AIPLA: The Supreme Court Must Ensure the U.S. Government Adheres to the American Rule in Peter v. NantKwest

“We are aware of no other area of the law—and the government identifies none—in which a losing defendant or appellee has been authorized to collect attorneys’ fees from its successful opponent.”

attorneys fees - a patent or trademark applicant loses in front of the U.S. Patent and Trademark Office (USPTO), they can either appeal to a court of appeals or develop a fuller record by starting a district court action. If the applicant goes to district court, then the applicable statute says that the applicant-appellant pays “[a]ll the expenses of the proceedings,” and everyone at one time agreed that those expenses did not include fees for the government’s attorneys. That changed in 2013, when the USPTO unilaterally started including its attorney and support staff fees among the expenses.

On the first Monday of October—the first day of arguments in the Supreme Court’s 2019 term—the Court will hear argument in Peter v. NantKwest, No. 18-801. The question in that case is whether the word “expenses” includes the government’s attorneys’ fees. On July 22, we filed an amicus brief on behalf of the American Intellectual Property Law Association (AIPLA) arguing that it does not.

The Government’s Sudden Abandonment of Its Longstanding Interpretation

The statute that provides for district court review in patent cases is 35 U.S.C. § 145, and the Supreme Court recognized the important right it provides in Kappos v. Hyatt, 566 U.S. 431 (2012), aff’g 625 F.3d 1320 (Fed. Cir. 2010). Section 145 allows a patent applicant to develop a full evidentiary record on district court review of a decision by the Patent Trial and Appeal Board (PTAB) of the USPTO denying patent protection.

For more than a century, the meaning of “expenses” in Section 145 was undisputed:  private litigants, the USPTO, and courts all interpreted it to require payment only for the government’s out-of-pocket expenses, including printing costs, counsel’s deposition travel costs, court reporter fees, and certain expert witness fees. No one took the position that it included attorneys’ fees. In fact, when Congress amended Section 145 in other respects in 2011, it did nothing to cast doubt on that longstanding, unanimous view.

Then, in 2013, the USPTO unilaterally departed from the longstanding consensus that the term “expenses,” as used in the statute, excludes attorneys’ fees. Disavowing its prior position, the USPTO began asserting that an applicant challenging a PTAB decision under Section 145 must also pay pro rata for USPTO attorney and staff time, even if the applicant’s challenge is successful. The USPTO applied this new reading in patent cases (including NantKwest’s civil action for review of an adverse PTAB decision) and in cases arising under a similar statute addressing trademark-related review of USPTO decisions. See B.V. v. U.S. Patent & Trademark Office, 915 F.3d 171 (4th Cir. 2019), as amended (Feb. 27, 2019), petition for cert. docketed, No. 18-1309; see also Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015) (awarding pro rata USPTO attorney and staff time for review of a Trademark Trial and Appeal Board decision).

But What About the American Rule?

AIPLA’s brief argues that the Supreme Court should reject the USPTO’s new interpretation as an affront to the American Rule. Under that rule, “[e]ach litigant pays his own attorneys’ fees, win or lose, unless a statute or contract provides otherwise.” Hardt v. Reliance Std. Life Ins. Co., 560 U.S. 242, 252-53 (2010) (citation omitted). As the U.S. Court of Appeals for the Federal Circuit recognized, the principal policy underlying the American Rule is society’s desire to avoid burdening a litigant’s exercise of First Amendment rights by imposing, as a penalty for invoking judicial review, the opposing party’s attorneys’ fees. Because the rule—and that policy—are “entitled to the respect of the court, till [the rule] is changed, or modified, by statute,” Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306, 306 (1796), the Court has departed from them only where a statute reflects an “explicit” grant of authority from Congress to do so. Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2164 (2015) (emphasis supplied) (quoting Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598, 602 (2001)). Section 145 contains no explicit authorization to shift attorneys’ fees.

The USPTO’s view would also make Section 145 an anomaly even among fee-shifting statutes. In the government’s view, Section 145 uses attorneys’ fees as a cudgel to penalize litigants, no matter the merits of their claims, for seeking district-court review under Section 145 instead of resting on the more limited PTAB record in a direct appeal to the Federal Circuit under 35 U.S.C. §§ 141 and 144. Although numerous exceptions to the American Rule exist, those exceptions are not designed to cut back on the American Rule’s core policy by discouraging litigation. Rather, the exceptions are aimed at enabling parties who initiate potentially meritorious litigation to recover attorneys’ fees, encouraging rights-vindicating suits. The government’s interpretation therefore would make Section 145 unique among the exceptions; it makes a Section 145 civil action a significant obstacle in front of the courthouse doors. That would make the statute not merely unusual (as even the government concedes its reading does!), but unprecedented.

The government’s interpretation, if adopted, would be unprecedented in another respect as well. In the government’s view, even successful Section 145 action applicants, i.e., those who obtain a reversal, must pay the government’s attorneys’ fees. We are aware of no other area of the law—and the government identifies none—in which a losing defendant or appellee has been authorized to collect attorneys’ fees from its successful opponent. See Ruckelshaus v. Sierra Club, 463 U.S. 680, 693 (1983) (“[E]stablished principles requir[e] that a fee claimant attain some success on the merits before it may receive an award of fees.”). In that respect as well, the government’s view would render Section 145 a radical departure from longstanding American practice.

In light of those considerations, the government’s argument that the phrase “all * * * expenses” could, in a vacuum, be construed also to encompass attorneys’ fees is beside the point. Cf. Pet’r Br. 14, 18-24. What matters is that the phrase neither clearly nor expressly requires the departure from longstanding practice—a departure that the government now advocates. And because the American Rule’s history, the USPTO’s longstanding views, and Congress’s approval of the exclusion of attorneys’ fees from “expenses” that governed prior to 2013 all support a reading that excludes attorneys’ fees, the departure the government proposes should be rejected. The Federal Circuit’s understanding, under which Section 145 authorizes the shifting of costs (which is common in American litigation), but not fees, is the only one that accords with the history of and the general policy common to the American Rule and its exceptions.

The NantKwest Case

AIPLA was not the only amicus to weigh in against the government’s view. Eight other amicus briefs were filed in opposition to the government’s position, with only one filed in the government’s favor. The case will be the second one argued on October 7, and it will be interesting to see how the Supreme Court responds to the sudden change in the government’s vie


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  • [Avatar for Charles E. Miller]
    Charles E. Miller
    August 14, 2019 09:47 am

    Fine article