Applicant Bears All Patent Office Fees following Civil Action to Obtain a Patent Regardless of Outcome

August 2017

 

NantKwest, Inc. v. Matal 2016-1974 (Fed. Cir. June 23, 2017)

In NantKwest, the Federal Circuit held that an applicant who files suit to obtain a patent pursuant to Section 145 of the Patent Act must bear the Patent Office’s attorneys’ fees regardless of the outcome of the suit.  The fees are reasonably part of the Patent Office’s expenses defined in the statute.

NantKwest filed a patent application directed to a method of treating cancer by administering natural “cancer killer” cells.  After the claims were rejected during prosecution, NantKwest appealed to the Patent Trial and Appeal Board.  The Board affirmed the rejection.  NantKwest appealed the Board’s determination to the United States District Court for the Eastern District of Virginia pursuant to 35 U.S.C. § 145.

Section 145 of the Patent Act allows an applicant dissatisfied with the PTAB’s decision to appeal directly to the Eastern District of Virginia.  The district court reviews the application de novo, and may determine whether the applicant should be entitled to receive a patent.  The section further provides that “[a]ll the expenses of the proceedings shall be paid by the applicant.”

The Patent Office prevailed before the district court, and filed a motion to recover both its attorneys’ fees and expert witness fees, pursuant to the expense provision in Section 145.  The district court permitted the Patent Office to recover its expert witness fees, but denied its motion to recover attorneys’ fees as beyond the scope of the statute.  The district court held that the so-called “American Rule” required litigants to bear their own attorneys’ fees absent the clear intent of Congress.  The Patent Office appealed.

The Federal Circuit reversed, awarding the Patent Office its fees.  The American Rule should not apply to this statute because that rule only concerns whether the prevailing party is entitled to receive its attorneys’ fees.  Because the applicant in a Section 145 suit bears all expenses for the proceedings regardless of its outcome, the American Rule is inapposite.

Regardless of whether the American Rule applied, the Patent Office would still be entitled to receive its fees under a fair reading of the statute.  The court relied on Supreme Court precedent and treatises that defined “expenses” to include all expenditures in connection with the action, including labor.  While other statutes exist that apply the word “expenses” more narrowly, the Federal Circuit declined to make fee awards contingent on certain specific key words.  From the context of the statute, it was clear that “all expenses” was intended to encompass attorneys’ fees.

Key Takeaway:  A patent applicant who fails to obtain a patent through original prosecution or appeal to the PTAB, may file suit in district court to obtain a patent, but will be required to pay all of the Patent Office’s expenses, including attorneys’ fees, in connection with the proceedings.