Last week during the Supreme Court’s first round of oral arguments of its new session, all eyes were on a group of cases about the reach of Title VII’s protection against employment discrimination. But an intellectual property case also lurked on the docket for last Monday that is set to decide how much the U.S. Patent and Trademark Office can recoup from a patent applicant in litigation over a denied patent.
The case addresses a narrow ambiguity in the Patent Act: Whether a patent applicant who chooses to appeal the USPTO’s denial of their application in federal district court, rather than going directly to the Federal Circuit, has to pay the government’s attorney fees from the litigation.
Section 145 requires an appealing applicant to pay all the “expenses of the proceedings,” and it applies whether the applicant wins or loses in litigation. For more than 100 years, “expenses” applied just to the government’s out-of-pocket costs, such as travel. But after the America Invents Act went into effect in 2012, the USPTO interpreted “expenses” to include attorney fees.
But in Peter v. NantKwest, the Federal Circuit Court of Appeals decided “expenses” do not include attorney fees. NantKwest has pointed to the “American rule,” a default assumption that parties are responsible for their own attorney fees in litigation, unless a statute or contract specifically says otherwise.
Patent applicants don’t have to take their case to federal district court — they can choose to appeal directly to the Federal Circuit, which will look at the USPTO’s administrative record. John Posthumus, a shareholder at Polsinelli, said the reason Section 145 applies only to appeals taken through district court first may be because starting litigation at the district court is a more expansive and labor-intensive process. The parties have to build up a factual record in district court, he said, and there may be more standards of review to sift through and determine which ones to apply.
By contrast, for an appeal directly to the Federal Circuit, “all that’s involved, from the PTO’s perspective, is drafting a brief and participating in oral arguments,” Posthumus said. Posthumus is a member of the amicus committee of the International Trademark Association, which submitted a brief in the NantKwest case.