Nantkwest v. Matal was decided on June 23, 2017 on appeal from the Eastern District of Virginia. There, the USPTO rejected Nantkwest’s patent application on obviousness grounds. The PTAB affirmed the rejection, and Nantkwest appealed to the district court under 35 U.S.C. § 145. After prevailing at the district court, the USPTO filed a motion under § 145’s expense provision to recover $78,592.50 in attorney fees and $33,103.89 in expert fees. The district court granted the USPTO’s expert fees, but denied its attorney fees, citing the American Rule. The USPTO appealed the denial of attorney fees.
The Federal Circuit reversed the denial of attorney fees, and remanded for the district court to award attorney fees to the USPTO.
Under 35 U.S.C. § 145, “[a]n applicant dissatisfied with the decision of the [PTAB] . . . may, unless appeal has been taken to the … Federal Circuit, have remedy by civil action against the Director in the … District Court for the Eastern District of Virginia . . . . All the expenses of the proceedings shall be paid by the applicant.” (emphasis added). The statute thus allows appeal from the PTAB to the district court (instead of the Federal Circuit), with the caveat that the applicant will pay all expenses of the proceedings. In Hyatt v. Kappos, the Federal Circuit interpreted this provision to require applicants to pay the USPTO’s expenses whether they win or lose. The issue here was “whether § 145‘s ‘[a]ll expenses of the proceedings’ provision authorizes an award of the USPTO’s attorneys’ fees.”
Under the American Rule, the prevailing litigant is ordinarily not entitled to collect attorney fees from the loser. Courts generally recognize an exception to the rule “when the statute itself specifically and explicitly authorizes an award of fees.”
The Federal Circuit held that § 145’s “expenses” includes attorney fees. Relying on the ordinary meaning as defined in dictionaries, treatises, and the Supreme Court’s interpretation of the term, the Federal Circuit “conclu[ded] that when Congress used the phrase ‘all expenses,’ it meant to include attorneys’ fees.” This conclusion is supported by the fact that Congress in § 145 “explicitly authorized compensation for ‘[a]ll expenses of the proceedings.’” A statute needn’t use the precise words “attorneys’ fees” or some equivalent to overcome the American Rule. Rejecting Nantkwest’s argument that the USPTO would have had to pay the portions of the full-time employees’ salaries regardless of the lawsuit, the Federal Circuit held that “‘[a]ll expenses of the proceedings’ under § 145 includes the pro-rata share of the attorneys’ fees the USPTO incurred to defend applicant’s appeal.”
Judge Stoll dissented, arguing that the American Rule’s “strong presumption” against fee shifting wasn’t overcome because “Section 145 neither mentions ‘attorneys’ fees’ nor reflects a congressional intent to authorize them.”
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