Source: https://www.ratnerprestia.com/2019/12/12/scotus-confirms-that-salaries-of-uspto-legal-staff-are-not-expenses-that-an-applicant-plaintiff-must-pay-in-a-civil-action-under-35-u-s-c-%C2%A7-145/
Timestamp: 2020-02-21 15:15:59
Document Index: 5972562

Matched Legal Cases: ['§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145', '§ 145']

SCOTUS Confirms That Salaries of USPTO Legal Staff Are Not “Expenses” That An Applicant/Plaintiff Must Pay In a Civil Action Under 35 U.S.C. § 145. – RatnerPrestia
SCOTUS Confirms That Salaries of USPTO Legal Staff Are Not “Expenses” That An Applicant/Plaintiff Must Pay In a Civil Action Under 35 U.S.C. § 145.
Written by: Shayne D. Rasay
In Peter v. NantKwest, Inc., the Supreme Court established a bright-line rule that the United States Patent and Trademark Office (PTO) may not recover legal personnel fees as “expenses” under 35 U.S.C. § 145. The language referencing “expenses” in § 145 states that “[a]ll the expenses of the proceedings shall be paid by the applicant.” Succinctly, such “expenses” do not include legal personnel fees. The Supreme Court reached this result through application of the American Rule, which prohibits the shifting of attorney fees from one party to another, absent sufficient evidence of “specific and explicit” Congressional intent to overcome such presumption.
By way of background, NantKwest, Inc. filed a civil action against the PTO Director in order to challenge the denial of its patent application. After the Federal Circuit affirmed the District Court’s grant of summary judgment in favor of the PTO, the PTO moved for the reimbursement of, inter alia, the salaries of PTO attorneys and a paralegal who worked on the matter. The District Court denied the motion, a decision which was ultimately affirmed by the en banc Federal Circuit. The USPTO appealed to the Supreme Court, which granted certiorari, and ultimately affirmed.
The American Rule Applies to § 145
The Court began its analysis with the “basic point of reference” when examining fee-shifting provisions in civil litigation: the “American Rule.” The American Rule establishes that “[e]ach litigant pays his own attorney’s fees.” The PTO argued that this “bedrock principle” does not apply to § 145 because the subject statute does not award expenses to a prevailing party—it places them squarely on the applicant. In other words, the American Rule does not apply because § 145 “requires one party to pay all expenses regardless of [the] outcome.”
The Court rejected this reading of the statute, citing a “line of precedents” that demonstrate a contrary view: the American Rule applies to all statutes, including those that “[do] not mention prevailing parties” and “even those like § 145 that do not explicitly award attorney’s fees to prevailing parties.” Indeed, the “presumption against fee shifting not only applies [to the statute], but is particularly important because § 145 permits an unsuccessful [party] to recover its expenses from a prevailing party.”
To Overcome the American Rule, There Must Be “Specific and Explicit” Congressional Intent to Depart from the Presumption
To determine whether “expenses” in § 145 encompass the shifting of attorney fees in contradiction to the American Rule presumption, the Court examined the statute’s plain text and legislative history. The plain text does not defeat the presumption because notwithstanding the “modifier ‘all’” that precedes “expenses of the proceeding,” the subject phrase, as it was “commonly understood” during the enactment of the statute, typically excluded attorney fees. Further, the terms “expenses” and “attorney’s fees” have often “appeared in tandem” in other pieces of legislation, demonstrating that “the two terms [are] distinct and not inclusive of each other.” Accordingly, it is when Congress expressly defines attorney’s fees as “a subset of expenses,” as seen in other statutes with the following language: “expenses…including…attorney[’s] fees,” that “specific and explicit” Congressional intent to overcome the American Rule presumption is properly inferred. Indeed, as evidenced by subsequent amendments made to the Patent Act, “when Congress intended to provide for attorney fees…it stated so explicitly.” “Simply put, 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.”
Significantly, the Court found it compelling that the PTO has no history of paying its legal personnel through the collection of attorneys’ fees from litigants, and the PTO specifically has not sought such a fee award in the 170-year history of § 145 until this instant case.
In sum, while the USPTO may seek certain “expenses” from applicants engaged with the USPTO in civil litigation, legal personnel fees are outside the scope of the “expenses” permitted by § 145.