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On June 23, 2017, the Federal Circuit held that, whether they
win or lose, patent applicants who appeal adverse PTAB decisions
directly to a district court must pay the PTO's attorneys'
fees.
Patent applicants seeking judicial review of Board decisions
have two options under the America Invents Act: appeal to the
Federal Circuit under 35 U.S.C. § 141, or to the Eastern
District of Virginia under 35 U.S.C. § 145. Appeals taken
under Section 145 offer certain benefits to the applicant, such as
allowing discovery and the introduction of further evidence.
Section 145 also provides that applicants must pay "[a]ll the
expenses of the proceeding." When Dr. Hans Klingemann's
patent application directed to a method of treating cancer was
rejected as obvious, Nantkwest, the assignee of the application,
appealed under Section 145. After prevailing on the merits, the
Director of the PTO moved for expert and attorneys' fees,
citing the "all expenses" provision of the statute.
The district court granted the PTO's expert fees, but denied
the requested attorneys' fees, citing the "American
Rule," under which litigants pay their own attorneys' fees
regardless of the outcome. Though courts recognize an exception to
this Rule when a statute "specific[ally]" and
"explicit[ly]" authorizes an award of attorneys'
fees, the district court concluded that Section 145 did not satisfy
the specificity requirement.
The Federal Circuit reversed. The Court found that the ordinary
meaning of "expenses" was clear and includes
attorneys' fees. In support, the Court pointed to dictionary
definitions and treatises, as well as a Supreme Court case that
recognized a distinction between costs and fees, and which
determined that fees include "expenses born by litigants for
attorneys." The Court rejected Nantkwest's argument that
the term "expenses" is ambiguous. According to Nantkwest,
in approximately twenty other statutory provisions, Congress uses
the term "expenses" to authorize attorneys' fees
either in addition to expenses, or as a component of them,
demonstrating that the term can either include or exclude
attorneys' fees, depending on the statute. The Court, however,
found this recitation of statutes insufficient to dislodge the
reasonable and ordinary meaning of the term, stating: "At
best, these examples demonstrate that Congress will not confine
itself to a single word or phrase when referencing attorneys'
fees."
Writing in dissent, Judge Stoll argued that the American
Rule's presumption against fee shifting in litigation is a
"bedrock principle" that dates back more than 200 years.
As such, the high bar it sets should be the starting point of the
analysis. Judge Stoll found Section 145 ambiguous at best, citing
contemporaneous dictionary definitions and other statutory
provisions that distinguish "expenses" from
"attorneys' fees." Further, she noted that if Section
145 were a fee-shifting statute, it diverts from the American Rule
because it requires even successful plaintiffs to pay the PTO's
attorneys' fees. Given such atypical circumstances, Judge Stoll
maintained that Congress's intent to shift fees should have
been more clear. Moreover, Judge Stoll was concerned that, given
the substantial fees involved, the majority's interpretation
"will likely deter applicants, particularly solo inventors and
other smaller entities, from pursuing review under §
145."
Notably, the Fourth Circuit reached the same result, though by
different reasoning, in a 2015 case interpreting the almost
identical "all expenses" provision in 15 U.S.C. §
1071(b)(3) of the Lanham Act, which governs appeals from the
Trademark Trial and Appeal Board.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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26 Sep 2018, Webinar, Washington, DC, United States
This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States.
Our team will provide guidance for challenges faced by IP owners and advisors, and consider potential solutions. We encourage everyone to join us live or on-demand for one or all of the sessions.
26 Sep 2018, Webinar, Washington, DC, United States
This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States.
This latest series of webinars will explore emerging trends in the changing intellectual property (IP) legal environment in Europe and the United States. Our team will provide guidance for challenges faced by IP owners and advisors, and consider potential solutions. We encourage everyone to join us live or on-demand for one or all of the sessions.
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