Peter v. NantKwest was decided by the Supreme Court on December 11, 2019 on appeal from the Eastern District of Virginia. 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. A divided Federal Circuit panel reversed, holding that “the term ‘expenses’ in §145 specifically and explicitly authorized an award of fees.” The en banc Federal Circuit reversed the panel over a dissent, holding that “awarding all the expenses simply cannot supply the specific and explicit directive from Congress to shift attorneys’ fees.” The USPTO appealed.
The Federal Circuit affirmed the en banc Federal Circuit, holding that the USPTO cannot recover the salaries of its legal personnel under §145.
Section 145 of the Patent Act affords applicants “dissatisfied with the decision of the Patent Trial and Appeal Board” an opportunity to file a civil action in the United States District Court for the Eastern District of Virginia. The statute specifies that “[a]ll the expenses of the proceedings shall be paid by the applicant.” (added emphasis).
Under the American Rule, “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.” “To determine whether Congress intended to depart from the American Rule presumption, the Court first looks to the language of the section at issue.” “Congress must provide a sufficiently specific and explicit indication of its intent to overcome the American Rule’s presumption against fee shifting.”
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The reference to “expenses” in §145 does not invoke attorney’s fees with the kind of “clarity … required to deviate from the American Rule.” Reading the term “expenses” alongside neighboring words in the statute “supports a conclusion excluding legal fees from the scope of §145.” The complete phrase “expenses of the proceeding” is similar to the Latin expensæ litis, or “expenses of the litigation,” which has “long referred to a class of expenses commonly recovered in litigation to which attorney’s fees did not traditionally belong.”
“The record of statutory usage also illustrates how the term ‘expenses’ alone does not authorize recovery of attorney’s fees.” “Expenses” and “attorney’s fees” appear in tandem “across various statutes shifting litigation costs,” indicating “that Congress understands the two terms to be distinct and not inclusive of each other.” The history of the Patent Act, specifically allowing attorney’s fees under 35 U.S.C. §285, “reaffirms the Court’s view that the statute does not specifically or explicitly authorize the PTO to recoup its lawyers’ or paralegals’ pro rata salaries in §145 civil actions.”