Last week, the United States Supreme Court issued an opinion in Peter v. NantKwest, Inc., No. 18-801 (Dec. 11, 2019), holding the “expenses” discussed in 35 U.S.C. § 145 do not include the salaries of attorney and paralegal employees of the PTO.
The Patent Act allows an applicant to challenge an adverse decision by the PTO in two alternative ways—the first is via direct appeal to the Federal Circuit under § 141, and the second is by filing a civil action against the PTO Director in federal district court under § 145. In a direct appeal under § 141, an applicant is limited to the record developed before the PTO. In a district court action under § 145, an applicant may present new evidence. In a § 145 proceeding, the district court acts as factfinder and makes “de novo determinations” taking into account new evidence and the administrative record before the PTO. Section 145 requires applicants to pay “[a]ll the expenses of the proceedings.”
In the case at bar, applicant NantKwest appealed the PTO’s rejection of its patent application. NantKwest appealed to the district court under § 145. The district court granted summary judgment in favor of the PTO, and the Federal Circuit affirmed. The PTO sought reimbursement of its expenses, including the pro rata salaries of PTO attorneys and a paralegal who worked on the case. The district court denied the PTO’s requested fee shifting, a divided panel of the Federal Circuit reversed, and the Federal Circuit sitting en banc reversed the panel. The Supreme Court granted certiorari.
The Court noted the “basic point of reference when considering the award of attorney’s fees is the bedrock principle known as the ‘American Rule’: Each litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.” The Court rejected the PTO’s assertion that the American Rule applies only to “prevailing party” statutes, noting the presumption against fee shifting is particularly important in the context of statutes like § 145, which “permit[] an unsuccessful government agency to recover its expenses . . . .” The Court explained that to overcome the presumption against fee shifting, “Congress must provide a sufficiently ‘specific and explicit’ indication” of its intent to do so, and concluded § 145 contained no such indication. Accordingly, the Court affirmed the Federal Circuit’s en banc decision denying the PTO’s request for attorney’s fees.