The Supreme Court held that the PTO cannot collect attorney's fees under 35 U.S.C. § 145, which requires challengers of PTAB decisions to pay all expenses of the proceedings.

On December 11th, the U.S. Supreme Court in Peter v. Nantkwest, Inc. (available here) rejected the PTO’s interpretation of 35 U.S.C. § 145 as permitting its recovery of attorney’s fees.

A patent applicant dissatisfied with the decision of the Patent Trademark and Appeal Board (“PTAB”) has the right to appeal either to the Court of Appeals for the Federal Circuit or, pursuant to 35 U.S.C. § 145, to the Federal District Court for the Eastern District of Virginia.  In appeals to the district court, § 145 provides that the applicant pay “[a]ll expenses of the proceedings.”  In 2017, “for the first time in the 170-year history of § 145,” the PTO requested, in moving for reimbursement of expenses under § 145, reimbursement of the pro rata salaries of the PTO attorneys and paralegal who worked on the appeal of a PTAB decision rejecting several claims of a patent application on obviousness grounds, which was brought by patent applicant Nantkwest.

The Supreme Court unanimously rejected the PTO’s contention that the language of § 145 entitles the PTO to collect attorney’s fees, stating that such a practice violates the American Rule, which presumes, in the absence of a statute explicitly allowing for the collection of attorney’s fees, that parties to a case pay their own attorney’s fees, win or lose.  Writing for the Court, Justice Sotomayor emphasized that “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.”

Implications for Trademark Practice

While trademark applicants have a broader array of courts to choose from in their appeals of a refusal of registration, the Lanham Act contains language analogous to § 145 in 15 U.S.C. § 1071(b)(3).  And, indeed, the PTO has previously recovered attorney’s fees under this section relying upon its now rejected interpretation of the term “expenses.”  While the Supreme Court did not address § 1071 in its decision, trademark litigants should find comfort in the Supreme Court’s recent statutory interpretation.

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