Nantkwest, Inc. v. Iancu
Nantkwest, Inc. v. Iancu
Opinion
*1180 When the United States Patent and Trademark Office's Patent Trial and Appeal Board ("Board") affirms an examiner's rejection of a patent application, § 145 of the Patent Act permits the disappointed applicant to challenge the Board's decision in district court. Applicants who invoke § 145 are required by statute to pay "[a]ll the expenses of the proceedings" incurred by the U.S. Patent and Trademark Office ("PTO") in defending the Board's decision, regardless of the outcome. Historically, the agency relied on this provision to recover sums it spent on travel and printing and, more recently, expert witnesses. Now, 170 years after Congress introduced § 145's predecessor, the agency argues that § 145 also compels applicants to pay its attorneys' fees. We hold that it does not, for the American Rule prohibits courts from shifting attorneys' fees from one party to another absent a "specific and explicit" directive from Congress. The phrase "[a]ll the expenses of the proceedings" falls short of this stringent standard. Accordingly, we affirm the district court's judgment.
I
A
The Patent Act gives applicants two mutually exclusive options for judicial review of an adverse Board decision. First, the applicant may appeal directly to this court.
Section 141 provides standard judicial review of an agency decision under the Administrative Procedure Act. We review the Board's legal determinations de novo,
Honeywell Int'l Inc. v. Mexichem Amanco Holding S.A. DE C.V.
,
Section 145, by contrast, authorizes a more expansive challenge to the Board's decision and is generally more time consuming. For example, patent applicants can conduct discovery and introduce new evidence. And once an applicant submits new evidence on a disputed factual question, "the district court must make a
de novo
finding."
Hyatt
,
Congress introduced § 145's predecessor in 1839, 1 and over the years, the PTO
*1181
has relied on these "expenses" provisions to recover PTO attorneys' travel expenses to attend depositions,
see
Robertson v. Cooper
,
B
As its name suggests, the American Rule is a "bedrock principle" of this country's jurisprudence.
Hardt v. Reli-ance Standard Life Ins. Co.
,
The rationale supporting the American Rule is rooted in fair access to the legal system, as well as the difficulty of litigating the fee question:
[S]ince litigation is at best uncertain one should not be penalized for merely defending or prosecuting a lawsuit, and ... the poor might be unjustly discouraged from instituting actions to vindicate their rights if the penalty for losing included the fees of their opponents' counsel. Also, the time, expense, and difficulties of proof inherent in litigating the question of what constitutes reasonable attorney's fees would pose substantial burdens for judicial administration.
Fleischmann Distilling Corp. v. Maier Brewing Co.
,
The American Rule traces its origins back to at least the late 1700s. In
Arcambel v. Wiseman
, the circuit court included $1,600 in counsel's fees as part of the damages. 3 U.S. (3 Dall.) 306, 306,
*1182
Fleischmann
,
Only Congress "has the power and judgment to pick and choose among its statutes and to allow attorneys' fees under some, but not others."
Alyeska Pipeline
, 421 U.S. at 263,
According to the Supreme Court, one "good example of the clarity ... required to deviate from the American Rule" can be found in the Equal Access to Justice Act's attorneys' fees provision.
Baker Botts
,
Not all fee-shifting statutes follow this template though. For example, the Supreme Court has a separate line of precedent "addressing statutory deviations from the American Rule that do not limit attorney's fees awards to the 'prevailing party.' "
Hardt
,
And while the American Rule sets a high bar for shifting attorneys' fees, it does not impose a magic words requirement so long as Congress's intent is "specific and explicit."
See
Summit Valley Indus., Inc. v. Local 112, United Bhd. of Carpenters
,
*1183 II
This brings us to the procedural background of the current case. In 2001, Dr. Hans Klingemann filed a patent application directed to a method for treating cancer using natural killer cells. Dr. Klingemann's application was eventually assigned to NantKwest, Inc. The examiner rejected the application as obvious in 2010, and the Board affirmed the rejection in 2013.
Pursuant to § 145, NantKwest challenged the Board's decision by filing a complaint against the Director of the PTO in the U.S. District Court for the Eastern District of Virginia. Discovery ensued and the PTO moved for summary judgment that the application's claims would have been obvious. The district court granted the PTO's motion, and we affirmed.
See
NantKwest, Inc. v. Lee
,
The district court denied the PTO's motion with respect to attorneys' fees, citing the American Rule.
Nan
[
K
]
west, Inc. v. Lee
,
The PTO appealed the denial of its motion to recover attorneys' fees, and a divided panel of this court reversed the district court's judgment. The majority relied on the Fourth Circuit's opinion in
Shammas v. Focarino
, which interpreted a nearly identical provision of the Lanham Act,
*1184
Our court voted sua sponte to hear the appeal en banc and vacated the panel's judgment.
NantKwest, Inc. v. Matal
,
III
We review de novo a district court's interpretation of a statute.
