Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Supreme Court Rules USPTO Can’t Recover Attorney Fees in §145 Actions

Author: Scarinci Hollenbeck, LLC

Date: February 28, 2020

Key Contacts

Back

SCOTUS recently ruled in Nantkwest, Inc. v. Iancu that 35 U.S.C. § 145 does not require patent applicants to pay the USPTO’s attorneys’ fees when challenging a USPTO decision in federal district court…

In a rebuff to the U.S. Patent and Trademark Office (USPTO), the U.S. Supreme Court recently ruled in Nantkwest, Inc. v. Iancu that 35 U.S.C. § 145 does not require patent applicants to pay the USPTO’s attorneys’ fees when challenging a USPTO decision in federal district court. The decision is good news for businesses that may have limited financial resources to challenge a USPTO decision.

Supreme Court Rules USPTO Can’t Recover Attorney Fees in §145 Actions

Challenging Patent Decisions

The Patent Act provides applicants with two options when seeking judicial review of an adverse USPTO decision. Under 35 U.S.C. § 141, the applicant may appeal directly to the Court of Appeals for the Federal Circuit. Alternatively, the applicant may file a civil action against the Director of the USPTO in the United States District Court for the Eastern District of Virginia pursuant to 35 U.S.C. § 145.

Suits under § 145 are attractive because they allow patent applicants to conduct discovery and introduce new evidence. At the conclusion of the proceeding, the district court must make a de novo finding. In comparison, the appellate review in § 141 proceedings is confined to the record already established before the USPTO. While patent challenges under § 145 are more expansive, they are also more costly. Section 145 provides: “All the expenses of the proceedings shall be paid by the applicant.” Accordingly, an aggrieved applicant who proceeds under § 145 must shoulder not only his own significant expenses and fees but also the USPTO’s “expenses of the proceedings,” without regard to that party’s success in those proceedings.

The USPTO has relied on these “expenses” provisions to recover USPTO attorneys’ travel expenses to attend depositions, printing expenses, court reporter fees, and reasonable fees for expert witnesses. However, more recently, the USPTO has also sought to recover attorney’s fees.

Facts of Nantkwest, Inc. v. Iancu

NantKwest, Inc. filed a §145 civil action after its patent application was denied. The District Court granted summary judgment to the USPTO, and the Federal Circuit affirmed. The USPTO subsequently moved for reimbursement of expenses, including  $78,592.50 in attorneys’ fees. The fees included the pro-rata salaries of the two USPTO attorneys and one paralegal who worked on the case.

The District Court denied 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. The en banc Federal Circuit affirmed. In reaching its decision, the Federal Circuit first rejected the USPTO’s argument that § 145 is not a fee-shifting that falls within the American Rule’s ambit, as it is not contingent upon which party prevails.  “Given the primary purpose of the American Rule—protection of access to courts—the PTO’s alleged distinction makes little sense,” the court reasoned. “We submit that the policy behind the American Rule would be even more strongly implicated where attorneys’ fees would be imposed on a winning plaintiff.” The Federal Circuit next turned to whether § 145 displaces the American Rule. It concluded that “the phrase ‘[a]ll the expenses of the proceedings’ falls short of this stringent standard.”

Supreme Court’s Decisions in Nantkwest, Inc. v. Iancu

The Supreme Court affirmed. In a unanimous decision, the justices agreed that the USPTO may not recover the pro-rata salaries of its legal personnel under §145. “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,” wrote Justice Sonia Sotomayor.

In reaching its decision, the Court rejected the government’s interpretation of the American Rule. “This Court has never suggested that any statute is exempt from the presumption against fee-shifting,” Justice Sotomayor wrote. “Nor has it limited its American Rule inquiries to prevailing-party statutes.”

Justice Sotomayor went on to explain that “the presumption against fee-shifting not only applies but is particularly important because §145 permits an unsuccessful government agency to recover its expenses from a prevailing party.” She added: “Reading §145 to award attorney’s fees in that circumstance ‘would be a radical departure from longstanding fee-shifting principles adhered to in a wide range of contexts.’”

