SCOTUS to Decide Case About Attorney Fees in Denied Patent Litigation

Could patent applicants be on the hook for paying USPTO’s attorney fees, even if they win?

Last week during the Supreme Court’s first round of oral arguments of its new session, all eyes were on a group of cases about the reach of Title VII’s protection against employment discrimination. But an intellectual property case also lurked on the docket for last Monday that is set to decide how much the U.S. Patent and Trademark Office can recoup from a patent applicant in litigation over a denied patent.

The case addresses a narrow ambiguity in the Patent Act: Whether a patent applicant who chooses to appeal the USPTO’s denial of their application in federal district court, rather than going directly to the Federal Circuit, has to pay the government’s attorney fees from the litigation.

Section 145 requires an appealing applicant to pay all the “expenses of the proceedings,” and it applies whether the applicant wins or loses in litigation. For more than 100 years, “expenses” applied just to the government’s out-of-pocket costs, such as travel. But after the America Invents Act went into effect in 2012, the USPTO interpreted “expenses” to include attorney fees.  

But in Peter v. NantKwest, the Federal Circuit Court of Appeals decided “expenses” do not include attorney fees. NantKwest has pointed to the “American rule,” a default assumption that parties are responsible for their own attorney fees in litigation, unless a statute or contract specifically says otherwise.

Patent applicants don’t have to take their case to federal district court — they can choose to appeal directly to the Federal Circuit, which will look at the USPTO’s administrative record. John Posthumus, a shareholder at Polsinelli, said the reason Section 145 applies only to appeals taken through district court first may be because starting litigation at the district court is a more expansive and labor-intensive process. The parties have to build up a factual record in district court, he said, and there may be more standards of review to sift through and determine which ones to apply. 

By contrast, for an appeal directly to the Federal Circuit, “all that’s involved, from the PTO’s perspective, is drafting a brief and participating in oral arguments,” Posthumus said. Posthumus is a member of the amicus committee of the International Trademark Association, which submitted a brief in the NantKwest case.

The justices have the task of deciding whether the American rule’s principle applies, meaning Section 145 would have to explicitly reference attorney fees in order for the USPTO to receive them from patent applicants.

Early on in the hour of oral arguments that seemed to reveal the justices’ skepticism about requiring applicants to pay the government’s attorney fees, Justice Brett Kavanaugh pressed Deputy Solicitor General Malcolm Stewart to reconcile his argument that the law unambiguously covers attorney fees with other litigation contexts where laws explicitly refer to attorney fees.

“The Court has made clear that, even though a relatively clear indication of congressional intent is necessary, there’s no magic words requirement,” Stewart said. “And the point I was making about expenses being unambiguous is that there is no ordinary, plain language understanding of the word ‘expenses’ that doesn’t encompass the money that you use to hire a person to accomplish a particular task.” 

He added the Supreme Court has said before that when Congress doesn’t include certain terms, it doesn’t necessarily translate to ambiguity, but instead indicates breadth.

The decision will probably apply in the world of trademark law as well. The Lanham Act has an analogous section for trademarks, and a 2015 decision from the Fourth Circuit Court of Appeals, in Shammas v. Focarino, interpreted “expenses” to include attorney fees. 

Stewart obliquely referenced the case in response to a question from Justice Ruth Bader Ginsburg. Ginsburg asked whether any other federal law allows for attorney fees simply based on the word “expenses.”

“We’re not aware of any, unless you include the trademark analogue to this provision,” Stewart answered. He added he assumes “the government’s position on those two statutes will rise or fall together.”

The Supreme Court declined to hear the Shammas case. But Posthumus said the split between the Fourth and Federal Circuits likely got the court’s attention.

“In order to deviate from the American Rule, do you have to have a clear and explicit expression in the statute?” he said. “And if so, is the patent statute clear and explicit, when it just says ‘expenses’ and it does not include attorneys’ fees?”

Posthumus said he’s not sure whether the Supreme Court will explicitly say whether its decision also applies to the analogous section of the Lanham Act, but he echoed Stewart’s sentiment that the government will likely treat expenses for patent and trademark litigation the same based on the Supreme Court’s eventual decision.

“I think that they won’t attempt to argue some differentiation between the two,” he said. 

— Julia Cardi

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