United States: Must Patent Applicants Pay For The PTO's Attorneys In District Court?

Suppose you apply for a patent and the U.S. Patent and Trademark Office rejects your application. You go to court to challenge the PTO's decision, as is your right under the patent statute, and win. It's expensive, but you get your patent. And then the PTO hands you a bill, saying even though they were wrong to reject your application, you must pay for the time the government's attorneys spent on the case.

You might be surprised, but that's exactly what the PTO started doing a few years ago. The statute that allows patent applicants to challenge the PTO's rejections in federal district court also says that the applicant pays "all the expenses" for the proceeding.

For over 170 years, the PTO interpreted "expenses" to mean printing costs, court reporter fees, travel expenses and the like — but not attorney fees. The general rule, known as the "American rule," is that each party to a court proceeding pays for its own attorneys.

The U.S. Court of Appeals for the Federal Circuit, which has exclusive jurisdiction over patent cases, rejected the PTO's bid for attorney fees in NantKwest Inc. v. Iancu, 898 F.3d 1177 (Fed. Cir. 2018). But trademark applicants who use a similar statute to challenge the PTO in district court currently must pay for the PTO's attorneys, even if the applicants win.

Section 145 Actions

The Patent Act gives patent applicants two options if they lose before the Patent Trial and Appeal Board.1   The applicant can appeal directly to the Federal Circuit, which is the most common procedure. The applicant can also file a civil action in the U.S. District Court for the Eastern District of Virginia under Section 145 of the Patent Act, 35 U.S.C.A. § 145. This second option is only available for original patent applications that are rejected by the PTAB — it's not available for reviews of issued patents, such as re-examinations or inter partes review proceedings.

There are significant differences between direct appeals from the PTAB to the Federal Circuit and Section 145 actions. Direct appellate review is confined to the record in the PTO,2 and the scope of review is limited. The U.S. Supreme Court confirmed in Kappos v. Hyatt, 566 U.S. 431 (2012), that the PTO's factual findings are reviewed for substantial evidence; that is, the findings can be reversed or set aside only if they are unsupported by substantial evidence.

A Section 145 action is more expansive and generally more time consuming (and costly) than a direct appeal. Most significantly, patent applicants who pursue the Section 145 route are not limited to the record in the PTO. Instead, they can conduct discovery and introduce new evidence. The parties can engage in motion practice, and the case can result in a full-blown trial with live testimony.

Once the applicant submits new evidence, the District Court makes its own factual findings and doesn't adopt the PTO's findings.

There's an additional cost to this type of litigation though, beyond the applicant's own fees and expenses. The statute says that in Section 145 actions, "all the expenses of the proceedings shall be paid by the applicant." Thus, win or lose, the applicant must pay the PTO's "expenses."

'Expenses of the Proceedings' 

Congress introduced the predecessor to Section 145 in 1839, in the form of the Act of March 3, 1839, ch. 88, § 10, 5 Stat. 353. The statute required the applicant to pay "the whole of the expenses of the proceeding ... whether the final decision shall be in his favor or otherwise."

In Section 145 actions and similar litigation under prior statutes, the PTO has recovered its attorneys' travel expenses to attend depositions, printing costs, court reporter fees and expert witness fees. For more than 170 years, the PTO never tried to recover its attorney fees for these types of civil litigations. Recently, that has changed.

Starting in 2013, the PTO has claimed that the "expenses of the proceedings" include attorney fees, or what the agency calls "personnel expenses." In particular, it has sought to recover the pro rata salaries of the PTO attorneys and paralegals who work on the case.

The PTO has justified its newly minted interpretation of the statute as necessary because civil litigations under Section 145 have become more common and more expensive. The agency now says it is unfair to require other PTO users to subsidize the expenses of these proceedings.

In fact, Section 145 actions are still not that common — the PTO estimated there are only one or two Section 145 actions a year. And for the much greater number of direct appeals, which are less expensive than Section 145 actions, the PTO still incurs significant "personnel expenses" that are subsidized by other PTO users.


NantKwest Inc. is the assignee of an application to patent a method for treating cancer using natural killer cells. A patent examiner rejected the application as obvious, and the PTAB affirmed the rejection.

