Supreme Court: PTO Cannot Recoup its Attorney Fees in Defending §145 Civil Actions

by Dennis Crouch

Peters v. NantKwest, 589 U. S. ____ (Supreme Court 2019)

In a short, unanimous decision, the Supreme Court has upheld the “American Rule” of fee shifting — holding that the “all expenses of the proceedings” provision of § 145 does not authorize reimbursement of PTO attorney/paralegal costs associated with working on the case.

The question presented in this case is whether such “expenses” include the salaries of attorney and paralegal employees of the United States Patent and Trademark Office (PTO). We hold that they do not.

Slip. Op.

I have sympathy for the PTO in this case. It is expensive for the agency to defend itself in district court litigation and those costs must be recouped somehow.  If the PTO spends $300,000 on defending a § 145 trial, that money will likely be taken-away from examination and lead to increased fees for next year.  From the PTO’s perspective, almost every substantial request from the patent applicant comes with an associated fee that is related to the cost of providing the service and why should this be different? The answer, of course, is that a trial in Federal Court is a far cry from agency action and is particularly designed to cut-off and avoid agency overreach. The Supreme Court correctly decided the case today based upon the tradition and long history of the “American rule” that is also supported by are culture of providing access to the courts.

= = =

Background: When the PTO refuses to issue a patent, most applicants just turn their tail and go home.  Others are stubborn and take the matter to court.  The Patent Code provides two alternative approaches: (1) appeal immediately to the Federal Circuit; or (2) file a civil action under § 145 — demanding a federal trial on whether the PTO must issue the patent.  Law students write appellate briefs in their 1L advocacy class — writing a pretty good appellate brief is relatively easy and also relatively cheap.  One problem with appealing directly is that the Federal Circuit gives substantial deference to any factual findings by the PTO — As such, it is usually only fruitful to appeal on questions of law or where the factual error is exceedingly clear.  Section 145 civil actions, however, allow the patent applicant to present new evidence, including oral expert testimony, that is considered afresh by the district court without deference to prior PTO factual findings.  The primary downside, of course, is the expense of expert witnesses, depositions, and the trial.

The last line of § 145 states: “All the expenses of the proceedings shall be paid by the applicant.”  The Lanham Act has a parallel provision for times with the PTO refuses to register a mark: “Unless the court finds the expenses to be unreasonable, all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not.” 15 U.S.C. § 1071.

Do “all the expenses” include PTO attorney fees: The Sotomayor opinion begins with the long-held tradition that “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.” The court explained that the tradition applies generally in civil cases. “This Court has never suggested that any statute is exempt from the presumption against fee shifting.”  Likewise, § 145 is not except.

The rule of no-fee-shifting is a presumption grounded in the common law — one that Congress can flip.  However, because the rule is so fundamental to American legal practice, the courts have required a “specific and explicit” statement of Congressional intent.  Here, the word “all the expenses” do not meet that threshold level of clarity.

The court’s interpretation of “all the expenses of the proceedings” is as follows:

The complete phrase “expenses of the proceeding” is similar to the Latin expensæ litis, or “expenses of the litigation.” This term has
long referred to a class of expenses commonly recovered in litigation to which attorney’s fees did not traditionally belong. See Black’s Law Dictionary 461 (1891) (defining “expensæ litis” to mean “generally allowed” costs) … These
definitions suggest that the use of “expenses” in §145 would not have been commonly understood to include attorney’s fees at its enactment. …

[T]he modifier “all” does not expand §145’s reach to include attorney’s fees. Although the word conveys breadth, it cannot transform “expenses” to reach an outlay it would not otherwise include. Cf. Rimini Street, Inc. v.
Oracle USA, Inc., 586 U. S. ___, ___–___ (2019) (slip op., at 6–7) (“The adjective ‘full’ in §505 therefore does not alter the meaning of the word ‘costs.’ Rather, ‘full costs’ are all the ‘costs’ otherwise available under law”).