Boston Sci. Scimed, Inc. v. Medtronic Vascular,Inc.
,
According to the PTO, the American Rule does not govern our interpretation of § 145. Even if it does, the PTO and the dissent aver that the statutory text suffices to displace this long-standing, common-law rule. We disagree on both counts and address each issue in turn.
A
At the outset, we hold that the American Rule applies to § 145. As noted, the American Rule provides that each litigant bears its own attorneys' fees, win or lose, and a statute must use "specific and explicit" language to depart from this rule. The Supreme Court in
Baker Botts
emphasized that the American Rule is the starting point whenever a party seeks to shift fees from one side to the other in adversarial litigation.
We are not persuaded by the PTO's contrary arguments for why the American Rule should not apply to litigation under § 145. The PTO begins by relying on the Fourth Circuit's Shammas opinion for the proposition that the American Rule only governs the interpretation of statutes that shift fees from a prevailing party to a losing party. Because § 145 imposes "[a]ll the expenses" on the applicant, win or lose, the PTO asserts it is not a fee-shifting statute that falls within the American Rule's ambit. We disagree. Given the primary purpose of the American Rule-protection of access to courts-the PTO's alleged distinction makes little sense. We submit that the policy behind the American Rule would be even more strongly *1185 implicated where attorneys' fees would be imposed on a winning plaintiff.
In
Shammas
, a divided panel of the Fourth Circuit awarded attorneys' fees to the PTO under
We respectfully submit that
Shammas
's holding cannot be squared with the Supreme Court's line of non-prevailing party precedent applying the American Rule. Although
Alyeska Pipeline
does refer to the American Rule in the context of a "prevailing party," the rule is not so limited. Rather, the Supreme Court has consistently applied the rule broadly to any statute that allows fee shifting to either party, win or lose. For example, the Supreme Court in
Hardt
evaluated a request for attorneys' fees under
Our decision is in keeping with
Ruckelshaus
, relied on by the Fourth Circuit in
Shammas
. While the Court in
Ruckelshaus
acknowledged that the vast majority of fee-shifting provisions impose a "success" requirement, the Court made clear that its absence does not render the American Rule inapplicable. Instead, the Court applied the American Rule even though the district court awarded fees to a "party that achieved no success on the merits" based on a statute that authorized "reasonable attorney ... fees[ ] whenever [the court] determines that such an award is appropriate."
Ruckelshaus
,
Our understanding is likewise confirmed by numerous other cases that applied the American Rule to a variety of statutes that did not mention a "prevailing party." The Supreme Court applied the American Rule to a bankruptcy statute allowing "reasonable compensation for actual, necessary services rendered by the trustee ... or attorney."
Baker Botts
,
The PTO also cites the Supreme Court's decision in
Sebelius v. Cloer
, which interpreted a statute requiring the payment of attorneys' fees regardless of the party's litigation success without expressly discussing the American Rule.
The Court answered this question in the affirmative, but its analysis does not undercut the American Rule's applicability to § 145. First, the Court rejected the government's argument that an untimely petition was ineligible for fees because it was never "filed" within the meaning of the statute.
Id.
at 377-79,
Given the Supreme Court's line of non-prevailing party precedent and the inapposite nature of
Cloer
, we see no reason why the American Rule would not apply to § 145. As the Supreme Court has explained, the American Rule simply provides that each litigant bears its own attorney fees.
Hardt
,
B
Having concluded that the American Rule applies, we now ask whether § 145 displaces it. The Supreme Court has explained that when, as here, a statutory provision "does not expressly provide for the recovery of attorney's fees ... we are not presented with a situation where Congress has made 'specific and explicit provisions for the allowance of' such fees."
*1187
Summit Valley
,
In our view, § 145's statement that "[a]ll the expenses of the proceedings shall be paid by the applicant" lacks the "specific and explicit" congressional authorization required to displace the American Rule. Section 145 contains no reference to attorneys' fees, "reasonable compensation for actual, necessary services rendered by the ... attorney,"
Baker Botts
,
We begin our analysis with contemporaneous definitions and usages of "expenses." In 1839, when Congress introduced the "whole of the expenses" language in § 145's predecessor, Act of Mar. 3, 1839, § 10, 5 Stat. at 354, the ordinary meaning of "expenses" did not implicitly encompass attorneys' fees. The PTO only cites one dictionary from this time period, which defined "expense" as "[a] laying out or expending; the disbursing of money, or the employment and consumption, as of time or labor." Appellant Br. 17 (quoting Noah Webster,
American Dictionary of the English Language
(1st ed. 1828) ). Other 1830s dictionaries defined "expense" as "cost; charges; money expended," J.E. Worcester,
A Comprehensive Pronouncing and Explanatory Dictionary of the English Language, with Pronouncing Vocabularies of Classical and Scripture Proper Names
117 (1830), and as "the disbursing of money," "[m]oney expended," "cost," and "[t]hat which is used, employed, laid out, or consumed," Noah Webster et al.,
An American Dictionary of the English Language
319 (Joseph Worcester ed., 1830). These vague definitions, however, do not establish that a statutory right to "expenses" includes "an implicit authorization to award attorney's fees."