NantKwest sued the PTO director in the Eastern District of Virginia under Section 145. After some discovery, the PTO moved for summary judgment of obviousness. The district court granted the motion. The Federal Circuit affirmed by a vote of 2-1 in NantKwest Inc. v. Lee, 686 F. App'x 864 (Fed. Cir. 2017).

The PTO filed for reimbursement of the "expenses of the proceedings" under Section 145. Consistent with its new interpretation of "expenses," it included in the amount sought approximately $80,000 in attorney fees. These fees (or "personnel expenses") were calculated based on the pro rata salaries of the two PTO attorneys and one paralegal who worked on the case.

The district court denied the PTO's reimbursement request for attorney fees, citing the American rule. NantKwest Inc. v. Lee, 162 F. Supp. 3d 540 (E.D. Va. 2016). The PTO appealed the denial of its request for attorney fees, and a 2-1 panel of the Federal Circuit reversed. NantKwest Inc. v. Matal, 860 F.3d 1352 (Fed. Cir. 2017).

The panel majority opinion expressed doubt on the application of the American rule to Section 145 because the statute imposes expenses without regard to whether the applicant is the prevailing party. The American rule that each party pays its own attorney fees may be displaced by an express grant from Congress in which fees are shifted to the winner. The majority reasoned that, because the applicant must pay expenses no matter what, the rule did not apply.

Relying on dictionary definitions, the panel majority upended 170 years of practice and concluded that the word "expenses" authorizes an award of the PTO's attorney fees in Sections 145 actions.

Trademarks and the 4th Circuit

The panel majority in NantKwest also relied on the 4th U.S. Circuit Court of Appeals' opinion in Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015). As unusual as the "win or lose" expenses provision in Section 145 may seem, there is an almost identical provision in the Lanham Act for trademark applicants.

Dissatisfied trademark applicants can appeal directly to the Federal Circuit, or they can file a civil action in a federal district court under Section 21(b) of the Lanham Act, 15 U.S.C.A. § 1071(b). If the applicant proceeds in the district court and there is no adverse party, the applicant names the PTO director as the defendant. And as with Section 145, Section 21(b)(3) of the Lanham Act, 15 U.S.C.A. § 1071(b)(3), says "all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not."

In another 2-1 panel decision, the 4th Circuit in Shammas held that Section 1071(b)(3) is not a fee-shifting statute because it does not refer to a prevailing party. The court thus concluded that the American rule does not apply. It upheld the district court's award of the PTO's attorney and paralegal fees, finding that "all the expenses of the proceeding" is broad enough to encompass these types of fees.

Federal Circuit's En Banc Decision

About two months after the panel opinion in NantKwest, the Federal Circuit, in a surprise move, decided on its own to rehear the case en banc and vacated the panel opinion. NantKwest Inc. v. Matal, 869 F.3d 1327 (Fed. Cir. 2017). The full Federal Circuit asked for new briefs on one question: whether the term "all the expenses" in Section 145 authorizes an award of attorney fees to the PTO.

Several organizations filed amicus briefs, including the American Bar Association, the Intellectual Property Owners Association, the American Intellectual Property Law Association and the International Trademark Association. Not surprisingly, they all opposed the PTO's new reading of the statute to require reimbursement of its attorney fees regardless of the outcome.

The full Federal Circuit voted 7-4 that the PTO could not recover its attorney fees as part of its expenses in Section 145 actions. NantKwest Inc. v. Iancu, 898 F.3d 1177 (Fed. Cir. 2018). The majority opinion, written by U.S. Circuit Judge Kara Farnandez Stoll, said the PTO's fee request was contrary to the American rule. The American rule can be overcome only if Congress makes a specific and explicit directive for attorney fees to be available, the court said. The reimbursement provision in Section 145 awarding "expenses" to the PTO fell short of this stringent standard, it explained.

The Federal Circuit's majority opinion also pointed out that the PTO's position would mean that patent applicants must pay attorney fees even if they win. There are no other statutes that require a private party to pay for the government's attorneys without regard to success, the majority said. The PTO's interpretation would create a particularly unusual divergence from the American rule, and had Congress intended such an anomalous result, it would have said so in far plainer language, the majority said.

While Section 145 actions are not that common, had the en banc Federal Circuit adopted the PTO's position, as the original panel did, it would have put a real disincentive in place. If patent applicants must always pay the PTO's attorney fees, there would be a big drawback to filing in district court.

