While Congress can create fee-shifting statutes, 35 U.S.C. § 145 did not reflect explicit congressional authorization for fee-shifting that would displace the American Rule.
The Federal Circuit en banc affirmed a district court’s decision that a patent applicant who challenges an adverse decision of the U.S. Patent and Trademark Office (“USPTO”) in court and loses, is not required to pay the PTO’s attorney’s fees. See NantKwest, Inc. v. Iancu, No. 2016-1794, 2018 (Fed. Cir. July 27, 2018) (Before Prost, C.J., Newman, Lourie, Dyk, Moore, O’Malley, Reyna, Wallach, Taranto, Hughes, and Stoll, J.) (Opinion for the court, Stoll, J., joined by Newman, Lourie, Moore, O’Malley, Wallach, and Taranto, J.) (Dissenting opinion, Prost, C.J., joined by Dyk, Reyna, and Hughes, J.)
NantKwest filed suit in district court under 35 U.S.C. § 145 to contest the PTO’s rejection of its patent application. The USPTO prevailed and filed a motion for reimbursement of all of its litigation expenses, including attorney’s fees. 35 U.S.C. § 145 requires that “all expenses of the proceeding be paid by the applicant,” which the USPTO claimed included their fees and costs.
The district court denied the PTO’s motion with respect to attorney’s fees. Under the “American Rule,” each party to a proceeding is generally required to pay their own attorney’s fees regardless of the outcome, which precluded the PTO from recovering fees. The PTO appealed to the Federal Circuit, where a split panel reversed the district court. The panel found that the “all expenses” language of 35 U.S.C. § 145 allowed the PTO to recover attorney’s fees, despite the American Rule. The Federal Circuit then voted sua sponte to hear the appeal en banc and vacated the panel’s judgment.
In the en banc proceeding, the Federal Circuit found Supreme Court precedent mandated that the American Rule must be applied as a starting point when determining whether attorney’s fees should be shifted between parties. While Congress can create fee-shifting statutes, 35 U.S.C. § 145 did not reflect explicit congressional authorization for fee-shifting that would displace the American Rule. The Court examined the historical meaning of “expenses” in Section 145, and well as modern definitions, and found that “expenses” generally did not include attorney’s fees. The Court also considered a body of case law wherein expenses and attorney’s fees were two separate categories of reimbursements and compared Section 145 with language in other areas of the Patent Act, such as 35 U.S.C. § 285, where “attorney’s fees” language was explicitly included for recovery purposes. Ultimately, the PTO could not recover attorney’s fees as the prevailing party under Section 145 and the Court affirmed the district court’s denial of the PTO’s motion for attorney’s fees.
Judge Prost’s Dissent
Judge Prost dissented, joined by Judges Dyk, Reyna, and Hughes. She concluded that the plain language of Section 145 requiring that the applicant must pay all expenses of the proceedings, which would include attorney’s fees. Judge Prost looked at language regarding the meaning of “expenses” in the Patent Act of 1836 and found that Congress understood that “salaries,” including those for attorneys, were within the scope of “expenses” recoverable by the PTO. The dissent also found that differences in language concerning expenses and attorney’s fees between Section 145 and Section 285 were not significant for the purpose of statutory construction. Section 145 allows patent applicants to contest the PTO’s rejection of their patent in district court. Therefore, attorney’s fees under this Section should be viewed as akin to examination expenses that are “a part of the application for the patent” and the responsibility of the applicant, rather than traditional attorney’s fees in litigation.
An applicant who challenges an adverse decision of the Patent and Trademark Office in district court is not required to pay the Patent and Trademark Office’s attorney’s fees.
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