Summit Valley
,
*1188
More compelling than the dictionary definitions, though, is Congress's usage of the terms "expenses" and "attorneys' fees" in other statutes. These statutes demonstrate Congress's understanding that the ordinary meaning of "expenses" does not include attorneys' fees. Similar to the Supreme Court's analysis in
West Virginia University Hospitals, Inc. v. Casey
, we think the "record of statutory usage" convincingly demonstrates that attorneys' fees and expenses are regarded as separate elements unless specifically identified otherwise.
Indeed, Congress has drafted numerous statutes authorizing the award of both "expenses" and "attorneys' fees." This first category of statutes list expenses and attorneys' fees as separate items of recovery.
See, e.g.
,
A second category of statutes define expenses to include attorneys' fees, but they do so explicitly. These statutes demonstrate that "expenses" does not necessarily include attorneys' fees, else there would be no need to so define "expenses."
See, e.g.
,
Collectively, these statutes encompass diverse categories of legislation and demonstrate that Congress understood the "ordinary, contemporary, common meaning" of "expenses" as being something other than "attorneys' fees" unless expressly specified.
See
Summit Valley
,
In considering whether the ordinary meaning of a particular statutory provision shifted attorneys' fees, the Supreme Court in
Key Tronic
found it persuasive that Congress included express provisions for fee awards in related statutes without including a similar provision in the statute at issue.
Congress elected in § 145 to provide for the recovery of the PTO's "expenses," not its "attorneys' fees." When "Congress includes particular language in one section of a statute but omits it in another section of the same Act, it is generally presumed that Congress acts intentionally and purposely in the disparate inclusion or exclusion."
Russello v. United States
,
We have also considered judicial usage of "expenses."
See
W. Va. Univ.
,
This distinction remains evident in recent legal opinions. For example, one court recognized that "[t]he terms 'costs' or 'expenses' when used in a statute do not ordinarily include attorney's fees."
Ark. Dep't of Human Servs., Div. of Econ. & Med. Servs. v. Kistler
,
Finally, we emphasize that the PTO's interpretation of § 145 would have a patent applicant pay the government's attorneys' fees even when the patent applicant succeeds. Other than what we believe to be an incorrect interpretation of the trademark analogue in
Shammas
, we are aware of no statute that requires a private litigant
*1192
to pay the government's attorneys' fees without regard to the party's success in the litigation. Indeed, the PTO could not identify any statute that shifts the salaries of an agency's attorneys onto the party bringing suit to challenge the agency's decision.
See
Oral Arg. at 26:53-27:09, http://oralarguments.cafc.uscourts.gov/default.aspx?fl=2016-1794_382018.mp3;
see also
Br. of Amici Curiae Am. Bar Ass'n 5 ("Congress has never enacted a fee-shifting provision that shifts only the government's fees onto private parties, much less a provision that does so even if the government loses the litigation."). Thus, adopting the PTO's interpretation would create a particularly unusual divergence from the American Rule. Had Congress intended to produce such an anomalous result, we believe "it would have said so in far plainer language than that employed here."
Ruckelshaus
,
The Supreme Court's reluctance to endorse statutory interpretations that would create sweeping departures from the American Rule furthers our conclusion. For example, even in statutes where Congress has granted courts broad leeway to shift "attorneys' fees," the Supreme Court has restricted the availability of those awards.
See, e.g.
,
Hardt
,
And the Court often rejects fee-shifting requests under the American Rule where Congress employs vague statutory language that might, to a layperson, seem broad enough to cover attorneys' fees as well as other items.
See, e.g.
,
Summit Valley
,
IV
The PTO and the dissent resist our conclusion that § 145 does not displace the American Rule. They both begin-as we do-with the meaning of "expenses." To support an expansive reading of "expenses" that includes attorney fees, the PTO and the dissent cite the Supreme Court's statement in
Taniguchi
that "[t]axable costs are a fraction of the nontaxable
expenses borne by litigants for
at
torneys
*1193
, experts, consultants, and investigators." 566 U.S. at 573,
In a similar vein, the PTO relies on a single sentence from
Arlington Central School District Board of Education v. Murphy
,
The PTO likewise insists that a single sentence in
Baker Botts
suggests that a statutory reference to "litigation costs" alone would suffice to shift attorneys' fees. Appellant Br. 39 (quoting
*1194
The PTO and dissent next accuse us of transforming a statute requiring the payment of "[a]ll the expenses" to one demanding reimbursement for only "some" of the expenses. Appellant Br. 41;
see
Dissent Op. 1200-01. Both emphasize the modifier "[a]ll" in arguing that Congress intended § 145 to be fully remedial. But the word "all" sheds no light on the breadth of "expenses" vis-à-vis attorneys' fees-the crux of the dispute-and serves only to clarify that, whatever the "expenses" are, all of them must be paid by the applicant. In addition, at least one statute expressly identifies "attorneys' fees" as one of an enumerated list of "all expenses" recoverable, further supporting the notion that the phrase "all expenses" does not carry the weight afforded to it by the PTO and the dissent.
See
The dissent next invokes "legislative history and the purpose of § 145" for displacing the American Rule. Dissent Op. 1200-03. At the outset, we question the role of legislative history in this context where the very point of the "specific and explicit" standard is to demand clarity in the statute's text.
See
Baker Botts
,
The dissent points to an expense reimbursement provision in the 1870 amendments to the patent laws, which it notes is similar to the language employed by Congress in § 145's predecessor. Dissent Op. 1201. Initial versions of the House bill limited the reimbursement by using the word "costs" and capping it at $25.
See
H.R. 1714, 41st Cong. § 52 (as passed by House, Apr. 25, 1870). The Senate, however, changed "costs" to "expenses" and removed the $25 cap.
See
H.R. 1714, 41st Cong. § 52 (as amended by Senate, May 31, 1870). The enacted version reflects the Senate amendments,
see
Act of July 8, 1870, ch. 230, § 52,
*1195 is broader than "costs." But the breadth of expenses relative to costs has no relevance here. Our task is to determine whether "expenses" includes attorneys' fees, and the dissent's legislative history is silent on this crucial point.
The PTO and the dissent also direct our attention to § 9 of the 1836 patent statute-a budgetary provision that uses the word "expenses." Appellant Br. 27-28; Dissent Op. 1197-98. Section 9 requires that money paid by patent applicants into the Treasury be used "for the payment of the salaries of the officers and clerks herein provided for, and all other expenses of the Patent Office." Act of July 4, 1836, ch. 357, § 9,
Both the dissent and the PTO contend that it would not make sense for Congress to use the phrase "attorneys' fees" in the context of § 145 actions because it is more accurate to classify the salaries of the PTO's attorneys as personnel "expenses." Appellant Br. 42; Dissent Op. 1199-1200. In light of other statutes providing for the government's recoupment of
attorneys' fees
, as opposed to personnel expenses, in enforcement actions, we do not find this argument convincing.
See, e.g.
,
Finally, the PTO and the dissent paint § 145 actions as a scourge on other patent applicants. Appellant Br. 21-25; Dissent Op. 1201-02, 1204-05. They claim it is unfair to burden all applicants with the additional costs caused by those who voluntarily initiate § 145 proceedings. But this policy debate on the value of § 145 actions is best left for Congress. And, as various amici indicate, Congress already addressed the debate by rebuffing an attempt to repeal § 145. Br. of Amici Curiae Intellectual Prop. Owners Ass'n 21 n.3; Br. of Amici Curiae Ass'n of Amicus Counsel 14. In any event, the dissent's concerns appear to us exaggerated. A back-of-the-envelope calculation elucidates the minuscule impact of these proceedings on the *1196 overall cost of a patent application. Although neither party could provide an exact tally of the § 145 proceedings, at the panel stage the PTO estimated that there were four to five of these proceedings in the last three years. See Oral Arg. at 19:19-20:10, http://oralarguments.cafc.uscourts.gov/default.aspx?fl=20 16-1794.mp3. If we were to take a conservative estimate of ten § 145 actions per year (five times the rate estimated by the PTO) and assume that the PTO expended $100,000 in attorneys' fees defending each action ($20,000 more than the amount the PTO incurred in this case), the total expense for fiscal year 2018 would be $1 million. The PTO estimates that it will receive more than 627,000 patent applications during this same time period. See U.S. Patent and Trademark Office, Fiscal Year 2018 Congressional Justification 11 (2017), https://www.uspto.gov/sites/default/files/documents/fy18pbr.pdf. When spread amongst the 627,000+ applications, the $1 million price tag amounts to less than $1.60 per application.
V
The general rule in the United States is that each party pays for its own attorneys. To deviate from the status quo embodied in the American Rule, Congress must draft legislation-"specific and explicit" legislation-demonstrating its intent to make the award of attorneys' fees available under that statute. Awarding "[a]ll the expenses" simply cannot supply the "specific and explicit" directive from Congress to shift attorneys' fees, and nothing else in the statute evinces congressional intent to make them available. Other than
Shammas
's interpretation of the trademark analogue, we are not aware of any statute requiring a private litigant to pay the government's attorneys' fees without regard to the party's success in the litigation. We are unwilling to "invade the legislature's province by redistributing litigation costs" in a way that would create such an anomalous statute here.
See
Alyeska Pipeline
, 421 U.S. at 271,
AFFIRMED
COSTS
Costs to Appellee.
Prost, Chief Judge, dissenting, with whom Dyk, Reyna, and Hughes, Circuit Judges, join.
The question for the en banc court is whether
I
When electing to pursue its § 145 action, NantKwest, a disappointed patent applicant, had two options for judicial review of the Patent Trial and Appeal Board's decision.
See
Kappos v. Hyatt
,
*1197
Litigation in district court is expensive and time-consuming, much more so than direct appeals to this court limited to the administrative record. Section 145, unlike § 141, requires the applicant to pay "[a]ll the expenses of the proceedings,"
In defending the § 145 proceedings initiated by NantKwest, the PTO incurred expenses for expert witnesses and personnel expenses-that is, the expense of diverting agency attorneys and paralegals from other matters to this § 145 action. The district court ordered NantKwest to reimburse the agency's expenses for its expert witness but not its personnel. The parties do not dispute that "[a]ll the expenses of the proceedings" includes the PTO's expert witness expenses. On appeal, the PTO seeks reimbursement under § 145 for personnel expenses it incurred.
II
I start, as I must, with the language of the statute.
E.g.
,
United States v. Ron Pair Enters., Inc.
,
A
Initially, I note that the PTO did not retain outside counsel to assist in defending this § 145 action. Instead, it used its salaried government lawyers. These lawyers incurred expenses because the time they devoted to this case was not available for other work.
See
Wis. v. Hotline Indus., Inc.
,
Thus, the question in this case is whether "[a]ll the expenses of the proceedings" includes the personnel expenses the PTO actually incurred for attorneys in defending these § 145 proceedings. I conclude that it does.
B
To determine whether the phrase "[a]ll the expenses" includes the PTO's personnel *1198 expenses, I first look to the meaning of "expenses." Although the statute does not expressly define that term, the Patent Act of 1836 did use the term "expenses" in a provision discussing application fees. That provision, which was retained when Congress added the expense-reimbursement language in 1839, read in relevant part:
[T]he applicant shall pay into the Treasury of the United States, or into the Patent Office, or into any of the deposite banks to the credit of the Treasury ... the sum of thirty dollars .... And the moneys received into the Treasury under this act shall constitute a fund for the payment of the salaries of the officers and clerks herein provided for, and all other expenses of the Patent Office , and to be called the patent fund.
Patent Act of 1836, ch. 357, § 9,
When a term goes undefined in a statute, we give the term its ordinary meaning.
Taniguchi v. Kan Pac. Saipan, Ltd.
,
Although the PTO did not retain outside counsel in this case, the statute's history suggests that Congress intended "expenses" to also include attorneys' fees for the PTO's retained outside counsel. At the time the expense-reimbursement provision appeared, proceedings in equity seem to have been quite rare. And when they occurred, it seems that the PTO incurred the expense of employing outside counsel. This conclusion is drawn from the Report of the Commissioner of Patents for the Year 1845, in which the Commissioner explained that "[t]wo suits in equity are now pending against the Commissioner in the circuit court for the district of Pennsylvania, in which, as it has not been necessary for me to attend, I have employed counsel." REPORT OF THE COMMISSIONER OF PATENTS FOR THE YEAR 1845, H. Doc. No. 29-140, at 8 (1st Sess. 1846).
The plain and ordinary meaning that the Supreme Court has ascribed to the word "expenses" comports with my reading of the dictionary definitions cited above. For example, the Court has recognized that "expenses" (as compared to taxable costs) contemplates the full range of expenditures a party must make in litigation (including
*1199
attorneys).
Taniguchi
, 566 U.S. at 573,
Although NantKwest and the majority do not deny that "expenses" is broad enough to cover the PTO's personnel expenses, they contend that the term "is merely capable of implicitly covering attorneys' fees" and "is at best ambiguous as to attorneys' fees." Majority Op. 1187. As support, NantKwest and the majority rely on other federal statutes under various titles where Congress has employed the term "expenses" to authorize attorneys' fees either in addition to expenses (e.g., "expenses and attorneys' fees"), or as a component of them (e.g., "expenses including attorneys' fees"). 1 The majority contends that "[t]hese statutes demonstrate Congress's understanding that the ordinary meaning of 'expenses' does not include attorneys' fees." Majority Op. 1188.
Certainly, "a definition [being] broad enough to encompass one sense of a word does not establish that the word is
ordinarily
understood in that sense."
Taniguchi
, 566 U.S. at 568,
The majority addresses the statutory context by pointing to
First, Congress intended a broader compensation scheme under § 145 than under § 285. Compare § 145 ("[a]ll the expenses of the proceedings"), with § 285 ("reasonable attorneys' fees"). For example, NantKwest does not contest that the language of § 145 includes the PTO's expert witness expenses. In § 285, Congress chose not to award all the expenses to the prevailing party, but only attorneys' fees. Congress can certainly employ a broad word over *1200 other narrower alternatives if it so chooses.
Second, as salaried employees, the PTO's attorneys do not bill individual hours for their work, nor do they collect fees from those whom they represent. In this context, the overhead associated with the PTO's attorneys' work is more aptly characterized as an "expense" to the PTO than a "fee." Compare Expense , Black's Law Dictionary (10th ed. 2014) (defining "expense" as "expenditure[s] of money, time, labor, or resources to accomplish a result"), with Attorney's fee , Black's Law Dictionary (10th ed. 2014) (defining "attorney's fee" as "[t]he charge to a client for services performed for the client, such as an hourly fee, a flat fee, or a contingent fee"). I would not require Congress to mimic § 285 and use the phrase "attorneys' fees" when, in this context, "expenses" is the more apt term.
Third, the § 145 and § 285 provisions are implicated in different settings. Section 285 arises in traditional patent litigation, and authorizes a district court to award attorneys' fees to the prevailing party.
See
Octane Fitness, LLC v. ICON Health & Fitness, Inc.
, --- U.S. ----,
But I need not rely on the word "expenses" alone. Congress did not simply provide for "expenses of the proceedings" in § 145-it clarified that it was requiring the applicant to pay " [a]ll the expenses of the proceedings."
The majority maintains that "the word 'all' sheds no light on the breadth of 'expenses,' " and reasons that "all" "serves only to clarify that, whatever the 'expenses' are, all of them must be paid by the applicant." Majority Op. 1194. I disagree. Such an interpretation leaves little work for "all" to do; simply saying "the expenses" would seem to do just as well. While this latter, more limited phrasing would still not explicate the breadth of "expenses," neither would it, by itself, provide a basis for excluding anything properly regarded as an "expense." In my view, Congress used the word "all" to broadly and comprehensively capture anything fairly regarded as an "expense," resolving any lingering doubt in favor of inclusion.
*1201 The majority acknowledges that the term "expenses" is capable of including attorneys' fees and cites to several statutes that list attorneys' fees as part of expenses. Majority Op. 1188-89 (citing ten such statutes). In § 145, Congress's use of the word "all" indicated its desire to broadly and comprehensively include all of the expenses as it commonly understood them, which includes the personnel expenses the PTO incurs in defending § 145 actions.
C
Both the legislative history and the purpose of § 145 support my reading of the statutory text and context.
The majority questions the relevance of legislative history in interpreting fee statutes. Majority Op. 1194-95. I note, however, that the Supreme Court has examined legislative history in cases implicating fee-shifting and the American Rule.
E.g.
,
Ruckelshaus v. Sierra Club
,
Consideration of the history of § 145 suggests that Congress intended "expenses" to capture broadly, not narrowly. As the parties have noted, the "expenses" provision arose (in slightly different form) in the 1839 Amendments to the Patent Act, which provided that an applicant bringing a proceeding in equity to contest an adverse decision of the Patent Office would be required to pay "the whole of the expenses of the proceeding ... whether the final decision shall be in his favor or otherwise." Patent Act of 1839, ch. 88, § 10,
When Congress revised the Patent Act in 1870, it used expense-reimbursement language very similar to the language used in the previously enacted 1839 statute. Initial versions of the House bill sought to limit the reimbursement provision by using the word "costs" instead of "expenses" and by limiting any reimbursement to $25. But these changes were rejected and the word "expenses" was retained. The version of the bill reported in the House and referred to the Senate read, in relevant part:
SEC. 52. And be it further enacted, That when the Commissioner of Patents is the only defendant in any such suit, all costs shall be paid by the complainant , and whole amount of costs taxed against the complainant shall not exceed the sum of twenty-five dollars ....
H.R. 1714, 41st Cong. § 52 (as referred to the S. Committee on Patents, Apr. 25, 1870) (emphasis added). The Senate made significant amendments to the bill, including changing Section 52 to use "expenses" rather than "costs" and by removing the $25 cap. The version passed by the Senate read, in relevant part:
SEC. 52. And be it further enacted, That whenever a patent on application is refused, for any reason whatever, either by the Commissioner or by the supreme court of the District of Columbia upon appeal from the Commissioner, the applicant may have remedy by bill in equity; .... And in all cases where there is no opposing party a copy of the bill shall be served on the Commissioner, and all the expenses of the proceeding shall be paid by the applicant, whether the final decision is in his favor or not .
H.R. 1714, 41st Cong. § 52 (as amended by the Senate, May 31, 1870) (emphasis added). The House disagreed with the Senate amendments and asked for a conference. Ultimately, the House members dropped their objections to the Senate amendments to § 52, and the enacted version reflected the Senate's version using the word "expenses." This demonstrates-or *1202 at least strongly suggests-that Congress specifically intended that "expenses" be broader than "costs."
The statute's purpose also confirms that Congress intended all of the expenses associated with § 145 proceedings to be borne by the applicants who elect them-not by taxpayers or other PTO users whose fees fund the agency's operations. Section 145 proceedings are an optional extension of the application process.
