On June 23, 2017, the Federal Circuit held in NantKwest v. Matal that patent applicants seeking review of a decision from the United States Patent and Trademark Office ("PTO") to the district court must pay the PTO's legal bill regardless of the outcome of the district court case.

There are two ways to appeal an adverse PTO decision: directly to the Federal Circuit or by a de novo proceeding in the district court in the Eastern District of Virginia. Although both the Patent Act and Lanham Act require appellants to pay "all expenses of the proceeding" in the district court, these provisions historically were interpreted as covering only certain fees like expert fees or travel costs. In 2015, in Shammas v. Focarino, the Fourth Circuit interpreted the Lanham Act's "all expenses" provision as including the PTO's attorneys' fees and affirmed a fee award to the PTO against an ex parte trademark applicant.

In NantKwest, the patent applicant sought review of the PTO's denial of its cancer drug patent to the Eastern District of Virginia. In connection with a ruling granting summary judgment for the PTO, the district court declined to award the attorneys' fees sought by the PTO.

The Federal Circuit reversed, holding that when Congress used the phrase "all expenses," it meant to include attorneys' fees. The Federal Circuit explained that such a construction was mandated by the statutory language and does not run afoul of the American rule, by which each side pays its own attorneys' fees in litigation.

NantKwest has significant implications for both trademark and patent applicants. Specifically, if an applicant must pay the PTO's attorneys' fees—win or lose—such a consequence may significantly reduce the desirability of de novo proceedings in a district court, as appeals directly to the Federal Circuit do not require appellants to pay PTO attorneys' fees. Also, a de novo proceeding in district court allows for introduction of additional evidence that was not submitted to the PTO, and whether NantKwest affects the quantum of evidence submitted to the PTO remains to be seen.

At a minimum, given that a de novo proceeding at the district court now requires paying the PTO's attorneys' fees, NantKwest will be a factor in determining where to appeal an unfavorable decision from the PTO.

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