Source: https://supreme.justia.com/cases/federal/us/589/18-801/
Timestamp: 2020-08-08 06:58:13
Document Index: 573257599

Matched Legal Cases: ['§145', '§145', '§145', '§363', '§361', '§141', '§141', '§144', '§145', '§145', '§145', '§145', '§145', '§145', '§300', '§9', '§145', '§145', '§145', '§285', '§271', '§273', '§296', '§297', '§145']

Peter v. NantKwest, Inc. :: 589 U.S. ___ (2019) :: Justia US Supreme Court Center
Justia › US Law › US Case Law › US Supreme Court › Volume 589 › Peter v. NantKwest, Inc.
Peter v. NantKwest, Inc., 589 U.S. ___ (2019)
The Patent Act provides two methods for challenging an adverse decision by the Patent and Trademark Office (PTO): direct appeal to the Federal Circuit, 35 U.S.C. 141, or a new civil action against the PTO Director in the Eastern District of Virginia, section 145. Under section 145, the applicant must pay “[a]ll the expenses of the proceedings.” NantKwest filed a section 145 civil action after its patent application was denied. The Federal Circuit affirmed summary judgment in favor of the PTO, which moved for reimbursement of expenses, including the pro-rata salaries of PTO attorneys and a paralegal who worked on the case. The Federal Circuit and the Supreme Court affirmed the denial of the motion, concluding that the statutory language referencing expenses was not sufficient to rebut the “American Rule” presumption that parties are responsible for their own attorney’s fees. Reading section 145 to permit an unsuccessful government agency to recover attorney’s fees from a prevailing party “would be a radical departure from longstanding fee-shifting principles adhered to in a wide range of contexts.” The phrase “expenses of the proceeding” would not have been commonly understood to include attorney’s fees at the time section 145 was enacted. The appearance of “expenses” and “attorney’s fees” together across various statutes indicates that Congress understands the terms as distinct and not inclusive of each other.
An award of "expenses" in an action against the Patent and Trademark Office under 35 U.S.C. 145 may not include an award of attorney's fees.
(a) The “American Rule”—the bedrock principle that “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise,” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 253—provides the starting point for assessing whether §145 authorizes payment of the PTO’s legal fees. Contrary to the Government’s view, this Court has never suggested that any statute is exempt from the presumption against fee shifting or limited its American Rule inquiries to prevailing party statutes. Rather, it has developed a line of precedents addressing statutory deviations from the American Rule that do not limit attorney’s fees awards to prevailing parties. See, e.g., id., at 254. The presumption against fee shifting is particularly important here because reading §145 to permit an unsuccessful government agency to recover attorney’s fees from a prevailing party “would be a radical departure from longstanding fee-shifting principles adhered to in a wide range of contexts.” Ruckelshaus v. Sierra Club, 463 U.S. 680, 683. Pp. 3–6.
(b) Section 145’s plain text does not overcome the American Rule’s presumption against fee shifting. Definitions of “expenses,” while capacious enough to include attorney’s fees, provide scant guidance. The mere failure to foreclose a fee award “neither specifically nor explicitly authorizes courts to shift [fees].” Baker Botts L. L. P. v. ASARCO LLC, 576 U.S. 121, ___. The complete phrase “expenses of the proceeding” would not have been commonly understood to include attorney’s fees at the time §145 was enacted. Finally, the modifier “all” does not transform “expenses” to reach an outlay it would not otherwise include.
In common statutory usage, the term “expenses” alone has never been considered to authorize an award of attorney’s fees with sufficient clarity to overcome the American Rule presumption. The appearance of “expenses” and “attorney’s fees” together across various statutes indicates that Congress understands the terms to be distinct and not inclusive of each other. See, e.g., 11 U. S. C. §363(n). Other statutes that refer to attorney’s fees as a subset of expenses show only that “expenses” can include attorney’s fees when so defined. See, e.g., 28 U. S. C. §361. Nor do this Court’s cases further the Government’s position that the Court has used “expenses” to mean “attorney’s fees.” See, e.g., Taniguchi v. Kan Pacific Saipan, Ltd., 566 U.S. 560, 573.
The Patent Act creates two mutually exclusive pathways to challenge an adverse decision by the PTO. The first permits judicial review by direct appeal to the United States Court of Appeals for the Federal Circuit. §141. There is “no opportunity for the applicant to offer new evidence” in a §141 proceeding, and the Federal Circuit “must review the PTO’s decision on the same administrative record that was before the [agency].” Kappos v. Hyatt, 566 U.S. 431, 434 (2012); 35 U. S. C. §144.
The District Court denied the PTO’s motion to recover its pro rata legal fees as “expenses” of the §145 proceeding. The court concluded that the statutory language referencing expenses was not clear enough to rebut the “American Rule”—the background principle that parties are responsible for their own attorney’s fees. NantKwest, Inc. v. Lee, 162 F. Supp. 3d 540, 542 (ED Va. 2016). A divided Federal Circuit panel reversed, with Judge Stoll dissenting. NantKwest, Inc. v. Matal, 860 F.3d 1352 (2017). The majority expressed “substantial doub[t ]” that §145 even implicated the American Rule’s presumption against fee shifting in a case in which the payment was not made to a prevailing party. Id., at 1355. The majority concluded that, even assuming the American Rule presumption applied, the term “expenses” in §145 “specific[ally]” and “explicit[ly]” authorized an award of fees. Id., at 1356.
