Case No. 18-801 | Fed. Cir.
Preview by Sean Lowry, Online Editor*
The question presented in NantKwest is: whether the phrase “[a]ll the expenses of the proceedings” in 35 U.S.C. § 145 encompasses the personnel expenses the U.S. Patent and Trademark Office (“PTO”) incurs when its employees, including attorneys, defend the agency in § 145 patent grant litigation.
An applicant for a patent has two options for challenging the PTO’s denial of a patent grant: (1) appeal the decision directly to the U.S. Court of Appeals for the Federal Circuit pursuant to 35 U.S.C. § 141, or (2) file a civil action against the Director of the PTO in federal district court pursuant to 35 U.S.C. § 145. Applicants typically choose the § 145 route because the district court reviews the record de novo, which allows them to introduce new evidence to support their claims. However, this choice comes at a cost. Section 145 requires applicants to pay all the expenses of the proceedings, both incurred by their counsel and the PTO. Over the years, courts have interpreted § 145 to cover expenses such as: printing expenses, counsel’s deposition travel expenses, court reporter fees, and money paid to expert witnesses.
In 2013, though, the PTO filed a motion to recover approximately $79,000 in attorneys’ and paralegals’ fees against NantKwest in a § 145 case (the total amount of expenses the PTO attempted to recover, including the $79,000, was approximately $112,000). The district court denied the PTO’s motion for those attorneys’ and paralegals’ expenses based on the “American Rule,” where parties typically pay their respective litigation costs. On appeal, a divided panel of the Federal Circuit reversed, holding that the American Rule applies unless “the statute itself ‘specific[ally]’ and ‘explicit[ly]’ authorizes an award of fees . . . .” NantKwest, Inc. v. Matal, 860 F.3d 1352, 1356 (Fed. Cir. 2017). The Federal Circuit cited decisions by the Second and Fourth Circuits, which have found that attorneys’ fees are “expenses of the proceedings,” and secondary sources, like dictionary definitions and treatises, to conclude that § 145 covers the types of costs the PTO sought to recover. Upon an en banc hearing, though, the Federal Circuit vacated the panel’s opinion, and held that the American Rule applied in this case because the language was not totally unambiguous. NantKwest, Inc. v. Iancu, 898 F.3d 1177 (Fed. Cir. 2018).
The PTO’s policy decision to recover expenses for its attorneys’ fees has not gone unnoticed by amici. Several associations representing intellectual property owners and lawyers’ bars have filed briefs in support of NantKwest, arguing that the PTO’s approach raises the financial bar to § 145 litigation and discourages meritorious claims.
*Sean Lowry is a 3LE (Class of 2021) and Analyst in Public Finance at the Congressional Research Service (CRS). The views expressed are those of the author and are not necessarily those of the Library of Congress or CRS.