The final section of the opinion delves briefly into PTO history and probably should have been left out because it appears to me to add more confusion than clarity. The court writes that:

There is no evidence that the (19th century) Patent Office, the PTO’s predecessor, originally paid its personnel from sums collected from adverse parties in litigation, or that the Office initially even employed attorneys.

This statement does not appear relevant –  a more relevant question would be whether the PTO collected attorney fees in those early cases.

In the end, the Supreme Court found that all signs pointed to a conclusion that the cost-shifting provision does not include attorney fees.

 

59 thoughts on “Supreme Court: PTO Cannot Recoup its Attorney Fees in Defending §145 Civil Actions

  1. 6

    This guy MM seems like he’s kind of a jerk.

    1. 6.1

      Seems….?

      You are new here, right?

      1. 6.1.1

        No, but his comments in this thread have a particularly jerk-like quality to them, so I felt compelled to state the obvious. Does anyone know his real identity?

        1. 6.1.1.1

          Does anyone know his real identity?

          I do not, nor do I care to.

          That being said, Prof. Crouch does.

          As to this thread, I just don’t see anything specific to make this thread to be one ‘in particular.’

          1. 6.1.1.1.1

            “That being said, Prof. Crouch does.”

            Cite?

            1. 6.1.1.1.1.1

              What line of work are you engaged in that you think that a reply asking for a “cite” is even pertinent here?

          2. 6.1.1.1.2

            Sorry, I forgot that you do not know what a citation is. You are either (1) paid to make stuff up or (2) (the majority view) mentally ill. Either way, any inferences you may make from the written record and from reality are unreliable. So, what is the factual basis for your statement that “Prof. Crouch does?” But now, I remember that you do no know what facts are or what “factual basis” means. Never mind. Carry on. Do your usual. And now, it comes.

          3. 6.1.1.1.3

            And here it is.

  2. 5

    This will have spillover effect on trademark practice. The Lanham Act has similar provisions to challenge a Trademark Office determination, including a choice of either appeal to the Federal Circuit or a civil action in district court. And, it provides that for the latter option “all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not.” 15 USC 1071.

    In Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015), the Fourth Circuit held that “all expenses” includes attorney’s fees. It even noted that the Lanham Act provisions were modeled after the Patent Act provisions.

    This new SCOTUS decision in effect overturns that decision. So now it is less expensive to challenge a Trademark Office decision by filing an action in district court.

    1. 5.1

      That sounds correct Bored — thanks for the analysis.

      I haven’t checked, but do you see many trademark challenges in district court; as compared to patent challenges?

      1. 5.1.1

        Not since the Shammas case, because you had to pay the PTO’s attorney’s fees (in cases where only the PTO was a party, i.e., you challenged denial of a TM application. In inter partes cases, the PTO is not a party, and the usual rules apply.)

        But now I think there will be a pickup in these. Since all you have to pay are the PTO’s costs, which are usually minimal.

        1. 5.1.1.1

          PTO costs include expert witnesses fees which can be substantial or minimal, depending on the case.

          1. 5.1.1.1.1

            And could the PTO hire outside counsel and make that an expense of the proceeding?

            1. 5.1.1.1.1.1

              I doubt it. The SCOTUS decision was based on the American rule, and the strong presumption that it applies unless Congress speaks very clearly that it does not.

              The American rule has nothing to do with whether the counsel is an in-house employee or outside counsel. Most of the time, litigants hire the latter, and yet the American rule generally applies.

              1. 5.1.1.1.1.1.1

                Thanks BL.

        2. 5.1.1.2

          Thanks Bored.

  3. 4

    Peters v. NantKwest, a unanimous affirmance of a unanimous en banc Fed Cir. affirmance of a D.C.
    [Makes one wonder why the Sup. Ct. even took cert on such a “marshmallow” question, also of such limited effect? ]

    1. 4.1

      Not a unanimous en banc Fed. Cir. decision. The en banc court sua sponte took over the case (!) and overruled the original panel majority. A couple more judges agreed with the original majority and signed onto the en banc dissent. But I wonder if cert petitions are given more weight when the guv’ment is the aggrieved party.

