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Federal Circuit Tosses Fee Award Under New USPTO Policy

August 14, 2018 | Posted in : Expenses / Costs, Fee Award, Fee Entitlement / Recoverability, Fee Issues on Appeal, Fee Reduction, Fee Request, Fees in Statutes

A recent Law 360 story by Bill Donahue, “After Big Ruling, Fed. Circ. Nixes USPTO Fee Award,” reports that, citing a ruling last month striking down the U.S. Patent and Trademark Office’s controversial policy on attorneys' fees, the Federal Circuit started tossing out such awards against other patent applicants.  Although a three-judge panel affirmed a district court’s decision to reject an application from a company called Realvirt LLC for a patent on network switching technology, it also vacated an order that required the company to repay $48,000 in attorneys' fees the USPTO spent litigating the case.

That’s because the fee award was granted under a USPTO policy adopted in 2013 requiring that patent and trademark applicants that appeal to a district court must always repay the agency's legal bills — a policy struck down by the en banc Federal Circuit last month.  As court watchers wonder whether the USPTO will appeal the so-called NantKwest ruling to the U.S. Supreme Court, the Federal Circuit applied the ruling to wipe out the fee award against Realvirt.

“In light of this court’s decision in NantKwest Inc. v. Iancu, the court hereby lifts the stay in [Realvirt’s case], vacates the judgment of the district court, and remands this case for further proceedings consistent with NantKwest,” the court wrote in a per curiam opinion.

There are other cases pending on the fee rule, most notably an appeal from Booking.com after it was ordered to repay $76,000 in attorneys’ fees even after winning a trademark appeal against the agency.  That case represents the most extreme outcome of the USPTO’s policy, which says applicants must pay the office’s legal bills no matter who wins the case.  Booking.com has already pointed to the NantKwest ruling, but the company's case is pending in the Fourth Circuit, where a panel upheld the USPTO’s approach to fees in 2015.  Barring an en banc appeal, the Fourth Circuit is compelled by precedent to side with the USPTO.

That clear circuit split — the Federal Circuit saying the rule is illegal and the Fourth Circuit saying it’s fine — might entice the U.S. Supreme Court to tackle the case if the USPTO files a petition to the high court.  Whether that’s a step that will be taken by the agency, which has come under new leadership since the policy was first rolled out, remains to be seen.  The fee policy at issue is the result of a new interpretation of old statutory language.

Both the Patent Act and the Lanham Act say that unsuccessful applicants who file a so-called de novo appeal to a district court — as opposed to a more streamlined record appeal directly to the Federal Circuit — must pay “all expenses of the proceeding.”  But for decades, the USPTO interpreted that language to mean relatively minor expenses, like travel costs and expert fees, not the substantially larger attorneys’ fees.

The case is Realvirt LLC v. Iancu, case numbers 17-1159 and 16-2669, in the U.S. Court of Appeals for the Federal Circuit.