Supreme Court Holds USPTO Cannot Recover Its Attorney's Fees Under § 145

On December 11, 2019, the Supreme Court of the United States upheld the long-standing presumption that parties are responsible for their own attorney's fees—€”holding that the "[a]ll expenses of the proceedings" provision of §145 of the Patent Act does not permit the United States Patent and Trademark Office (USPTO) to recoup its legal personnel salaries. Peters v. NantKwest, 589 U.S. _____ (2019).


As background, the Patent Act provides two ways for an applicant to challenge an adverse decision. The applicant can either (1) appeal directly to the Federal Circuit under §141 or (2) file a new civil action against the Director of the USPTO in federal district court under §145. The latter allows the applicant to present new evidence for de novo review. Thus, as a condition for permitting such extensive review, the applicant is required to pay "[a]ll the expenses of the proceedings." 35 U.S.C. §145.

In this case, after the USPTO denied NantKwest Inc.'s patent application, NantKwest brought a new civil action under §145. The District Court granted summary judgment to the USPTO, and the Federal Circuit affirmed. The USPTO then moved for reimbursement of expenses, including the pro rata salaries of legal personnel that worked on the case. The District Court denied the motion, concluding that the statutory language referencing "expenses" was not sufficient to rebut the presumption that parties are responsible for their own attorney's fees. The en banc Federal Circuit affirmed, and the Supreme Court granted certiorari.

The Supreme Court’s Decision

The unanimous opinion, written by Justice Sotomayor, starts with the "bedrock principle known as the '€˜American Rule': Each litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise." The Court notes that this presumption applies to all statutes—even those like §145 that do not explicitly award attorney's fees to prevailing parties. In fact, the Court points out that the presumption is "particularly important" here "because §145 permits an unsuccessful government agency to recover its expenses from a prevailing party."

After concluding that the "American Rule" presumption is the starting point, the Court then turns to the plain text of §145 to determine whether Congress intended to depart from that presumption. The Court's interpretation follows:

Reading the term '€˜expenses' alongside neighboring words in the statute, however, supports a conclusion excluding legal fees from the scope of §145. 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.

Thus, the Court concludes that the reference to "expenses" was not sufficient to deviate from the American Rule's presumption against fee shifting.

Lastly, the Court goes on to add that the Patent Act's history reinforces that Congress did not intend to shift attorney's fees in §145 actions. The Court notes there is no evidence that the original Patent Office ever paid its personnel from sums collected from adverse parties, that the USPTO has never sought its attorney's fees under §145 until this litigation, and when Congress intended to provide for attorney's fees in the Patent Act, it has stated so explicitly. Accordingly, the Court concludes that the USPTO cannot recover the pro rata salaries of its legal personnel under §145.

While reasonableness has prevailed for the Patent Office, the question of attorney's fees remains for appeals of decisions of the Trademark Office. Despite statutory language nearly identical to that of the Patent Act, the Fourth Circuit ruled in Shammas v. Focarino, 114 USPQ2d 1489 (4th Cir. 2015), that the USPTO was entitled to recover its attorney's fees. While the Supreme Court denied the petition for certiorari in 2016, the Supreme Court may revisit this issue in the BOOKING.COM case now before it.

Author: Ryan Steinman