as some independent agencies. That statute may not include copyright claims officers, who work within the domain of the Library of Congress, although Title 5 expressly does include the Government Accountability Office, another legislative agency.
Even if Title 5 were interpreted broadly enough to cover the Library of Congress, there is no definition of "administrative law judge" in the statute, and the CASE Act never calls the copyright claims officers administrative law judges. Because these officers preside over agency hearings on the record, they may be deemed to be administrative law judges.
In 1958, the Supreme Court unanimously ruled in Wiener v. U.S. that the president did not have the authority to remove members of the War Claims Commission.[6] The court held that the president did not have the power to remove a "quasi-judicial" official absent an explicit directive from Congress granting that power.
The court reasoned that where Congress, through the statutes it passed, intended for claims to be adjudicated on their merits there must protection for those quasi-judges to make merits determinations without facing removal. This federal common law may protect copyright claims officers from removal.
If copyright claims officers can only be removed for good cause, then the appointment of the copyright claims officers under the CASE Act is probably unconstitutional. This raises a number of thorny questions about how to address this constitutional violation.
How might courts rewrite the CASE Act to comply with the appointments clause?
Before Arthrex reached the Supreme Court, the U.S. Court of Appeals for the District of Columbia Circuit found the appointment of inter partes patent law judges unconstitutional. The circuit court rewrote the statute to allow the administrative patent law judges to be fired without cause.
While in Arthrex the Supreme Court was closely divided on the constitutionality of the administrative patent judges, seven justices agreed that the remedy was to simply make the decisions of the judges reviewable by the U.S. Patent and Trademark Office director, a position appointed by the president.
While the court did not provide much guidance as to how that process should work, the USPTO adopted a policy that essentially allows any party to ask for review by the director. If the director decides to review the case, the director can then substitute his or her own judgment to decide the outcome of inter partes cases. This resolution is consistent with what Chief Justice John Roberts' majority opinion described as an "almost-universal model of adjudication in the Executive Branch."[7]
The Arthrex decision will likely lead lower courts to rewrite statutes to give final decision-making authority to presidential appointees, instead of removing civil service protections from administrative law judges. Such a result is consistent with the Wiener decision, and it would seem simple enough to apply that remedy to the CASE Act.
However, there are questions about who has the authority to apply that remedy.
Can the board itself decide the CASE Act violates the appointments clause and simply rewrite the act consistent with Arthrex?
In the 2018 Lucia v. Securities and Exchange Commission decision, the Supreme Court determined that an SEC administrative law judge was not properly appointed pursuant to the appointments clause.[8] In that case "Lucia contended, [the administrative law judge] lacked constitutional authority to do his job."
It would seem to be a truism that an administrative law judge who was not properly appointed would not have an appointment sufficient to render to issue a final decision determining he or she was improperly appointed.
Then the question becomes whether the Librarian of Congress could make such a decision? The Lucia court seemed to indicate that the SEC itself had the authority to determine the administrative law judge was not properly appointed. Such a result would be anomalous, as the librarian would be deciding whether he or she had the authority to substitute his or her decision for the Copyright Claims Board's decision despite the fact the statute specifically limits the Librarian's ability to review these decisions.
Does participation in a claim before the board waive any arguments under the appointments clause?
The CASE Act attempts to work around its potential constitutional infirmities by being optional. That is, defendants can opt out of claims brought before the board.[9] The Supreme Court has been clear that failure to timely object to the appointment of a judge is a waiver of any claim under the appointments clause.[10]
However, the court has never taken up whether participating in a voluntary process while simultaneously objecting to the manner in which the administrative law judges are appointed is a waiver of any rights under the appointments clause. This creates uncertainty for any defendant wishing to avoid the expense of a district court litigation but also wanting to have the constitutionally guaranteed oversight of bureaucratic agencies.
While these questions are unanswered, it is clear that defendants who choose not to opt out of the Copyright Claims Board should be objecting to the appointment of the copyright claims officers and reserving their potential right to have any decision reviewed by the Librarian of Congress. However, those defendants should understand that it is possible that by participating in the Copyright Claims Board they are waiving their rights to have a constitutionally appointed decision maker.
In sum, it remains to be seen exactly what effect the Arthrex decision will have on the new Copyright Claims Board, but it appears likely the CASE Act will undergo revision to bring the bureaucratic appointment of board members in line with the appointments clause.
Our Intellectual Property Practice Group will stay up to date on the CASE Act as it is put into practice. Please contact Mary Ellen Roy, Andrew Coffman or any member of Phelps’ Intellectual Property team if you have questions or want advice and guidance.
