Innovate Articles

Reassessing PTAB Adjudication Post-Jarkesy 

Dax Sotero

The Supreme Court’s recent decision in Securities and Exchange Commission v. Jarkesy (2024)^[1] revived the Seventh Amendment as a structural limit on administrative adjudication. As Steve Vladeck observes in One First,^[2] Jarkesy is part of a line of other recent decisions such as Loper Bright Enterprises v. Raimondo (2024)^[3] and Ohio v. EPA (2024)^[4] that collectively “destabilize” the administrative state. In Jarkesy, the Supreme Court held that the SEC’s in-house fraud proceedings violated the jury trial right because the agency sought civil penalties analogous to common law damages, rather than remedies integral to a public rights scheme. The Supreme Court first distinguished public rights disputes from private-rights disputes in Murray’s Lessee v. Hoboken Land (1856),^[5] and refined that distinction across later cases, including Crowell v. Benson (1932),^[6] and Atlas Roofing Co. v. OSHA (1977)^[7] before reaffirming it in Granfinanciera v. Nordberg (1989).^[8] Public rights involve privileges created by Congress and administered by the executive while private rights disputes are those that historically belonged in common law courts.

When an agency imposes punitive sanctions or remedies, such as tort-like penalties, as opposed to remedial sanctions which merely compensate for actual harm or ensure orderly procedure, the agency may cross from “public rights” into the “private rights” threshold, thereby implicating the Seventh Amendment’s jury trial clause and Article III judicial review. Although the majority opinion in Jarkesy was directed to securities enforcement, as Justice Sotomayor warned in her dissent, the decision threatens “the constitutionality of hundreds of statutes and dozens of agencies that, for decades, have exercised congressionally granted authority to impose civil penalties in administrative proceedings.”^[9]

Applied to the Patent Trial and Appeal Board (PTAB), Jarkesy casts doubt on the constitutionality of the Board’s ability to impose punitive sanctions under 37 C.F.R. § 42.12.^[10] In particular, subsections (b)(3) and (b)(7) authorize adverse judgments as well as “other appropriate actions,” respectively, and thus empower the agency to punish misconduct in ways that resemble judicial contempt or civil penalties. In Oil States Energy Services, LLC v. Greene’s Energy Group, LLC (2018),^[11] the Supreme Court upheld the constitutionality of PTAB Inter Partes Review (IPR) adjudicatory proceedings to determine patent validity and found that patents fall squarely under the public rights doctrine because “the grant of a patent involves a matter ’arising between the government and others.’ By issuing patents, the PTO ’take[s] from the public rights of immense value, and bestow[s] them upon the patentee.’”^[12] However, Oil States did not address whether other aspects of PTAB proceedings, such as sanctions or fee awards, might implicate private rights. In OpenSky Industries v. VLSI Technology LLC (IPR2021-01064, 2023),^[13] the Director of the USPTO (at the time Kathi Vidal) entered a $413,000 sanction against a petitioner found to have abused the IPR process in bad faith. Though framed as compensatory, these facts arguably make the sanction substantively punitive and raise questions as to whether PTAB actions of this nature could trigger Article III and Seventh Amendment protections post-Jarkesy: the magnitude of the dollar sum; that the sanction punished a private party for misconduct unrelated to patent validity; that the sanction amount was discretionary and deterrent; and that the sanction was imposed by an Article II principal officer exercising Article I-delegated adjudicatory authority without jury review.

In Spectrum Solutions LLC v. Longhorn Vaccines and Diagnostics, LLC (IPR2021-00847, 2025),^[14] the PTAB initially cancelled all challenged patent claims as a sanction for litigation misconduct. Acting Director Kathi Vidal initially affirmed these sanctions in July 2024, just one month after Jarkesy, but then new Acting Director Coke Morgan Stewart vacated them on reconsideration in June 2025, determining that “absent extraordinary circumstances, the Board should never cancel claims it has not determined to be unpatentable as a sanction.”^[15] Director Stewart drew a distinction between this extreme measure and compensatory expenses, including attorney fees, which she deemed appropriate sanctions under 37 C.F.R. § 42.12(b)(6).^[16] While the temporal proximity to Jarkesy may be coincidental, Director Stweart’s distinctions between claim cancellation and monetary sanctions may not survive Jarkesy’s analytical framework. Jarkesy’s inquiry focuses on whether the remedy resembles common law damages requiring jury trial, not on whether it operates on a substantive right, such as patent validity, versus procedural conduct. In Goodyear Tire & Rubber Co. v. Haeger (2017),^[17] the Supreme Court distinguished between compensatory sanctions, those limited to reimbursing actual, documented costs, and punitive sanctions imposed to deter future misconduct. Although the Director in OpenSky calculated the $413,000 fee award under the lodestar method—a standard approach multiplying the hours reasonably spent by a reasonable hourly rate—and described it as compensatory, the decision’s deterrent rationale and discretionary language emphasizing the need to preserve the integrity of the IPR process give the sanction a punitive tinge.^[18] As previously mentioned, the award also punished OpenSky for conduct unrelated to patent validity. Under Jarkesy, even such functionally punitive monetary remedies, when imposed administratively, may implicate Article III and Seventh Amendment protections regardless of their compensatory form.

To reconcile PTAB practices in light of Jarkesy, Congress could require that any PTAB sanction exceeding a fixed monetary threshold or involving an adverse judgment be certified to a U.S. District Court for de novo review, including the availability of a jury if the remedy is punitive in nature. This would preserve the efficiency of administrative adjudication for ordinary procedural sanctions while ensuring Article III and Seventh Amendment compliance for penalties resembling common law damages. Alternatively, the USPTO could amend 37 C.F.R. § 42.12 to expressly define “remedial” sanctions as limited to compensation for identifiable expenses and prohibit any sanction imposed for deterrence or punishment. The regulation could require that deterrent sanctions be referred to an Article III court for enforcement. This solution would insulate the agency from Jarkesy-based constitutional challenges while preserving the Director’s oversight authority. Finally, if Congress and the USPTO do nothing as so far Jarkesy poses more of a theoretical than a practical threat to the PTAB, consider how patent owners can preserve Seventh Amendment rights if the unlikely happens.