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US Supreme Court to Decide USPTO Attorney Fee Rule

March 5, 2019 | Posted in : Expenses / Costs, Fee Doctrine / Theory, Fee Entitlement, Fee Issues on Appeal, Fee Jurisprudence, Fee Shifting, Fee Statute

A recent The Recorder story by Scott Graham, “Supreme Court Will Decide if USPTO Can Collect Legal Fees,” reports that the U.S. Supreme Court agreed to hear a dispute over attorneys fees between the U.S. Patent and Trademark Office and a company led by billionaire Patrick Soon-Shiong.  Iancu v. NantKwest is an appeal from the PTO after the U.S. Court of Appeals for the Federal Circuit refused en banc to award the office its fees in litigation with immunotherapy company NantKwest.  After being denied a patent, NantKwest initiated what’s known as a Section 145 proceeding in district court to try to force the PTO to issue it.  Section 145 of the Patent Act provides that “all the expenses of the proceedings shall be paid by the applicant,” regardless of outcome.

NantKwest lost the suit, and the PTO moved for $78,592 in attorneys fees and $33,103 in expert fees.  The PTO did not seek attorneys fees for more than 100 years but says it changed its policy after the Supreme Court in 2012 broadened the kinds of evidence and discovery that can be introduced in 145 proceedings.  The agency argues that the expansive “all the expenses” language is broad enough to cover attorneys fees.  The Federal Circuit disagreed in a 7-4 en banc ruling.  Judge Kara Stoll wrote that the Supreme Court has generally applied the American Rule and allowed fee-shifting only when Congress explicitly provides for it.  “All the expenses” doesn’t meet that standard, she concluded.

The PTO and the Justice Department argued in their petition for cert that the Fourth Circuit has awarded fees in a Section 145 appeal.  The filing included U.S. Solicitor General Noel Francisco and Assistant Attorney General Jody Hunt, who heads the Civil Division.  NantKwest is represented by an Irell & Manella team led by partner Morgan Chu.  “’Fees’ are never mentioned” in the statute, Chu wrote in opposition, “let alone ‘attorneys’ fees’ or any other equivalent that would suggest that such fees are recoupable.”

Section 145 proceedings are fairly rare, but two academics who follow Federal Circuit law said they weren’t entirely surprised the Supreme Court took the case.  Emory University law professor Timothy Holbrook said that, whenever the solicitor general’s office signs on to a PTO cert petition, the odds of the court granting cert go up.  Villanova University law professor Michael Risch said the close vote at the Federal Circuit could have gotten the court’s attention, and the justices might be on the lookout for some noncontroversial decisions to counter the potential blockbusters in the offing with the arrival of Brett Kavanaugh.

Risch also suggested the court might use the case to examine whether “expenses” should be narrowed to exclude not only attorneys’ fees but expert witness fees as well.  “Similarly, the law is unsettled about whether in-house counsel can even collect in fee-shifting cases,” he said via email.  “As far as I can tell, the Federal Circuit doesn’t even address that question (though the dissent does).”