The Supreme Court : CAFC Alert

The United States Patent and Trademark Office cannot recover salaries of its lawyers and paralegals in civil actions brought under 35 U.S.C. §145

| December 26, 2019

Peter v. Nantkwest, Inc.

December 11, 2019

Opinion by Justice Sotomayor (unanimous decision)


The “American Rule” is the principle that parties are responsible for their own attorney’s fees.  While the Patent Act requires applicants who choose to pursue civil action under 35 U.S.C. §145 to pay the expenses of the proceedings, the Supreme Court found that the American Rule’s presumption applies to §145, and the “expenses” does not include salaries of its lawyers and paralegals.


            There are two possible ways in which a dissatisfied applicant may appeal the final decision of the Patent Trial and Appeal Board.  One option is to appeal to the United States Court of Appeals for the Federal Circuit under 35 U.S.C. §141.  In choosing this avenue, the applicant will not be able to offer new evidence that was not presented before the USPTO.  The other option is to seek remedy in filing a civil action against the Director of the USPTO in federal district court under 35 U.S.C. §145.  Unlike under 35 U.S.C. §141, the applicant may introduce new evidence, and the district court would make de novo determinations based on the new evidence and the administrative record before the USPTO.  Because 35 U.S.C. §145 allows for an applicant to introduce new evidence, the litigation can be lengthy and expensive.  For this reason, the Patent Act requires applicants who choose to file a civil action under 35 U.S.C. §145 to pay “[a]l the expenses of the proceedings.”  35 U.S.C. §145.

            In this case, the USPTO denied NantKwest, Inc’s patent application, which was directed to a method for treating cancer.  NantKwest Inc. then filed a complaint against the Director of the USPTO in the Eastern District of Virginia under 35 U.S.C. §145.  The District Court granted summary judgment to the USPTO, which the Federal Circuit affirmed.  The USPTO moved for reimbursement of expenses, including the pro rata salaries of the USPTO attorneys and paralegals who worked on the case.  The Supreme Court noted in its opinion that this was “the first time in the 170-year history of §145” that the reimbursement of such salaries were requested as a part of expenses.  The District Court denied the USPTO’s motion.  NantKwest, Inc. v. Lee, 162 F. Supp. 3d 540 (E.D. Va. 2016).  Then a divided Federal Circuit panel reversed.  NantKwest, Inc. v. Matal, 860 F. 3d 1352 (2017).  The en banc Federal Circuit voted sua sponte to rehear the case, and reversed the panel over a dissent, holding that the “American Rule” (the principle that parties are responsible for their own attorney’s fees) applied to §145, after examining the plain text, statutory history, the judicial and congressional understanding of similar language, and policy considerations.  NantKwest, Inc. v. Iancu, 898 F. 3d 1177 (2018).  The Supreme Court granted certiorari. 

            The Supreme Court first notes as the “basic point of reference” the principle of the “American Rule” which is that “[e]ach litigant pays his own attorney’s fees, win or lose, unless a statute or contract provides otherwise.”  While the USPTO did not dispute this principle, it argued that the presumption applies only to prevailing-party statutes, and as §145 requires one party to pay all expenses, regardless of outcome, it is therefore not subject to the presumption.  However, the Supreme Court stated that Sebelius v. Cloer, 569 U.S. 369 (2013) confirm that the presumption against fee shifting applies to all statutes, including statute like §145 that do not explicitly award attorney’s fees to “prevailing parties.”

            The Supreme Court then analyzed whether Congress intended to depart from the American Rule presumption.  The Supreme Court first looked at the plain text, reading the term alongside neighboring words in the statute, and concluded that the plain text does not overcome the American Rule’s presumption against fee shifting.  The Supreme Court also looked at statutory usage, and found that “expenses” and “attorney’s fees” appear in tandem across various statutes shifting litigation costs, indicating “that Congress understands the two terms to be distinct and not inclusive of each other.”  While some other statutes refer to attorney’s fees as a subset of expenses, the Supreme Court stated that they show only that attorney’s fees can be included in “expenses” when defined as such.

            Based on the foregoing, the Supreme Court concluded that the USPTO cannot recover salaries of its lawyers and paralegals in civil actions brought under 35 U.S.C. §145.


The USPTO has recovered attorney costs under a similar trademark law, 15 U.S.C. 1071, in the 2015 Fourth Circuit decision of Shammas v. Focarino, 114 USPQ2d 1489 (4th Cir. 2015).  While the Supreme Court does not mention the applicability of the interpretation of “expenses” under 35 U.S.C. §145 to the interpretation of “expenses” in 15 U.S.C. 1071(b)(3), we would expect the Supreme Court to interpret “expenses” the same way in both of these statutes.

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