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Federal Circuit Rejects USPTO's Request for Attorneys' Fees

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On July 27th, the Federal Circuit issued an opinion concerning the award of fees in NantKwest, Inc. v. Iancu, No. 2016-1794, rejecting the United States Patent and Trademark Office’s argument seeking fees for the agency’s legal bills on appeal.  In a seven to four en banc decision, the Federal Circuit sided with NantKwest, Inc. in finding that the USPTO’s policy on seeking such fees, despite whether the USPTO wins or loses, does not find support by any specific directive by Congress. 

After the Patent Trial and Appeal Board affirmed the examiner’s rejection of NantKwest’s patent application, NantKwest appealed that decision to the district court.  The USPTO prevailed again at the district court level an sought its fees and the fees for its expert under 35 U.S.C. § 145.  The USPTO argued that the language holding that all “expenses of the proceedings” should be borne by the applicant permitted the USPTO to seek such fees.  

Initially, the Federal Circuit had awarded such fees.  See NantKwest, Inc. v. Matal, 860 F.3d 1352 (Fed. Cir. 2017).  However, the Federal Circuit sua sponte ordered that the panel decision be vacated and that the case be heard en banc.  

The majority decision of the Federal Circuit concluded that awarding attorneys’ fees to the USPTO runs afoul of the standard American Rule of jurisprudence that each litigant pays his own attorney’s fees, win or lose.  Slip Op. at 6.  To overcome the standard rule, the Federal Circuit reasoned that Congress must have provided an express grant.  The statutory language in 35 U.S.C. § 145 regarding “all expenses” presented an ambiguity as to whether expenses included attorneys’ fees.  Without an express provision for attorney’s fees, the majority resolved that ambiguity in favor of NantKwest and overturned the award of fees.  Though the amount of the fees was approximately $110 thousand, the implication for such an award would have had a far greater significance.  Smaller entities may have been forced to reconsider pursuing appeals at the risk of having to be on the hook for additional fees, despite prevailing on the merits.  

 

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