    2. 4.2

      After some more thinkin’, I can’t recall a single case where the Supremes have denied a cert. petition from the Commissioner/Director of the PTO. (Technically, not the Director in this case but I believe he was recused.)

      1. 4.2.1

        That may be it, thanks.

      2. 4.2.2

        In re Noll, 545 F.2d 141 (C.C.P.A. 1976), cert. denied, 434 U.S. 875 (1977).

        In re Chatfield, 545 F.2d 152 (C.C.P.A. 1976), cert. denied, 434 U.S. 875 (1977).

        1. 4.2.2.1

          Glad I could make your day. What were you doing in 1977?

        2. 4.2.2.2

          Just kidding, Mr. DeLassus. Thanks for the information. Those cert denials are understandable (Computers! Section 101!). However, I was not speaking of legal research but personal knowledge. I was in a different line of work when those denials occurred last century. The exception proves the rule?

          1. 4.2.2.2.1

            I was in a different line of work when those denials occurred last century

            Given your comment up at post 5.1.1.1.1., one has to wonder what line of work you are in now.

            1. 4.2.2.2.1.1

              What a respectful insult! We are evolving!

              1. 4.2.2.2.1.1.1

                You are welcome to see insults wherever you want, but I am really curious what your line of work is.

                1. If you think 5.1.1.1.1 is a frivolous question, you might want to review the “question presented” in NantKwest. It’s reproduced at the outset in the professor’s write-up. You don’t even have to read the Court’s decision.

                2. Did i say “frivolous”?

                  Answer: no.

                  Again, you are welcome to see insults wherever you want to. I am still interested in what your current line of work is.

              2. 4.2.2.2.1.1.2

                Thanks AL.

                1. So, no reply to the question as to your current line of work….?

                  It’s not as if I am asking you to out yourself, my shifty historical pseudonym friend…

                2. My line of work? Why don’t you just make up my employment and credentials and recite it as if fact?
                  Again. Are you still working at the Taco Bell?

                3. I am asking you a straight up question.

                  You respond with nothing but snark and misinformation (and accuse me of the same).

                  It’s more than clear who is doing what.

                  Let’s try again: what is your current line of work?

                4. RSS,

                  I agree with your comments in this regard as well.

                  Our shifty historical pseudonym friend is all about the nonsense. He’s like a court jester ‘wanna-be’ Malcolm, but lacks the deep personal animosity that might inject vigor into comments and, quite frankly, he simply lacks the intellect to be anything other than a f001, one to be toyed with on occasion, but mostly one to watch as he attempts to be smarter than he ever can be (and cannot grasp the part that he plays).

                5. Not only does Shifty occasionally refer to himself in the plural – here, he is actually attempting dialogue between his different monikers…..

                  I do have to wonder what line of work might engender that type of behavior.

  4. 3

    “This statement does not appear relevant – a more relevant question would be whether the PTO collected attorney fees in those early cases.”

    I think that’s what they were trying to say, the PTO didn’t used to collect money from the trials and give it to their attorney employees. Or at least I think that’s what they’re trying to say.

  5. 2

    Bravo SCOTUS.

    Now how about those two American innovation killing, unconstitutional Mayo / Alice decisions . . . which are also contrary to the clear and unambiguous 35 U.S.C. Section 101:

    “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

    1. 2.1

      Maybe read this case and Dennis’ write-up and pay attention to the reasoning. Writing a facially unconstitutional statute that is absurd on its face is not going to suffice to overturn >100 years of legal precedent. That precedent would have included a bar on using patents to protect the process of “correlating one fact with another.” You follow?

      Mayo and Alice stand for the non-rebuttable proposition that a claim that recites “Prior art plus ineligible subject matter X” effectively protects the ineligible subject matter. Therefore the claim is ineligible. That proposition is never going to be “overturned” because the Supreme Court can’t “overturn” logic and reason. And the First Amendment is going to prevent patentees from monopolizing publically disclosed abstractions like, you know, “facts and correlations, to be applied in a prior art context”.