The Court further concluded that § 145’s plain text does not overcome the American Rule’s presumption against fee-shifting. Citing the Court’s decision in Baker Botts v. Asarco, Justice Sotomayor found that the term “expenses” “does not invoke attorney’s fees with the kind of ‘clarity we have required to deviate from the American Rule.’”

In further support of the Court’s conclusion, Justice Sotomayor noted that the Patent Act’s history reinforces that Congress did not intend to shift attorney’s fees in §145 actions. “There is no evidence that the original Patent Office ever paid its personnel from sums collected from adverse parties,” she wrote. “Neither has the PTO, until this litigation, sought its attorney’s fees under §145. When Congress intended to provide for attorney’s fees in the Patent Act, it has stated so explicitly.”

This decision may also render the same result, going forward, in analogous trademark cases. The U.S. Court of Appeals for the Fourth Circuit, in 2015, interpreted a nearly identical costly provision in the Lanham (Trademark) Act to include the USPTO attorney fees.   The Fourth Circuit decision is likely inconsistent with this new Supreme Court ruling.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business post image

The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business

Since his inauguration two months ago, Donald Trump’s administration and the Congress it controls have indicated important upcoming policy changes. These changes will impact financial services policies and priorities. The changes will particularly affect cryptocurrency, as well as banking rules and regulations. Key Regulatory Changes in Cryptocurrency For example, in the burgeoning cryptocurrency business environment, […]

Author: Dan Brecher

Link to post with title - "The Current Administration's Proposals for the Financial Services and Banking Industries Will Affect Your Business"
Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1 post image

Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1

The retail sector has experienced a wave of bankruptcy filings over the last year. Brick-and-mortar businesses in financial distress include big-name brands like Big Lots, Party City, The Container Store, and Vitamin Shoppe. When large retailers seek bankruptcy protection, they are not the only businesses impacted. Landlords can be particularly hard hit. While commercial landlords […]

Author: Brian D. Spector

Link to post with title - "Tips for Commercial Landlords Impacted by Wave of Retailer Bankruptcies Part 1"
How Understanding Bankruptcy Trends Can Benefit Your Business post image

How Understanding Bankruptcy Trends Can Benefit Your Business

The bankruptcy legal landscape presents both challenges and opportunities for businesses navigating financial distress. Understanding current bankruptcy trends can help businesses make more informed and strategic decisions. Corporate Bankruptcy Filings Trending Upwards Bankruptcy filings continued to trend upwards in 2024. According to statistics released by the Administrative Office of the U.S. Courts, personal and business […]

Author: Brian D. Spector

Link to post with title - "How Understanding Bankruptcy Trends Can Benefit Your Business"
SEC Takes Actions Against Issuers for Failure to File Form D post image

SEC Takes Actions Against Issuers for Failure to File Form D

In December, the U.S. Securities and Exchange Commission (SEC) announced charges against two privately held companies for failing to file a Form D notice, which is generally utilized for exempt securities offerings. Here, the SEC’s enforcement sends a strong message: compliance with regulatory requirements is not optional and failure to comply can have significant consequences. […]

Author: Kenneth C. Oh

Link to post with title - "SEC Takes Actions Against Issuers for Failure to File Form D"
Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda post image

Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda

On February 14, 2025, the Office of General Counsel (OGC) of the National Labor Relations Board (NLRB) under Acting General Counsel William B. Cowen issued Memorandum 25-05, “New Process for More Efficient, Effective, Accessible and Transparent Case handling.” The Memorandum rescinds nearly all of the Memoranda issued by his direct predecessor, Jennifer Abruzzo, setting the […]

Author: Matthew F. Mimnaugh

Link to post with title - "Redefining Labor Relations: NLRB's Pivot from Abruzzo’s Memoranda"
What Are FIRPTA Withholding Requirements? post image

What Are FIRPTA Withholding Requirements?

If you purchase real property from a foreign person or entity, you may be required to withhold taxes from your payment to the seller under the Foreign Investment in Real Property Tax Act (FIRPTA). The federal tax law is designed to ensure that foreign sellers pay any applicable capital gains tax on profits realized from […]

Author: Jesse M. Dimitro

Link to post with title - "What Are FIRPTA Withholding Requirements?"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!

Please select a category(s) below: