Peter v. NantKwest: Attorney Fees for Challenging PTO Decisions

Peter v. NantKwest, Inc., No. 18-801 (Supreme Court 2019)

I believe there are many situations where it makes sense to award reasonable costs and attorney fees to the prevailing party.  It goes further to ensure that the injured party is ‘made whole’ and it also discourages folks to push forward with weak arguments.

That said, I don’t like 35 U.S.C. 145. That provision awards the USPTO “all the expenses of the proceedings” regardless of whether the agency wins or loses.  The provision works to discourage the filing of Civil Actions to obtain a patent.  In NantKwest, the USPTO is asking that “all the expenses” be interpreted to include its personnel expenses, including attorney fees, win-or-lose.  The Federal Circuit ruled against the PTO and denied such fees, but the Supreme Court has agreed to hear the case:

Whether the phrase “[a]ll the expenses of the proceedings” in 35 U.S.C. 145 encompasses the personnel expenses the USPTO incurs when its employees, including attorneys, defend the agency in Section 145 litigation.

USPTO’s opening merits brief is due later this week, with amicus filings shortly thereafter.

Until recently, the case was known as Iancu v. NantKwest.  However, in a recent letter to the Supreme Court, Solicitor Noel Francisco indicated that Iancu “is recused in this matter.” Solicitor Francisco suggested that Laura Peter be substituted as petitioner in her official capacity as the Deputy Director of the United States
Patent and Trademark Office.  Thus, the case has become Peter v. NantKwest.

The letter does not indicate the reason for Iancu’s recusal. However, NantKwest is represented by top advocate Morgan Chu from Irell & Manella.  Iancu was managing partner at Irell when the representation began.

14 thoughts on “Peter v. NantKwest: Attorney Fees for Challenging PTO Decisions

  1. 5

    In view of the 35 U.S.C 145 proceedings controlling decision in Kappos v. Hyatt, 132 S. Ct. 1690, 1694 (2012) discussed below, note that this decision remanded the case to the Fed. Cir. for further proceedings.
    As I recall Hyatt’s AIA complaint in this case was for not considering his proposed declaration on 112 enablement. So what were those further proceedings, and how did they end?

  2. 4

    The fees to get an attorney to bring it to district court are sufficient to make this alternative only used in rare cases. Shouldn’t have to pay the PTO fees.

    1. 4.1

      Maybe make it like a fee. So there is a fixed fee to take the PTO to the district court.

  3. 3

    This is an unusually good collection of comments below, as they are all substantive, and basically in agreement.
    Lode Runner at 1.2 makes a good argument that for a value patent, like a patent on a potential blockbuster drug, it can be worth the Section 145 preparation and trial expenses [even if one might now also have to pay the [lower] hourly billing rates of PTO staff solicitors] by avoiding the ABA deference to the PTO fact findings, per Kappos v. Hyatt, providing sufficient new evidence in rebuttal is added to the trial record that can stand up to cross examination.
    However, as per comment 1, I have seen 145 or 146 cases in which it looked to me like the new evidence could have been submitted in a continuation much more easily and cheaply and just as effectively or ineffectively.

    1. 3.1

      Agreement does not “make” anything exceptionally good.

      In fact, agreement may often signal a lack of exceptionally good.

      You may have subconsciously realized this as your own post introduces a “point” upon which disagreement may pivot.

      I think that you see more agreement here on this topic because the topic itself is simply not that decisive.

  4. 2

    Dennis, when you say “don’t like 35 U.S.C. 145,” are you referring to the statute as a whole or just the expense shifting provision? I’ve personally never been a fan of the statute as a whole.

    But fee shifting statutes that allow recovery by the government are pretty rare across the United States Code, and are even more rare when (as in Section 145) they do not even require the government prevail in the action.

