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IP Alert: Sue the USPTO? You're Not on the Hook for Their Attorneys' Fees

July 30, 2018

On July 27, in NantKwest, Inc. v. Iancu, the full Federal Circuit held that a party who brings civil action against the USPTO under 35 U.S.C. 145 need not pay the USPTO’s attorneys’ fees as part of the costs of the proceeding after all. Last year, a panel of Federal Circuit judges had reached the opposite conclusion. Last Friday’s en banc decision will, at least for now, restore the conventional understanding of how section 145 operates.

The court reasoned that Congress has not expressly overturned the so-called “American Rule,” which stipulates that each litigant pays its own attorneys’ fees in promulgating section 145. Congress provided specifically for recovery of attorneys’ fees and other portions of the Patent Act, but used the term “expenses” in section 145—a strong signal that attorneys’ fees were not contemplated under this statute.

The court further found it significant that the USPTO has not attempted to recover attorneys’ fees for over 170 years under section 145 or its predecessor containing similar language. The court also observed that the USPTO’s interpretation of section 145 would require a patent applicant to pay the government’s attorneys’ fees even when the patent applicant succeeded in the 145 proceeding, an apparently unique result in federal law that would not seem to follow from the language of the statute or anything in its legislative history. (Notably, though, even a successful litigant must pay other USPTO expenses.) The court also rejected the USPTO’s effort to characterize section 145 actions as a “scourge” on other patent applicants, finding first that the policy debate on the value of section 145 actions was best left for Congress and second that the cost of these proceedings was miniscule given the overall USPTO budget.

The decision was 7–4 with one judge abstaining. The dissent pointed out that in the 2014 case Shammas v. Focarino, the Fourth Circuit Court of Appeals reached the opposite result in trademark cases. A similar provision of the Lanham Act allows dissatisfied trademark applicants to sue the USPTO, and the Shammas court held that that statute entitled the USPTO to recover its attorneys’ fees as determined as a portion of the USPTO’s employee’s salaries allocated to the case. The dissent further concluded that the language of section 145 evinces Congress’s “specific and explicit” intent to depart from the American Rule and to impose upon the applicant payment of all of the expenses of the proceeding, including personnel expenses of the USPTO.

Given what appears to be a circuit split on this issue, albeit in different context (patent v. trademark), Supreme Court review would not be surprising. Fitch Even will report on any subsequent developments in this lawsuit in a subsequent alert.

For more information, please contact Fitch Even partner Allen E. Hoover, author of this alert.

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