Nantkwest v. Iancu was decided en banc on July 27, 2018 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. The USPTO appealed the denial of attorney fees. A panel of the Federal Circuit reversed the denial of attorney fees and remanded for the district court to award attorney fees to the USPTO. The Federal Circuit voted sua sponte to hear the appeal en banc and vacated the panel’s judgment.
The en banc Federal Circuit affirmed the district court decision, holding that the American Rule applies to § 145 and that there was no specific and explicit directive from Congress to shift attorney fees.
The question before the en banc court was “whether the panel correctly determined that 35 U.S.C. § 145‘s ‘[a]ll the expenses of the proceedings’ provision authorizes an award of the [PTO’s] attorneys’ fees.”
Under the Patent Act, an applicant may appeal an adverse PTAB decision directly to the Federal Circuit under § 141 or the applicant may file a civil action against the PTO Director in the E.D. Va. under § 145. When proceeding under § 145, the statute provides that “[a]ll the expenses of the proceedings shall be paid by the applicant.” The American Rule provides that, in the United States, “each litigant pays his own attorney’s fees, win or lose.” The rule may however be displaced by a congressional intent to provide for attorney fees that is “specific and explicit.”
As an initial matter, the American Rule applies to § 145. The rule is not limited to statutes that shift fees from a prevailing party to a losing party. Rather, “the Supreme Court has consistently applied the rule broadly to any statute that allows fee shifting to either party, win or lose.” Because the American Rule applies to § 145, only a specific and explicit congressional intent to shift fees can displace it.
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The Federal Circuit held that “[a]ll the expenses of the proceedings” under § 145 “lacks the specific and explicit congressional authorization required to displace the American Rule.” To satisfy this strict standard, the PTO must show that “[a]ll the expenses of the proceedings” specifically and explicitly includes attorneys’ fees. Section 145, however, “contains no reference to attorneys’ fees, reasonable compensation for actual, necessary services rendered by the attorney, PTO attorney salaries, or any other equally clear language.” The section “is at best ambiguous as to attorneys’ fees.” Moreover, other statutory provisions from “diverse categories of legislation” enacted by Congress show that “ordinarily, a statutory right to ‘expenses’ does not include an implicit authorization to award attorneys’ fees.” And there are several Patent Act provisions awarding “attorneys’ fees,” which shows Congress’s use of “specific and explicit” language in the Patent Act to shift fees when it so desired. Accordingly, Congress elected in § 145 to provide for the recovery of the PTO’s “expenses,” not its “attorneys’ fees.”
Chief Judge Prost dissented, joined by Judges Dyk, Reyna, and Hughes. The dissent argued that when Congress said “[a]ll the expenses” in § 145, “it meant all the expenses,” including attorney fees, as opposed to “just some of the expenses.” The dissent relied on the language of § 145, its legislative history, and its statutory purpose.
NantKwest, Inc. v. Iancu, 898 F.3d 1177 (Fed. Cir. 2018)