By Linda O’Brien, J.D., LL.M.
The Director of the USPTO was entitled to an award of attorney fees after prevailing in an appeal by patentee Nantkwest from the Patent Trial and Appeal Board, the U.S. Court of Appeals for the Federal Circuit has decided. The provision in 35 U.S.C. §145 that an applicant must pay "all expenses of the proceedings regardless of the outcome" includes the pro-rata share of attorney fees the USPTO incurred to defend that applicant’s appeal. Thus, the district court’s denial of the USPTO’s attorney fee request was reversed and remanded (Nantkwest, Inc. v. Matal, June 23, 2017, Prost, S.).
In 2001, Dr. Hans Klingemann filed a patent application directed to a method of treating cancer by administering natural killer cells. The USPTO rejected the application on the grounds of obviousness. The Patent and Trial Appeal Board affirmed the examiner’s rejection, and Nantkwest, as assignee of the application, appealed to the district court under 35 U.S.C. §145.
Section 145 allows a plaintiff to have a federal district court to review its patent claims, along with new evidence, to determine the patentability of the relevant claims. However, when a plaintiff elects to have a district court review its patents pursuant to Section 145, Congress has mandated that the plaintiff is responsible for "all the expenses of the proceeding."
In September 2015, the federal district court in Alexandria, Virginia, entered summary judgment in favor of the USPTO. The USPTO then sought $111,696.39 from Nantkwest as "expenses" of the proceeding under Section 145. The USPTO was granted an award of $33,103.89 for expert witness fees. However, the requested attorney fees of $77,592.50 were denied on the ground that Section 145’s language requiring a plaintiff to pay for the USPTO’s "expenses" did not encompass the payment of the USPTO’s attorney fees. Before the court was the appeal by the USPTO.
Attorney fees award. The court determined that Section 145 authorized an award of the USPTO’s attorney fees, and the American Rule did not apply to these proceedings. Under the American Rule, each litigant paid its own attorney fees, win or lose, unless a statute or contract provided otherwise. In agreement with the decisions of two other circuits in Shammas v. Focarino 784 F.3d 219 (4th Cir. 2015) and U.S. v. 110-118 Riverside Tenants Corp., 886 F.2d 514 (2d Cir. 1989), the court found that "expenses" included attorney fees. Further, the definitions and explanations that standard legal dictionaries and treatises provided for the term "expense" supported this conclusion.
Nantkwest’s argument that the term "expenses" lacked the requisite specificity to overcome the presumption of the American Rule was rejected. The court noted that "expenses" included attorney fees within the plain and ordinary meaning of the term, and Congress made it clear in other statutes that attorney fees were meant to be awarded under the broader term "expenses" within the context of this case.
In Section 145, Congress explicitly authorized compensation for "all expenses of the proceedings." According to the court, Section 145 was a unique provision that required applicants to uniformly name the Director of the USPTO as defendant in their suits. The Director relies on the Office of the Solicitor to represent USPTO interests; those attorneys received salaries as compensation for their work. This was an expense to the government, rather than a fee. Congress was not required to use the word "fee" for the USPTO to receive remuneration.
Also rejected was Nantkwest’s contention that the USPTO would have had to pay portions of the employees’ salaries regardless of the suit. The court noted that Section 145 proceedings impact the USPTO’s resources, and those costs were the vast majority of expenses that the USPTO incurred as the proximate cause of Nantkwest’s appeal.
Dissent. In a dissent, Judge Stoll maintained that the American Rule set a strong presumption against fee-shifting and required an explicit provision allowing for a departure from the Rule or other evidence of Congressional intent to make the award available. Section 145 did not mention attorney fees and did not reflect Congressional intent to authorize such an award. Stoll also noted that if Congress had intended to make attorney fees available in patent litigation, it would have done so. Instead the term "attorney fees" was excluded from the language of Section 145. Further, Judge Stoll contended, the ordinary meaning of the term" expenses" did not necessarily include attorney fees.
The case is No. 2016-1794.
Attorneys: Alan J. Heinrich (Irell & Manella LLP) for Nantkwest, Inc. Jaynie Randall Lilley, U.S. Department of Justice, for Joseph Matal and the U.S. Patent and Trademark Office.
Companies: Nantkwest, Inc.
MainStory: TopStory Patent FedCirNews
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