PTAB Appellants Must Pay USPTO’s Attorneys’ Fees Regardless of Outcome of Appeal

Nantkwest, Inc. v. Matal, No. 2016-1794,  (Fed. Cir. June 23, 2017) (Before Prost, C.J., Dyk, and Stoll, J.) (Opinion for the court, Prost, C.J.) (Dissenting opinion, Stoll, J.).

The Federal Circuit reversed the Eastern District of Virginia’s denial of the USPTO’s request for attorneys’ fees in connection with Nantkwest’s district court appeal of the PTAB rejection of its patent application. At issue was the correct interpretation of Section 145 of the Patent Act, namely the language “[a]ll of the expenses of the proceeding.” The Court held that Section 145 of the Patent Act requires the appellant to pay the USPTO’s attorneys’ fees, regardless of the outcome of the case.

The Court found support in legal dictionaries, treatises, and Supreme Court precedent to find that the ordinary meaning of “expenses” includes attorneys’ fees. See Taniguchi v. Kan Pacific Saipan, Ltd., 132 S. Ct. 1997, 2006 (2012). The majority thus interpreted Section 145 to “specifically” and “explicitly” authorized attorneys’ fees, successfully overcoming the “American Rule” presumption against awarding attorneys’ fees. According to the majority, Taniguchi distinguished “costs” as a subset of “expenses,” which supports the finding that “expenses” could be read to include attorneys’ fees. The Court also noted that the USPTO’s use of salaried employees is more akin to “expenses” than traditional attorneys’ fees.

In dissent, Judge Stoll emphasized the importance of starting with the “strong presumption against fee-shifting” under the American Rule. According to Judge Stoll, Section 145 did not do enough to rebut that strong presumption, because Congress has shown the ability to award attorneys’ fees explicitly in other sections of the Patent Act. Contemporaneous dictionaries and legislation support the conclusion that attorneys’ fees were not part of the common meaning of “expenses” at the time of enactment. Also, the public policies behind the American Rule (e.g., protecting poor litigants) support excluding attorney’s fees.

Practitioners will need to counsel client’s on the costs and expenses of appealing a PTAB decision to the Eastern District of Virginia, which include that the appellant shall pay for the USPTO’s attorneys’ fees, regardless of the outcome of the appeal.

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2 comments so far.

  • [Avatar for Michael Shore]
    Michael Shore
    July 6, 2017 11:21 am

    This is ridiculous and another example of how big tech companies are literally trying to kill the US patent system because as dominant market players, they do not need patents. Patents allow small companies to compete against the “big guys” on innovation. Take patents away, and the only thing that favors small companies, their ability and agility to innovate and create, is gone. A dysfunctional patent system means we will have one big version of a few things instead of thousands of versions of everything.

  • [Avatar for Joachim CS Martillo]
    Joachim CS Martillo
    July 2, 2017 09:56 am

    Weren’t the wrong dictionaries and treaties consulted?

    The Court found support in legal dictionaries, treatises, and Supreme Court precedent to find that the ordinary meaning of “expenses” includes attorneys’ fees. See Taniguchi v. Kan Pacific Saipan, Ltd., 132 S. Ct. 1997, 2006 (2012). The majority thus interpreted Section 145 to “specifically” and “explicitly” authorized attorneys’ fees, successfully overcoming the “American Rule” presumption against awarding attorneys’ fees. According to the majority, Taniguchi distinguished “costs” as a subset of “expenses,” which supports the finding that “expenses” could be read to include attorneys’ fees. The Court also noted that the USPTO’s use of salaried employees is more akin to “expenses” than traditional attorneys’ fees.

    I argue in Rigging the Patent System in Favor of Large Incumbent Corporations that because of the nature of the service that the USPTO provides and by GAAP (Generally Accepted Accounting Principles), the government attorneys represent a direct labor cost and not an expense under Accounts Payable as a technical expert would be treated, who prepared an expert report, was deposed, and testified in court.