4th Circuit (incl. bankruptcy) Defense Federal Circuit / U.S. Court of Spec. Jurisdiction Intellectual Property Litigation / Trial Practice

Appellants Generally Not Liable for USPTO Attorneys’ Fees

Appellants Generally Not Liable for USPTO Attorneys' Fees


The en banc US Courtroom of Appeals for the Federal Circuit reversed a panel choice and held that 35 USC § 145 doesn’t require candidates interesting to the US District Courtroom for the Japanese District of Virginia to pay the USPTO’s attorneys’ charges.

In Depth

The en banc US Courtroom of Appeals for the Federal Circuit reversed a panel determination and held that 35 USC § 145 doesn’t require candidates interesting to the US District Courtroom for the Japanese District of Virginia to pay america Patent and Trademark Workplace’s (PTO) attorneys’ charges. After a sua sponte determination to assessment the panel determination en banc, the courtroom in a 7-Four choice affirmed the district courtroom’s determination, regardless of a spirited dissent authored by Chief Decide Sharon Prost. NantKwest, Inc. v. Iancu, Director of the USPTO (No. 16-1794) (Fed. Cir. July 27, 2018) (en banc) (Stoll, J., joined by Newman, Lourie, Moore, O’Malley, Wallach and Taranto, JJ) (Prost, CJ, dissenting, joined by Dyk, Reyna, and Hughes, JJ).

There are two methods to attraction antagonistic Patent Trial and Attraction Board selections arising out of patent prosecution. First, beneath 35 USC § 141, dissatisfied candidates might attraction on to the Federal Circuit, probably the most routinely used path for attraction. Second, candidates might use § 145, and as an alternative search evaluation within the Japanese District of Virginia by means of the submitting of a civil motion. In such an motion, the events can conduct full discovery and introduce new proof, together with oral proof that was not introduced to the PTO throughout prosecution. These § 145 actions are resolved underneath the identical strategies as conventional district courtroom proceedings, resembling movement follow and a trial on the deserves.

A trade-off to an applicant’s capacity to broaden the document underneath § 145 proceedings is that “[a]ll the expenses of the proceedings shall be paid by the applicant.” Ever because the predecessor statute of § 145 was handed within the mid-1800s, these bills included, journey, professional charges and doc manufacturing prices, however by no means attorneys’ charges. Within the underlying NantKwest district courtroom proceedings, nevertheless, the PTO, for the primary time in additional than 170 years, demanded that it’s paid its attorneys’ charges incurred in the course of the motion win or lose.

Two main distinctions separated the bulk and dissenting opinions on this case. First, the bulk emphasised the statutory language, “expenses,” somewhat than the time period “all,” which was a spotlight of the dissent. The bulk additionally decided that the statute itself was not “specific and explicit,” whereas the dissent thought-about the supply so clear that no further readability was required to determine its objective. Neither the bulk nor the dissent, nevertheless, appeared notably involved with the PTO’s prior 170-year follow, which might initially seem to point how the PTO has seen the which means of this provision for greater than a century.

The en banc majority began its attorneys’ charges evaluation with the American Rule as a “bedrock principle” of American jurisprudence: that every social gathering pays its personal attorneys’ charges, win or lose. The American Rule is rooted in truthful entry to the authorized system for the poor, in addition to the problem of litigating the reasonableness of charges. That’s, the American Rule—in contrast to the presumption in England—permits less-wealthy litigants to contest a case moderately than make sure that a prevailing social gathering avoids any loss in any respect from litigation. As the bulk famous, nevertheless, Congress has, every so often, chosen to determine a presumption in sure instances that a prevailing litigant will recuperate attorneys’ charges as long as the statutory language demonstrates “specific and explicit” congressional intent.

The bulk first thought-about whether or not the presumption of the American Rule utilized underneath § 145. The Patent Workplace argued that it shouldn’t, as a result of it relates solely to instances during which charges are shifted from a dropping get together to a prevailing get together. The Patent Workplace relied closely on a US Courtroom of Appeals for the Fourth Circuit case, Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015), through which language from the Lanham Act, almost equivalent to § 145, was held to not require consideration of the American Rule in compelling an appellant’s cost of the PTO’s attorneys’ charges in trademark instances. The bulk in NantKwest selected to reject the Shammas holding, discovering that it “cannot be squared with the Supreme Court’s line of non-prevailing party precedent applying the American Rule.”

The Patent Workplace additionally relied on Sebelius v. Cloer, 569 US 369 (2013), which interpreted a statute that permits prevailing “Vaccine Court” petitioners to get well affordable attorneys’ charges, but in addition permits a discretionary award of charges for unsuccessful petitions “brought in good faith [with] a reasonable basis for the claim.” Characterizing the underlying statute in Sebelius as an easy occasion of a selected and specific intent by Congress to beat the presumptive American Rule, the bulk disagreed with the Patent Workplace that Sebelius supplies a cause to keep away from making use of the presumption of the American Rule.

