Update: On March 4, 2019, the Supreme Court granted the Government’s cert. petition to review the Federal Circuit’s judgment in NantKwest, Inc. v. Iancu, discussed in the post below. The Court’s docket for this case is 18-801.
In NantKwest, Inc. v. Iancu, No. 2016-1794 (Fed. Cir. Jul. 27, 2018) (en banc), the Federal Circuit decided en banc that attorneys’ fees are not “expenses” required to be paid by an applicant who appeals an ex parte prosecution case to the Eastern District of Virginia under 35 U.S.C. § 145. A Federal Circuit panel had earlier reached a contrary result, and the court sua sponte vacated the panel decision to take up the issue en banc.
The Patent Act gives patent applicants two alternative options for judicial review of an adverse PTAB decision in ex parte appeals. First, the applicant may directly appeal to the Federal Circuit, under 35 U.S.C. § 141. Second, under 35 U.S.C. § 145, the applicant may file a civil action against the Director of the PTO in the Eastern District of Virginia.In § 145 actions, applicants can introduce new evidence, and the district court makes do novo findings based on the full record before the court. The district court’s decision may then be appealed to the Federal Circuit. The statute provides that for § 145 actions, “[a]ll expenses of the proceedings shall be paid by the applicant.” This provision (and its predecessors) had been interpreted by the PTO for over 170 years to require payment of expenses such as printing, travel, court reporter, and expert witness fees, but not attorney fees.
In Nantkwest, the applicant filed a § 145 action challenging the PTAB’s decision upholding the examiner’s rejection of its claims. The district court upheld the PTAB’s decision, and the Federal Circuit affirmed that decision on appeal. NantKwest , Inc. v. Lee, 686 F. App’x 864 (Fed. Cir. 2017). The PTO then filed a motion for reimbursement of its “expenses,” including attorneys’ fees for defending the PTAB’s decision. The district court denied the PTO’s motion, but a Federal Circuit panel reversed the decision, determining that attorneys’ fees were awardable. NantKwest, Inc. v. Matal, 860 F.3d 1352, 1355–56 (Fed. Cir.), vacated by 869 F.3d 1327 (Fed. Cir. 2017). The Federal Circuit relied on a Fourth Circuit decision interpreting a similar provision of the Lanham Act, relating to district court appeals of adverse decisions in trademark matters, Shammas v. Focarino, 784 F.3d 219, 223–24 (4th Cir. 2015). The panel’s decision was not unanimous. Chief Judge Prost wrote the majority opinion and was joined by Judge Dyk; Judge Stoll dissented.
The en banc court (in a 7-4 decision) determined that attorneys’ fees were not awardable, based on the common-law American Rule, which provides that each litigant must pay its own attorneys’ fees, unless a statute uses “specific and explicit” language to depart from this rule. The court stated that the statute’s reference to payment of all “expenses” of the proceeding is at best ambiguous as to attorneys’ fees, and lacks the “specific and explicit” congressional authorization required to displace the American Rule. The court contrasted 35 U.S.C. § 285, which demonstrates Congress’s use of “specific and explicit” language to require payment of attorneys’ fees, by stating that in exceptional cases the court “may award reasonable attorney fees to the prevailing party.” In the court’s view, the Fourth Circuit incorrectly interpreted the Lanham Act in Shammas to require payment of attorneys’ fees, and the court noted that other than Shammas, it was not aware of a statute interpreted to “require a private litigant to pay the government’s attorneys’ fees without regard to the party’s success in the litigation.”
Chief Judge Prost wrote a dissenting opinion, joined by Judge Dyk and two other judges, which would have upheld the panel decision.
This case reinstates the longstanding interpretation of § 145 not to require of payment of attorneys’ fees, and illustrates the Federal Circuit’s ability to correct an error in a precedential panel decision, by acting sua sponte to vacate the decision and reconsider the issue en banc with input from amicus curiae. The court received several amicus briefs, including briefs from the International Trademark Association, the Federal Circuit Bar Association, the American Intellectual Property Law Association, the Intellectual Property Owners Association, and the American Bar Association. No amicus briefs supported the PTO’s position or the original panel’s majority decision.