Supreme Court Unanimously Rules Patent and Trademark Office Cannot Recover Attorneys’ Fees in Section 145 District Court Challenges of Patent Denial Decisions

On December 11, 2019, the Supreme Court unanimously ruled in Peter v. NantKwest, Inc. that the United States Patent and Trademark Office (USPTO) cannot recover the salaries of its attorneys or paralegals as “expenses” in district court cases filed under 35 U.S.C. § 145.

The Patent Act provides two methods for applicants to challenge adverse decisions by the USPTO.  The first method allows applicants to directly appeal to the United States Court of Appeals for the Federal Circuit under 35 U.S.C. § 141.  However, the applicant is not allowed to offer new evidence and the Federal Circuit may only review the USPTO’s decision based on the same administrative record that was before the USPTO.

The second method allows applicants to file a new civil case in the United States District Court for the Eastern District of Virginia, pursuant to 35 U.S.C. § 145.  Section 145 permits applicants to introduce new evidence to appeal the USPTO’s denial of a patent, but requires applicants to pay “[a]ll the expenses of the proceedings.”

The Supreme Court’s decision in Peter v. NantKwest, Inc. was preceded by a Section 145 action filed by NantKwest, Inc. after its patent application was denied by the USPTO.  The District Court granted summary judgment in favor of the USPTO and the Federal Circuit affirmed.  The USPTO then moved to recover its legal fees as “expenses” of the Section 145 litigation.  The District Court denied the motion, concluding that the language of Section 145 regarding “expenses” did not rebut the “American Rule” presumption that parties are responsible for paying their own attorneys’ fees.  After a divided Federal Circuit panel reversed, the en banc Federal Circuit reversed the panel and held that the American Rule presumption applied to Section 145, and that the USPTO cannot recover its staff attorneys’ salaries as an award of expenses under Section 145.

In its unanimous decision authored by Justice Sotomayor, the Supreme Court affirmed the en banc Federal Circuit, explaining that the “American Rule” still applies to Section 145 cases.  The Court went on to explain that “in common statutory usage, the term ‘expenses’ alone has never been considered to authorize an award of attorney’s fees with sufficient clarity to overcome the American Rule presumption.”  The Court also noted that the terms “‘expenses’ and ‘attorney’s fees’ appear in tandem across various statutes shifting litigation costs,” indicating that “Congress understands the two terms to be distinct and not inclusive of each other.”

The Court concluded its analysis by pointing out that the USPTO had never previously sought attorneys’ fees under Section 145, and that the Patent Act’s history demonstrates that Congress did not intend to allow recovery of attorneys’ fees in Section 145 actions because legislation explicitly provides for attorneys’ fees when Congress so intends.

AALRR has a dedicated group of attorneys on its Intellectual Property Team with the experience and expertise to advise you if you are faced with an office action issued by the USPTO or an action in District Court.  Contact the authors for assistance with your intellectual property needs.

This AALRR blog post is intended for informational purposes only and should not be relied upon in reaching a conclusion in a particular area of law. Applicability of the legal principles discussed may differ substantially in individual situations. Receipt of this or any other AALRR publication does not create an attorney-client relationship. The Firm is not responsible for inadvertent errors that may occur in the publishing process. 

© 2019 Atkinson, Andelson, Loya, Ruud & Romo

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