Peter v. Nantkwest, U.S., No. 18-801, amicus brief filed 07/22/2019.

July 24, 2019

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In Kappos v. Hyatt, 566 U.S. 431 (2012), aff’g 625 F.3d 1320 (Fed. Cir. 2010), this Court recognized the important right provided by 35 U.S.C. § 145. That statute permits a patent applicant to develop a full evidentiary record on district court review of a decision by the Patent Trial & Appeal Board (the “PTAB”) of the U.S. Patent & Trademark Office (“PTO”) denying patent protection. In exchange, the statute requires the applicant-appellant to pay “[a]ll the expenses of the proceedings.” 35 U.S.C. § 145.

For more than a century after Section 145 was enacted, the meaning of “expenses” in that phrase was undisputed: private litigants, the PTO, and courts all interpreted it to require payment only for the Government’s out-of-pocket expenses, including printing costs, counsel’s deposition travel costs, court reporter fees, and certain expert witness fees. No one, until recently, has ever taken the position that it included attorneys’ fees. In fact, when Congress amended Section 145 in other respects in 2011, it did nothing to cast doubt on that longstanding, unanimous view.

Then, in 2013, the PTO unilaterally departed from the longstanding consensus that the term “expenses,” as used in the statute, excludes attorneys’ fees from what “shall be paid by the applicant.” See 35 U.S.C. § 145; Brief For The Petitioner (filed May 17, 2019) (“Pet’r Br.”) 7. Disavowing its prior position, the PTO began asserting that an applicant challenging a PTAB decision under Section 145 must also pay pro rata for PTO attorney and staff time, even if the applicant’s challenge is successful. The PTO applied this new reading in patent cases (including the instant civil action for review of an adverse PTAB decision) and in cases arising under a similar statute addressing trademark-related review of PTO decisions. See Booking.com B.V. v. U.S. Patent & Trademark Office, 915 F.3d 171 (4th Cir. 2019), as amended (Feb. 27, 2019), petition for cert. docketed, No. 18-1309; see also Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015) (awarding pro rata PTO attorney and staff time for review of a Trademark Trial & Appeal Board decision)).

This Court should reject the PTO’s new interpretation as an affront to the American Rule. Under that rule, “[e]ach litigant pays his own attorneys’ fees, win or lose, unless a statute or contract provides otherwise.” Hardt v. Reliance Std. Life Ins. Co., 560 U.S. 242, 252-53 (2010) (citation omitted); accord Fleischmann Distilling Corp. v. Maier Brewing Co., 386 U.S. 714, 717 (1967) (American Rule is an intentional divergence from the English Rule that loser pays); see Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 249-50 (1975) (citing cases from 1796, 1852, 1872, 1873, 1879, 1967, and 1974). As the U.S. Court of Appeals for the Federal Circuit recognized, the principal policy underlying the American Rule is society’s desire to avoid burdening a litigant’s exercise of First Amendment rights by imposing, as a penalty for invoking judicial review, the opposing party’s attorneys’ fees. Pet. App. 4a-5a. Because the rule— 4 and that policy—are “entitled to the respect of the court, till [the rule] is changed, or modified, by statute,” Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306, 306 (1796), the Court has departed from them only where a statute reflects an “explicit” grant of authority from Congress to do so. Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158, 2164 (2015) (emphasis supplied) (quoting Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep’t of Health & Human Res., 532 U.S. 598, 602 (2001)). Section 145 contains no explicit authorization to shift attorneys’ fees, and the Government’s view should be rejected for that reason alone.

Moreover, the PTO’s view would make Section 145 an anomaly even among fee-shifting statutes. In the Government’s view, Section 145 uses attorneys’ fees as a cudgel to penalize litigants, no matter the merits of their claims, for seeking district-court review under Section 145 instead of resting on the more limited PTAB record in a direct appeal to the Federal Circuit under 35 U.S.C. §§ 141 and 144. Although numerous exceptions to the American Rule exist, those exceptions are not designed to cut back on the American Rule’s core policy by discouraging litigation. Rather, the exceptions are aimed at enabling parties who initiate potentially meritorious litigation to recover attorneys’ fees, encouraging rights vindicating suits. The Government’s interpretation therefore would make this unique among the exceptions; it makes a Section 145 civil action a significant obstacle in front of the courthouse doors, rendering the statute not merely “unusual,” as the government concedes (Pet’r Br. 16), but unprecedented. See infra pp. 10-24.

In fact, the Government’s interpretation, if adopted, would be unprecedented in another respect as well. In the Government’s view, even successful Section 145 action applicants must pay the Government’s attorneys’ fees. AIPLA is aware of no area of the law—and the Government identifies none—in which a losing defendant or appellee has been authorized to collect attorneys’ fees from its successful opponent. See Ruckelshaus v. Sierra Club, 463 U.S. 680, 693 (1983) (“[E]stablished principles requir[e] that a fee claimant attain some success on the merits before it may receive an award of fees.”). In that respect as well, the Government’s view would render Section 145 a radical departure from longstanding American practice.

In light of those considerations, the Government’s argument that the phrase “all * * * expenses” could, in a vacuum, be construed also to encompass attorneys’ fees is beside the point. Cf. Pet’r Br. 14, 18- 24. What matters is that the phrase neither clearly nor expressly requires the departure from longstanding practice—a departure that the Government now advocates. And because the American Rule’s history, PTO’s longstanding views, and Congress’s approval of the exclusion of attorneys’ fees from “expenses” that governed prior to 2013 all support a reading that excludes attorneys’ fees, the departure the Government proposes should be rejected. The court of appeals’ understanding, under which Section 145 authorizes the shifting of costs (which is common in American litigation), but not fees, is the only one that accords with the history of and the general policy common to the American Rule and its exceptions. The Court should therefore affirm.  

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