      Is this difficult for you to follow? If so, you have no business getting anywhere near a patent or the a legal blog. Dennis should be ashamed of himself for letting m0-uth-breathers like you pollute his blog with vapid bullcr-a-p for eons, long after you’ve demonstrated no willingness to even understand the issues. Then again, Dennis has mostly given up trying to educate his readers (and probably his students, too) when it comes to subject matter eligibility (can anybody take a guess why that might be? It’s a real mystery!).

      You could, of course, rewrite the entire patent statute and require applicants to identify with particularity exactly what is “new” in their claims versus what is in the prior art but that’s not likely to happen in our lifetimes given the tendencies of the maximalists and grifters who have infested the patent bar for some time.

      1. 2.1.1

        Moonbeam: ” . . . to overturn >100 years of legal precedent.”

        Which is exactly what the unconstitutional Mayo and Alice decisions did.

        But then, you knew that, right?

        The only surprise is that Dennis inexplicably permits you to scurry from comment to comment, urinating along the way . . . as a dog does from tree to tree.

        Thankfully, at least Gene put a stop to your scurrying years ago.

        You remain the only blot on an otherwise excellent IP resource.

        The. Only. One.

        1. 2.1.1.1

          Which is exactly what the unconstitutional Mayo and Alice decisions did.

          LOL

          No. Not at all. Can you tell everyone the salient facts of the case and what Prometheus’ theory of infringement was? I don’t think you have any idea what the case was about. The types of claims at issue in Mayo were not widely pursued 100 years ago, and certainly not asserted by any entity against another entity with the means to challenge the claims. That sort of greed was a much more recent development.

          Also, there were no cases dealing with the eligibility of “logic instructions carried out by instructable computing machines” 100 years ago. Can you guess why? Think really hard. Of course, the idea that logic itself was ineligible for patent protection was not really controversial at all. And it still isn’t among most normal people, including among most normal instruction writers.

          Lastly, Supreme Court decisions aren’t “unconstitutional” in any meaningful sense of that word. You sound like a hack.

          Strike three. You’re out. Go slink back to Big Jeans’ echo chamber and find a b-u-t-ton to polish. I’m sure Bildo left one special for you.

          1. 2.1.1.1.1

            Lastly, Supreme Court decisions aren’t “unconstitutional” in any meaningful sense of that word. You sound like a hack.

            One of the more blatant Accuse Others hack statements of all time.

            You do understand that ALL three branches of the government fall under the Constitution, eh Malcolm?

            It’s as if you really have no clue how the structure of government works.

  6. 1

    Long-standing fundamental practices require a specific and explicit statement of Congressional intent to overturn?

    Golly, who knew?

    But the maximalists will keep on screeching about “it’s a process therefore eligible” regardless. “Rule of Law”!

    What a pack of hypocritical derpsherts.

    1. 1.1

      Your untethered rants are noted.

      1. 1.1.1

        Your vapid response to a statement of fact is noted.

        Also observe that the prediction in my comment was confirmed within ten minutes.

        You really a laugh riot, Bildo, at your own expense. Keep it coming! It’s only Wednesday, after all, and the Supreme Court has just unanimously confirmed what I and others have been telling you and your whining cohorts for years.

        1. 1.1.1.1

          What you merely feel to be “statements of fact” are not.

          My post is simply the correct one.

          1. 1.1.1.1.1

            Tell everyone what statement in my comment is incorrect, Bildo.

            Go ahead. You’re a very serious person.

            1. 1.1.1.1.1.1

              Your vapid response to a statement of fact is noted.

              And

              Also observe that the prediction in my comment was confirmed within ten minutes.

              Anything else?

              1. 1.1.1.1.1.1.1

                My 11:25 comment (i.e., the one we’re discussing, you silly f—kwit) was followed by ProSay’s prediction-satisfying 11:33 comment less than 10 minutes later.

                Now let’s watch you dance, Bildo. Dance for us! LOL

                1. Pro Say’s comment is a direct quote of the statute.

                  Are you making another admission that the law according to the statute is not how you feel the law should be?

                  And where is the “Rule of Law” screeching that you predicted? You seem to be dealing with “alt-facts” and elevating your feelings above reality (again) — just like a certain President….

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