On December 11, 2019, the Supreme Court unanimously decided that the term “expense” under §145 of the Patent Act does not include the salaries of the USPTO’s legal personnel, and put an end to the USPTO’s attempts to recover attorneys’ fees in court challenges to its decisions.
The Peter v. NantKwest, Inc. dispute arose after the USPTO denied NantKwest’s patent application for a method to treat cancer in 2013. NantKwest unsuccessfully appealed the USPTO’s decision in 2017, and the U.S. District Court for the Eastern District of Virginia awarded the USPTO its experts’ fees, but not attorneys’ fees. The district court held that the so-called “American Rule” includes a presumption that litigants pay their own attorneys’ fees. The USPTO challenged this decision and tried to recoup its “expenses,” arguing that the “expenses” mentioned in 35 U.S.C. § 145 included the salaries of its attorneys and paralegals involved in the case. Sitting en banc, the Federal Circuit agreed with the district court on July 27, 2018, and the USPTO appealed to the Supreme Court. The Supreme Court granted the USPTO’s petition for certiorari.
This month, the Court issued an opinion holding that “[s]ection 145’s plain text...does not overcome the American rule’s presumption against fee shifting to permit the PTO to recoup its legal personnel salaries.” Justice Sotomayor, writing for the court, stated that each litigant “pays his own attorneys’ fees, win or lose, unless a statute or contract provides otherwise.” The Court went on to explain that the use of the term “expenses” in §145 does not “invoke attorneys’ fees with the kind of clarity we have required to deviate from the American Rule.” Further, the Court called out five instances where Congress provided for attorney’s fees explicitly in the Patent Act (35 U.S.C. §285, §271(e)(4), §273(f ), §296(b), and 297(b)(1)), and found that “[b]ecause Congress failed to make its intention similarly clear in §145, the Court will not read the statute to ‘contravene fundamental precepts of the common law.’”
The decision not only impacts patent applicants, but also trademark applicants, as the USPTO has made similar arguments regarding the term “expenses” in trademark appeals. The Court’s decision helps to ensure that everyone has equal access to the courts; it is a positive decision for inventors and patent owners who may not have the means to challenge a final USPTO decision. Inventors and patent owners are not totally off the hook though, as they still remain responsible for the USPTO’s “expenses of the proceedings” whether they win or lose. Those expenses can still include expert fees and other costs of litigation. Although there may still be problems with allowing the USPTO to recover anything in a case that it loses, that is an issue to be taken up with Congress, not the courts.