Did You Drop Something… Something Like Attorneys’ Fees? (NantKwest v. US PTO)
Last month the Court of Appeals for the Federal Circuit decided NantKwest v. Iancu, US PTO, Case No. 2016-1794 (Fed. Cir. July 27, 2018)(en banc). The official question in NantKwest was whether “35 USC §145’s ‘[a]ll the expenses of the proceedings’ provision authorizes an award of the United States Patent and Trademark Office’s attorneys’ fees?” It sounds like a deadbeat question to ask, right; what government should expect its citizen’s or patrons to pay for its salaried attorneys’ “fees” regardless of outcome? at 26 (“[W]e are aware of no statute that requires a private litigant to pay the government’s attorneys’ fees without regard to the party’s success in the litigation.”). But a year ago, the question did not sound so extreme because a competent majority in the 2017 panel awarded the Patent Office attorneys’ fees for a §145 civil litigation. See Just Intellectuals eNewsletter September 2017 ed.. Now, the “majority” members are in the minority, dissenting on the court’s reversal clarifying that expenses under §145 do not include attorneys’ fees.
NantKwest v. US PTO is a case where the applicant, Dr. Hans Klingemann, and assignee, NantKwest, filed a patent application directed to a method of treating cancer. Dr. Klingemann’s claims were ultimately rejected for §103 and that decision was affirmed by the Patent Trial and Appeal Board. NantKwest then brought a §145 action. Remember, §145 enables unsuccessful applicants for patents to appeal claim rejections by the Patent Trial and Appeal Board through a civil action in district court. (“An applicant dissatisfied with the decision of the Patent Trial and Appeal Board in an appeal under section 134(a) may, unless appeal has been taken to the United States Court of Appeals for the Federal Circuit, have remedy by civil action against the Director… All expenses of the proceeding shall be paid by the applicant.”)(emphasis given). In §145, the applicant will have to pay “all” the Patent Office’s “expenses” regardless of whether the applicant succeeds or fails on appeal. In many cases, as with NantKwest, attorneys’ fees accumulate easily and account for the lion’s share of expenditures, here over 70% or $79k. So, the question is what did Congress really mean by “all expenses?”
Under the American Rule of jurisprudence, each litigant bears its own attorneys’ fees, win or lose. Courts only diverge from the American Rule for limited equitable reasons and where Congress has set forth a “specific and explicit” directive to make fees available. Judge Stoll, previously a lone (dissenting) wolf on the original panel, wrote for the majority in the en banc decision. The en banc court first cited US Supreme Court precedent that still applied the American Rule regardless of whether a statute on fees was prevailing-party neutral as in §145. Next, the majority reasoned that §145 demonstrates no “specific and explicit” congressional intent to displace the American Rule at least because the statute makes no explicit reference to attorneys’ fees in contrast to other places in the Code, like §285, where Congress clearly intended to enable attorneys’ fees as shown from its explicit references to the availability of attorneys’ fees therein. Historically also, use of the word “expenses” in cost-shifting statutes does not include attorneys’ fees; common sense and good judgment would demand the same. “To the extent the phrase ‘expenses’ unambiguously includes attorneys’ fees, it is unclear why it took the PTO more than 170 years to appreciate the statute’s alleged clarity and seek the attorneys’ fees that are statutorily mandated upon its interpretation.” See ftn 5.
On the original panel, Chief Judge Prost and Judge Dyk (now on dissent with Judge Reyna and Judge Hughes) would have reversed the ED of Virginia’s denial of attorneys’ fees. The dissent took a broader definition of “expenses” to include attorneys’ fees. The dissent reasoned that the American Rule did not apply in this instance because §145 is not a traditional fee-shifting statute and the burden of paying “expenses” is consistently upon the applicant regardless of success on the merits. The loser syndicate found no evidence that §145’s attorneys’ fees actually placed an undue burden on solo inventors and small companies gaining access to justice, arguing that the same was only mere “speculation.” Well, if $79k is merely speculative evidence to anyone out here, “Salud to you Don [Patent Attorney]!”
NantKwest v. US PTO restored balance to The Force, placing less burden on applicants seeking to have their patentability determinations reviewed by the courts. The PTO generated $3B (billion) in revenues and had a net income of $61M (million) in FY2015 according to its Performance and Accountability Report, pp33-34. Under the circumstances, the Office assuredly takes pride in taking care of its own attorneys.
