Should Patent and Trademark Applicants Be Required To Pay USPTO Attorneys’ Fees?

The Federal Circuit just issued its en banc decision in Nantkwest v. Iancu, concluding that the proper statutory construction of Section 145 of the patent statute, which allows patent applicants to file actions in a federal district court to challenge the denial of patent applications by the Patent and Trademark Office (USPTO), does not require the challengers to pay the USPTO’s attorneys’ fees. The Federal Circuit’s opinion expressly rejects the Fourth Circuit’s earlier decision in Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015), which came to the opposite conclusion with respect to USPTO attorneys’ fees in trademark appeals.

Nantkwest filed a patent application for its invention for a method of treating cancer.  The patent examiner rejected Nantkwest’s claims, and the Patent Trial and Appeal Board upheld the rejection.  Nantkwest then chose to appeal to the U.S. District Court for the Eastern District of Virginia under 35 U.S.C. §145. The USPTO prevailed in that action and sought its expenses, including attorneys’ fees. The USPTO interpreted Section 145 to provide that patent applicants must pay all expenses regardless of outcome. The District Court awarded the USPTO’s expert fees, but denied its request for attorneys’ fees, citing the “the American Rule,” the principle that each party is responsible for paying its own attorneys’ fees unless specific and explicit statutory authority provides otherwise.

The Federal Circuit held, in an opinion by Judge Stoll, that the “American Rule” should apply, affirming the District Court’s ruling that the USPTO should not be entitled to claim attorneys’ fees in such cases.  The Federal Circuit’s majority opinion reasoned that the statutory requirement to pay all expenses cannot supply the “specific and explicit” directive from Congress that is necessary to put aside the American Rule and shift the payment of attorneys’ fees.  The Federal Circuit’s en banc decision was a reversal of the original panel decision.

There also was a dissent in the Nantkwest case, authored by Chief Judge Prost, on behalf of four judges.  That dissent broadly interpreted the term “expenses” to include attorneys’ fees, even though the USPTO had offered no such interpretation in the over 170 years that Section 145 and analogous statutes have existed in United States patent laws.

With the Shammas trademark case still on the books, and the strongly worded dissent in the Nantkwest case, there is now a split in the circuits on the issue of payment of USPTO attorneys’ fees in direct appeals to the federal district courts.  Will the PTO seek certiorari?  Maybe not, as USPTO’s  decision to seek attorneys’ fees in these cases was made under a different USPTO commissioner, not Andre Iancu.  Not only that, but Commissioner Iancu’s former partner at Irell & Manella, Morgan Chu, was lead counsel for the prevailing party, Nantkwest, in this most recent en banc decision at the Federal Circuit.  So stay tuned.

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