The bulk thus began with the presumption of the American Rule and thought of whether or not § 145’s requirement that the applicant pay “all the expenses of the proceedings” confirmed a selected and specific intent to beat the American Rule. In doing so, it seen the important thing query as whether or not attorneys’ charges can be thought-about “expenses” within the context of § 145, which meant an investigation of the which means of the time period in 1839. The bulk discovered that the majority contemporaneous dictionary definitions wouldn’t contemplate bills to included attorneys’ charges. Equally, different statutes’ use of “expenses” usually didn’t embrace attorneys’ charges. In some instances, the statutes recognized bills and attorneys’ charges as totally different classes, some others explicitly included attorneys’ charges in bills. And the place the Patent Act discusses charge awards (particularly, § 285), it does so explicitly, with language fairly totally different from the extra common time period “expenses” utilized in § 145. Moreover, judicial selections from the 1800s by means of the current day view bills and attorneys’ charges as two separate classes. Lastly, the bulk thought-about that the Patent Workplace’s interpretation would require a prevailing appellant to pay the dropping Patent Workplace’s attorneys’ charges, and such a unprecedented departure from the American Rule ought to require extraordinary readability. As such, the bulk discovered no “specific and explicit” intent to depart from the Rule.

The bulk then examined further coverage arguments raised by the PTO and the dissent. First, analyzing the legislative historical past of § 145 and its predecessor, discovering it opaque when altering the statutory language from “costs” capped at $25 to uncapped “expenses.” Definitely, the bulk agreed, this was meant to broaden the recoverable quantities, nevertheless it offered no steerage as as to if attorneys’ charges was meant to be one of many recoverable classes. The bulk additionally rejected the dissent’s reliance on the Patent Workplace’s 1836 budgetary provisions (which included salaries of staff as one of many ‘expenses of the Patent Office’) as being such a special context as to be uninformative. Lastly, it rejected the dissent’s suggestion that § 145 actions can be a scourge on the patent system as an entire if the Patent Workplace have been required to pay its personal attorneys’ charges. The bulk famous that solely a handful of § 145 actions are filed per yr and the Patent Workplace’s attorneys’ charges may be unfold over lots of of hundreds of purposes, leading to a price per software that’s lower than $2. Thus, the bulk discovered that every get together should bear its personal attorneys’ charges in § 145 actions, discovering the PTO’s arguments unpersuasive and the PTO’s reliance on Shammas to be reliance on an incorrect interpretation of the regulation.

Chief Decide Prost’s dissent targeted on the plain which means of § 145 and the supply’s legislative historical past. Prost famous that Congress understood salaries to be inside the scope of bills in 1836 as evidenced by an 1830’s dictionary as together with “employment and compensation” inside the scope of “expenses”  and that the dictionaries cited by the bulk additionally help a discovering that “expenses” ought to embrace an worker’s compensation.  The dissent additionally distinguished the bulk’s argument relating to § 285, explaining that “Congress intended a broader compensation scheme under § 145 than under § 285” by evaluating “all of the expenses” with “reasonable attorneys’ fees.” The dissent additionally targeted on the time period “all” modifying “expenses” as demonstrating congressional intent to “comprehensively capture anything fairly regarded as an ‘expense,’ resolving any lingering doubt in favor of the inclusion” of the PTO’s attorneys’ charges. The dissent additional famous the legislative historical past of § 145 as evidencing a congressional intent that “all of the expenses associated with § 145 proceedings [should] be borne by the applicants who elect them” and never the taxpayers of the general consumer base of the PTO.

Prost endorsed the holding in Shammas stating that the American Rule doesn’t even apply on this context as a result of the “expenses” are to be paid by the applicant no matter which celebration prevails.


(1) The choice in NantKwest creates a circuit cut up between the 4th Circuit and the Federal Circuit within the interpretation of comparable statutes (15 USC § 1071 (b) and 35 USC § 145) as as to if the American Rule applies and what’s included in “all the expenses of the proceeding(s)” for appeals to a district courtroom in statutes with comparable language. Presently, an attraction to a district courtroom from an opposed choice of the Director or the Trademark Trial and Attraction Board requires cost of the PTO’s attorneys’ charges, win or lose (4th Circuit in Shammas holding whether or not or not the American Rule applies, cost of the PTO’s attorneys’ charges is included in “all the expenses of the proceeding” underneath 15 USC § 1071 (b); and Federal Circuit in NantKwest holding the American Rule does apply and cost of the PTO’s attorneys’ charges isn’t included in “all the expenses of the proceedings” in appeals to the Japanese District of Virginia beneath 35 USC 35 USC § 145.)

(2) The authors have been the principal writers of an amicus temporary filed on behalf of the Mental Property Regulation Affiliation of Chicago, which agreed with the Federal Circuit’s en banc majority opinion in NantKwest.

We might additionally wish to thank Paul S. St. Marie Jr. for his contributions to this text.