But that's exactly where trademark applicants now find themselves. Because of the Shammas decision, unlike patent applicants, trademark applicants must pay the PTO's attorney fees in the same types of civil litigations. As stated in Booking.com BV v. Matal, No. 16-cv-425, 2017 WL 4853755 (E.D. Va. Oct. 26, 2017), regardless of how the Federal Circuit rules in Section 145 actions, the law in the 4th Circuit, as reflected in Shammas, allows the PTO to recover its attorney fees in trademark cases under Section 1071(b).

What's Next?

It's now up to the U.S. Supreme Court to resolve this circuit split. The high court turned down a certiorari petition two years ago in Shammas v. Hirshfeld, 136 S. Ct. 1375 (2016), when Shammas sought review of the 4th Circuit's decision. The PTO recently obtained a month extension to file a certiorari petition in NantKwest because "the solicitor general has not yet determined whether to file a petition for a writ of certiorari in this case."3

PTO Director Andrei Iancu, who assumed that position in February 2018 after the en banc Federal Circuit argument in NantKwest but before the decision, may not be as interested as his predecessor in pursuing attorney fees in these types of cases. The PTO estimates that there are one to two Section 145 actions a year. The fees sought in NantKwest were about $80,000. If these numbers were typical, the fees would come to only $160,000 a year.4

If the PTO does not seek certiorari in NantKwest, then we will likely have to wait for a trademark applicant to challenge the 4th Circuit precedent. That will require the applicant — win or lose on the merits, of course — to first suffer an attorney fee award in the district court, followed by an unsuccessful appeal, before being able to raise the circuit split in the Supreme Court.

The recent Booking.com case could present that opportunity. Booking.com won on the merits, but the district court in Booking.com BV v. Matal, No. 1:16-cv-425, 2017 WL 4853755 (E.D. Va. Oct. 26, 2017), awarded the PTO its attorney fees. Booking.com's appeal to the 4th Circuit is pending.

In the meantime, the lower courts are not waiting for the Supreme Court. Shortly after the en banc decision in NantKwest, the Federal Circuit tossed out an award of attorney fees in a Section 145 action. Realvirt LLC v. Iancu, 734 F. App'x 754 (Fed. Cir. 2018).

And more recently, the court in Halozyme Inc. v. Iancu, No. 16-cv-1580, 2018 WL 5270329 (E.D. Va. Oct. 23, 2018), denied the PTO's motion to stay consideration of attorney fees in a Section 145 action until it decides whether to seek certiorari in NantKwest. Observing that the Federal Circuit's NantKwest decision is binding authority, the court found it inappropriate to stay the case any longer.

So for now, the PTO can't recover its attorney fees in civil actions filed by patent applicants, but trademark applicants who file similar district court actions must pay the PTO's attorney fees, win or lose.


1  35 U.S.C.A. § 141.

2  35 U.S.C.A. § 144.

3  Iancu v. NantKwest Inc., No. 18A369, opinion issued (Oct. 5, 2018) (granting extension until Nov. 23, 2018).

4  See NantKwest, 898 F.3d 1177 (Fed. Cir. 2018). Of course, the fees in some cases may be much more, such as in Halozyme Inc. v. Iancu, No. 16-cv-1580, 2018 WL 5270329 (E.D. Va. Oct. 23, 2018), where the PTO's attorney fees were estimated at close to $250,000.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
18 Dec 2018, Webinar, Washington, DC, United States

As part of Strafford Publications’ webinar series, Finnegan attorneys Adriana Burgy, Chris Johns, and Show Summary

2 Jan 2019, Conference, Washington, DC, United States

Finnegan is a Silver sponsor of the 36th annual National CLE Conference. Finnegan partner Erika Arner will co-present “The Interplay Between IPRs and Other PTAB Trial Proceedings and Litigation—Strategy and Lessons.

6 Jan 2019, Webinar, Washington, DC, United States

As part of Strafford Publications’ webinar series, Finnegan attorneys Virginia Carron and Jessica Marks will consider patent eligibility issues with engineered natural products.

Similar Articles
Relevancy Powered by MondaqAI
Fross Zelnick Lehrman & Zissu, PC
Marshall, Gerstein & Borun LLP
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Fross Zelnick Lehrman & Zissu, PC
Marshall, Gerstein & Borun LLP
Finnegan, Henderson, Farabow, Garrett & Dunner, LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions