Following up on our Fall 2019 U.S. Intellectual Property Newsletter, on December 3, 2019, the U.S. Supreme Court unanimously decided Peter v. NantKwest, Inc., holding the term “expenses” in the phrase “[a]ll the expenses of the proceedings shall be paid by the applicant” in § 145 of the Patent Act (35 U.S.C.) did not allow the U.S. Patent and Trademark Office (“USPTO”) to recover attorney”™s fees associated with defending the agency in § 145 litigation.
As a brief reminder, § 145 permits applicants to seek judicial review of an adverse Patent Trial and Appeal Board (“PTAB”) decision by filing a civil suit against the Director of the USPTO in the U.S. District Court for the Eastern District of Virginia. Applicants who invoke § 145 are required by statute to pay “[a]ll the expenses of the proceedings” incurred by the [USPTO] in defending the [PTAB”™s] decision, regardless of the outcome.” The USPTO, after prevailing against NantKwest, Inc., (“NantKwest”) in a § 145 litigation, sought reimbursement for its attorney”™s fees.
In its opinion, the Supreme Court first noted when considering the award of attorneys”™ fees, the American Rule”™s presumption against fee-shifting must be referenced. That is, under the American Rule, “[e]ach litigant pays his own attorney”™s fees, win or lose, unless statute…provides otherwise.” Despite the USPTO”™s contention that § 145 is not subject to the American Rule, the Supreme Court explained the American Rule “applies to all statutes””even those like § 145 that do not explicitly define attorney”™s fees as an “expense.”
Moreover, the Supreme Court recognized the term “expenses,” without being further defined, had never been sufficient to overcome the American Rule”™s presumption against fee-shifting. Therefore, the modifier “all” could not change the term “expenses” to include fees outside the scope of its ordinary definition. Accordingly, the Supreme Court found the plain text of § 145 did not overcome the American Rule”™s presumption against fee-shifting to permit the USPTO to collect attorney”™s fee.
The Supreme Court next determined whether Congress intended § 145 to overcome the presumption of the American Rule. In doing so, it analyzed the language of § 145 to see if Congress provided a sufficiently specific and explicit indication that § 145 deviated from the American Rule. Critically, the Supreme Court cited several other provisions in the Patent Act which demonstrated that when Congress intended to provide attorney”™s fees, it stated so explicitly. Further, the Supreme Court found that the legislative history of § 145, along with the USPTO”™s longstanding history of foregoing the collection of attorney”™s fees in §145 litigation, reaffirmed the position that the statute did not overcome the American Rule”™s presumption against fee-shifting.
In sum, the Supreme Court held the USPTO could not recover the salaries of its legal personnel under § 145. In doing so, the Supreme Court affirmed the U.S. Court of Appeals for the Federal Circuit.