See
Gandy
,
Indeed, even in 1838, Congress was aware that proceedings in equity were adding to the Patent Office's expenses-including labor expenses. H.R. Rep. No. 25-797, at 3 (1838) (discussing the 1839 Act). A letter from the Commissioner of Patents annexed to the House Report stated:
The judicial decisions on interfering applications, subsequent to the examination, on application, will, both in number and importance, exceed all the patent cases before the United States courts. On the first of January three cases were pending a hearing, valued at upwards of $100,000 each. The evidence is voluminous, and the arguments often lengthy. The subject of appeals is beginning to add considerably to the labor of the office , and the litigated cases demand many long copies.
Id . (emphasis added).
An applicant's choice to proceed under § 145 diverts the agency's resources from the PTO's principal mission of examining patent and trademark applications at the agency. The purpose of § 145's expense-reimbursement provision is to ensure that these expenses fall on the applicants who elect the more expensive district court proceedings over the standard appeal route.
III
The majority concludes that the text of § 145 fails to provide the necessary congressional directive to overcome the American Rule's bar against shifting attorneys' fees. Under the American Rule, "the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser."
Alyeska Pipeline Serv. Co. v. Wilderness Soc'y
,
I note that the Fourth Circuit reviewed
But even assuming the American Rule applies here, I still disagree with the majority's analysis. For example, the majority attempts to create ambiguity by focusing on the word "expenses" in a vacuum. But, as I've discussed, Congress did not simply provide that under § 145 an applicant pays "expenses." Nor did it say "may pay" or something that could be less than "all." Congress said that the applicant "shall" pay "[a]ll the expenses of the proceedings."
It is also well established that "[t]he absence of specific reference to attorney[s'] fees is not dispositive if the statute otherwise evinces an intent to provide for such fees."
Key Tronic Corp. v. United States
,
But again, the absence of "attorneys' fees" is not dispositive. In making clear that "[t]he absence of specific reference to attorney[s'] fees is not dispositive if the statute otherwise evinces an intent to provide for such fees," the Supreme Court pointed to an Eighth Circuit decision, stating that "[t]he Eighth Circuit, for example, found 'a sufficient degree of explicitness' in [the Act's] references to 'necessary costs of response' and 'enforcement activities' to warrant the award of attorney[s'] fees and expenses."
Key Tronic
,
In sum, contrary to the majority's views, the language of § 145 evinces Congress's "specific and explicit" intent to depart from the American Rule and to impose upon the applicant payment of all the expenses of the proceedings, including the PTO's personnel expenses.
IV
The majority also references certain policy justifications for its interpretation of § 145. First, the majority cites the access-to-justice concern underlying the American Rule. Majority Op. 1181. I am unconvinced that these disappointed applicants' access to justice is lacking. Applicants have the
*1204
option to forgo § 145 actions altogether and pursue appeals before this court under § 141-a choice the overwhelming majority of applicants make.
See
Hyatt
,
Second, and relatedly, the majority expresses special solicitude for "small businesses and individual inventors," Majority Op. ---- - ----, presumably because they may be less able to afford the PTO's personnel expenses. This possibility is entirely speculative. And, even if it were always the case, it is of no moment. "Our unwillingness to soften the import of Congress'[s] chosen words even if we believe the words lead to a harsh outcome is longstanding."
Baker Botts L.L.P. v. ASARCO LLC
, --- U.S. ----,
While I do not deny that the PTO's personnel expenses may, in some cases, amount to substantial sums, it is important to view these amounts against those expenses that applicants must undisputedly pay if they elect a § 145 action. For example, the parties do not dispute that "[a]ll the expenses of the proceedings" includes the PTO's expert witness expenses. In
Booking.com B.V. v. Matal
, aside from the $51,472.53 in personnel expenses, the applicant was required to pay $21,750 in expert witness expenses. No. 1:16-CV-425,
Further, unless the applicant is proceeding pro se, it is of course quite likely that its own attorneys' fees would vastly exceed the PTO's personnel expenses. 4 Indeed, I wonder who the majority seeks to protect: the hypothetical applicant who would pay its own attorneys and the PTO's expert witness expenses, yet balk at the PTO's personnel expenses.
And while it may be true that the PTO's personnel expenses in some cases might amount to a significant sum for applicants who choose to proceed down the optional § 145 route, those expenses have to be paid by someone. As the PTO observes, at Congress's direction, the PTO now must *1205 operate entirely as a user-funded agency. PTO's En Banc Br. 23. All applicants pay a number of fees throughout the patent-examination process to cover the PTO's expenses of operation. Id. at 24. Thus, in asking this court to exclude personnel expenses from "[a]ll the expenses of the proceedings," NantKwest asks this court to require other PTO applicants to pay the PTO's personnel expenses incurred in response to its § 145 complaint, rather than NantKwest itself. This contravenes Congress's intent. The statutory language is clear: it is the applicant that voluntarily chooses a § 145 action, and not other PTO users, who must pay "[a]ll the expenses of the proceedings." Thus, the question of the equitable allocation of burdens is one that Congress has already addressed in the language of the statute. It is not this court's job to allocate those burdens differently based on our own policy preferences.