    But I suppose expense shifting is justified by the truly extraordinary nature of the Section 145 remedy. An action under Section 145 is a severe detour to the path established by the PTO examination system, and as such, requires the PTO to do a whole lot more work than if the applicant directly appealed the PTAB decision to the Federal Circuit. Anyone who’s litigated in E.D. Va. (where any Section 145 action must be brought) knows that litigating there will often be fast and exceedingly expensive, especially if there’s discovery because the applicant tries to submit new evidence. If an applicant is going to employ that extraordinary remedy and privilege, and cause the USPTO to incur a lot of additional expenses as a result, I see nothing wrong with requiring reimbursement by the applicant.

    The deterrence value is very important, as there are hundreds of thousands of patent applications examined each year; the district court would be swamped and overwhelmed if even a tiny fraction of rejected applications resulted in Section 145 actions. The deterrence purpose build-in to the statute is somewhat undermined if you only allow the PTO to recover a small amount of its expenses.

  5. 1

    35 U.S.C. 145 civil actions are to try obtain patent claims in a suit in the E.D. VA district court case that were rejected by both the examiner and the Board. Instead of a Fed. Cir. appeal.
    What I have always had difficulty understanding is how presenting evidence in a 145 suit is better than having presented that same evidence before, ex parte and with unchallenged declarations? When in the 145 suit it can be challenged by the PTO solicitors, one’s witnesses can be cross-examined, and possibly counter-evidence might be presented? What % are ultimately successful?

    1. 1.1

      What I have always had difficulty understanding is how presenting evidence in a 145 suit is better than having presented that same evidence before, ex parte and with unchallenged declarations?

      Aren’t the factual findings of the examiner entitled to deference as opposed to heard anew?

      1. 1.1.1

        Kappos v. Hyatt, 132 S. Ct. 1690, 1694 (2012) (“[T]he district court must make a de novo finding when new evidence is presented on a disputed question of fact. In deciding what weight to afford that evidence, the district court may, however, consider whether the applicant had an opportunity to present the evidence to the PTO”).


          Greg, I think the part of Kappos v. Hyatt of further interest to Random Guy’s question may be: “judicial review in §145 proceedings is not limited to the administrative record because the district court may consider new evidence. If it does so, the district court must act as a factfinder and cannot apply the APA’s deferential standard to PTO factual findings when those findings are contradicted by new evidence.”
          [Must make a de novo fact findings under normal federal evidence and other litigation rules,]


            Maybe I am misremembering, but my understanding is as Lode Runner says below – You can either seek appellate review, or you can seek a district court trial. If you go the appellate route, the administrative record is the fact record, there is no new evidence and the examiner/board are given fact finding deference. Conversely, if you go the trial route, you can certainly introduce the administrative record or even new evidence, but the office can introduce new evidence and cross your evidence – it’s an entire standard trial process.

            There is no situation where you can start in district court, nor is there a situation where you can get both non-deference and non-cross simultaneously so “how presenting evidence in a 145 suit is better than having presented that same evidence before, ex parte and with unchallenged declarations?” is not an apples to apples comparison nor is it an option open to you. Obviously evidence subjected to cross is less persuasive than evidence not subjected to cross, but that inferior evidence might be enough for a judge when even the superior unchallenged version wouldn’t be for an examiner. If you liked the fact finding judgement of your first fact finder you wouldn’t be appealing.

      2. 1.1.2

        Someone else could answer that question better, but my understanding is that the examination record below becomes part of the record in the 145 suit. So the point of the suit is to put on additional evidence with documents and witnesses that may be found sufficient by the judge to overcome those examiner and/or Board decisions below [not to raise new issues]. [One good reason might be to conduct and present the results of experiments that the applicant did not have the time, incentive or success rates to do before.]

    2. 1.2

      The reason you would use a Section 145 action is that, in the vast majority of cases, it’s a better “last resort” than a direct appeal to the Federal Circuit.

      If you appeal directly to the Federal Circuit, they have to (1) apply a highly deferential (“substantial evidence”) standard of review to the PTAB’s findings, and the Federal Circuit is (2) strictly limited to the record before the Examiner and the PTAB. Both of those downsides go away in Section 145 actions.

      But despite this, most Section 145 actions still fail. But if you’re trying to get some value patent, like a patent on a potential blockbuster drug, it’s worth the expense since the rewards of success are very high.

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