The Supreme Court Rules That the PTO Cannot Recover Its In-House Attorneys’ Fees from a Party That Challenges Its Refusal to Grant A Patent

On December 11, 2019, writing for a unanimous Court Judge Sotomayor ruled that the language in Section 145 of the Patent Act, 35 U.S. Code § 145, that provides that the prevailing party is entitled to “all expenses of the proceedings” does not authorize reimbursement of the PTO’s attorneys’ fees. Peters v. NantKwest, 589 U. S. ____ (2019),

Section 145 provides that if the PTO refuses to grant a patent, the applicant may file an action in Federal District Court for the Eastern District of Virginia seeking to have the refusal overturned. Unlike in an appeal of a refusal to the Federal Circuit, which reviews the PTO decision on the administrative record, in a District Court case the applicant can present new evidence that the District Court reviews de novo. For that reason a proceeding in the District Court is typically more expensive than an appeal to the Federal Circuit.

Judge Sotomayor first notes that the long standing “American Rule” is that “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.” Judge Sotomayor explained that “[t]he question presented in this case is whether such ‘expenses’ include the salaries of attorney and paralegal employees of the United States Patent and Trademark Office (PTO)”.

After noting that to overturn the American Rule a statute must include a “specific and explicit” intent to do so, and that this case was “the first time in the 170-year history of § 145” that the PTO included attorneys’ fees in a reimbursement request, the Court concluded that “[t]his term has long referred to a class of expenses commonly recovered in litigation to which attorney’s fees did not traditionally belong”, and that “the modifier ‘all’ does not expand §145’s reach to include attorney’s fees.”

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