Finally, much is made of the fact that the PTO refrained from seeking reimbursement for its personnel expenses until recently, despite the provision's 170-year existence. Notably, however, while the PTO has historically refrained from seeking reimbursement of these expenses, it has never affirmatively disclaimed that authority. Given how dramatically the patent and litigation landscapes have changed since the provision was first enacted, it is hardly surprising that the PTO would have felt compelled in recent years to change its strategy. The PTO's past decisions to not seek reimbursement for its personnel expenses may be related to the fact that it is so rarely confronted by these cases. The PTO now points, however, to how § 145 proceedings have become more common and more expensive. PTO's En Banc Br. 30. Accordingly, the PTO has become increasingly reluctant to require other PTO users to subsidize the expenses of these optional proceedings, in light of Congress's mandate that the PTO fund itself exclusively through fees.
Even within the more rigorous administrative rule-making environment, "[a]gencies are free to change their existing policies as long as they provide a reasoned explanation for the change."
Encino Motorcars, LLC v. Navarro
, --- U.S. ----,
* * *
Because Congress meant all the expenses of the proceedings when it said "[a]ll the expenses of the proceedings," I respectfully dissent.
The original language from 1839 required an applicant to pay "the whole of the expenses of the proceeding ... whether the final decision shall be in his favor or otherwise." Act of Mar. 3, 1839, ch. 88, § 10,
The Supreme Court has carved out several equitable exceptions to further the interests of justice.
See
F. D. Rich Co. v. U.S. for Use of Indus. Lumber Co.
,
Following issuance of this Court's
NantKwest
decision, the PTO requested and received attorneys' fees in at least one § 145 action.
See, e.g.
,
Realvirt, LLC v. Lee
,
The dissent questions the import of these statutes because they post-date the enactment of § 145's predecessor. Dissent Op. 1199 n.1. But Congress distinguished between attorneys' fees and expenses during the mid-1800s too,
see, e.g.
, S.J. Res. 25, 40th Cong. § 1,
We note that § 145 is not discretionary; it requires that "[a]ll the expenses of the proceedings
shall
be paid by the applicant."
The dissent cites
Key Tronic
as an example of the Supreme Court favorably citing the Eighth Circuit's conclusion that a statute's reference to "necessary costs of response" and "enforcement activities" constituted a "sufficient degree of explicitness" to permit the award of attorneys' fees. Dissent Op. 1203 (quoting
Key Tronic
,
The patent laws have been amended on numerous occasions since Congress enacted § 145's predecessor in 1839. If the PTO's decision not to seek fees during this time contradicted Congress's intent, Congress could have revised the statute to make its intent more clear. For example, Congress amended the law in 1946 to permit the "award [of] reasonable
attorney's fees
to the prevailing party" in infringement actions. Act of Aug. 1, 1946, ch. 726,
Alyeska Pipeline
also cited numerous statutory examples of "specific and explicit provisions for the allowance of attorneys' fees."
When the Supreme Court examines the "record of statutory usage" it focuses on contemporaneous statutes.
See
W. Va. Univ. Hosps., Inc. v. Casey
,
The majority proposes that Congress should have amended § 145 to include the "attorneys' fees" language when it amended the Patent Act in 1946 to permit the "award [of] reasonable
attorney's fees
to the prevailing party" in infringement actions (i.e., the precursor to § 285 ). Majority Op. 1190-91 n.7 (quoting Patent Act of 1946, ch. 726,
When asked during oral argument to propose other language that Congress could have employed to overcome the American Rule, NantKwest offered "including, without limitation, the time spent by lawyers working on the particular matter from the Solicitor's office ... and outside counsel" or "persons providing lawyer services who are hired internally or externally by the Patent Office" as the only alternatives. Oral Argument No. 2016-1794 (Mar. 8, 2018) 40:45-41:23, 43:57-44:05, http://www.cafc.uscourts.gov/oral-argument-recordings. I do not believe the American Rule requires such labored descriptions, when "[a]ll the expenses of the proceedings" suffices in this context.
For example, in this case, the PTO's calculations indicated that its attorneys earned only $78.55 per hour, yet the district court has authorized a range of rates for private attorneys between $300 and $600 per hour. J.A. 84 & n.7 (citing
Tech Sys., Inc. v. Pyles
, No. 1:12-CV-374,
Reference
- Full Case Name
- NANTKWEST, INC., Plaintiff-Appellee v. Andrei IANCU, Under Secretary of Commerce for Intellectual Property and Director if the United States Patent and Trademark Office, Defendant-Appellant
- Cited By
- 14 cases
- Status
- Published