The en banc Federal Circuit voted sua sponte to rehear the case and reversed the panel over a dissent. NantKwest, Inc. v. Iancu, 898 F.3d 1177, 1184 (2018). The majority opinion—now authored by Judge Stoll—held that the American Rule presumption applied to §145 because it is “the starting point whenever a party seeks to shift fees from one side to the other in adversarial litigation.” Id., at 1184 (citing Baker Botts L. L. P. v. ASARCO LLC, 576 U.S. 121, ___ (2015)). After examining the plain text and statutory history of §145, the judicial and congressional understanding of similar language, and overarching policy considerations, the majority concluded that “[a]warding ‘[a]ll the expenses’ simply cannot supply the ‘specific and explicit’ directive from Congress to shift attorneys’ fees, and nothing else in the statute evinces congressional intent to make them available.” 898 F. 3d, at 1196 (quoting Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 260 (1975)). We granted certiorari, 586 U. S. ___ (2019), and now affirm.
This Court’s “ ‘basic point of reference’ when considering the award of attorney’s fees is 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.” Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252–253 (2010) (quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 683 (1983)). The American Rule has “roots in our common law reaching back to at least the 18th century.” Baker Botts, 576 U. S., at ___ (slip op., at 3) (citing Arcambel v. Wiseman, 3 Dall. 306 (1796)); see also Summit Valley Industries, Inc. v. Carpenters, 456 U.S. 717, 721 (1982) (observing that the American Rule “has been consistently followed for almost 200 years”); Alyeska Pipeline, 421 U. S., at 257 (referring to the presumption against shifting attorney’s fees as a “general” rule).
Sebelius v. Cloer, 569 U.S. 369 (2013), confirms that the presumption against fee shifting applies to all statutes—even those like §145 that do not explicitly award attorney’s fees to “prevailing parties.” In Cloer, the Court interpreted a provision of the National Childhood Vaccine Injury Act that permitted courts to “award attorney’s fees . . . ‘incur- red [by a claimant] in any proceeding on’ an unsuccessful vaccine-injury ‘petition . . . brought in good faith [with] a reasonable basis for the claim.’ ” 569 U. S., at 371 (quoting 42 U. S. C. §300aa–15(e)(1)). The Court held that the provision’s clear language authorized attorney’s fees, even though the statute exclusively applied to unsuccessful litigants. 569 U. S., at 372.
To determine whether Congress intended to depart from the American Rule presumption, the Court first “look[s] to the language of the section” at issue. Hardt, 560 U. S., at 254 (internal quotation marks omitted). While “[t]he absence of [a] specific reference to attorney’s fees is not dispositive,” Key Tronic Corp. v. United States, 511 U.S. 809, 815 (1994), Congress must provide a sufficiently “specific and explicit” indication of its intent to overcome the American Rule’s presumption against fee shifting. Alyeska Pipeline, 421 U. S., at 260.
“The record of statutory usage” also illustrates how the term “expenses” alone does not authorize recovery of attorney’s fees. See West Virginia Univ. Hospitals, Inc. v. Casey, 499 U.S. 83, 88 (1991) (looking to statutory usage to determine whether attorney’s fees and expert fees were distinct expenses in the fee-shifting context).
The Government cites several decisions to argue how, on occasion, this Court has used the term “expenses” to mean “attorney’s fees.” None of the cases furthers its position. See, e.g., Rimini Street, 586 U. S., at ___, ___ (slip op., at 4, 11) (reasoning that the term “costs” in the general federal costs statutes does not include attorney’s fees); Taniguchi v. Kan Pacific Saipan, Ltd., 566 U.S. 560, 573 (2012) (mentioning that a party may bear “expenses” related to attorneys, without specifying whether these “expenses” include attorney’s fees); Arlington Central School Dist. Bd. of Ed. v. Murphy, 548 U.S. 291, 297–303 (2006) (distinguishing “attorney’s fees” from “costs” and “costs” from “expenses,” without indicating whether “expenses” encompasses attorney’s fees); Casey, 499 U. S., at 99 (suggesting that an explicit reference to “expert witness fees” or “litigation expenses” could shift expert fees in addition to attorney’s fees—not that the term “litigation expenses” alone could shift attorney’s fees).
There is no evidence that the 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. See Act of July 4, 1836, §9, 5Stat. 121 (“[T]he moneys received into the Treasury under this act shall constitute a fund for the payment of the salaries of the officers and clerks herein provided for, and all other expenses of the Patent Office, and to be called the patent fund”). That salaries of PTO employees might have qualified as an “expense” of the agency, however, does not mean that they are an “expense” of a §145 proceeding. Neither has the PTO, until this litigation, sought its attorney’s fees under §145. That the agency has managed to pay its attorneys consistently suggests that financial necessity does not require reading §145 to shift fees, either.
In later years, when Congress intended to provide for attorney’s fees in the Patent Act, it stated so explicitly. See, e.g., 35 U. S. C. §285 (“The court in exceptional cases may award reasonable attorney fees to the prevailing party”); §271(e)(4) (“[A] court may award attorney fees under section 285”); §273(f ) (same); §296(b) (same); §297(b)(1) (“Any customer . . . who is found by a court to have been injured by any material false or fraudulent statement . . . may recover . . . reasonable costs and attorneys’ fees”). Because Congress failed to make its intention similarly clear in §145, the Court will not read the statute to “contravene fundamental precepts of the common law.” United States v. Rodgers, 461 U.S. 677, 716 (1983).
Andrei Iancu, Under Secretary of Commerce for Intellectual Property and Director, Patent and Trademark Office