Never, is the answer from the United States District Court for the Eastern District of Virginia. In a decision dated July 27, 2018, the Court found that §145 of the Patent Act does not override the common-law “American Rule,” which states that in the absence of a fee-shifting statute, each side of a lawsuit bears its own fees and costs.

The USPTO denied Plaintiff NantKwest, Inc.’s 2010 patent application for a cancer treatment on the basis of obviousness. The Patent Trial and Appeal Board affirmed that decision in 2013. NantKwest then brought suit against the U.S. Patent and Trademark Office in district court under 35 U.S.C. §145, which allows for the filing of a complaint and a more thorough adjudication process of the dispute. This section also obligates the losing party to pay the “expenses” of the prevailing party.

Traditionally, the USPTO has used this statute as the basis for claiming reimbursement for such costs as attorneys’ travel fees to attend depositions, printing fees, expert witness fees, and court reporter fees. In this case, however, the USPTO also moved for reimbursement of approximately $78,000 in attorneys’ fees.

The Court found that the American Rule is such a “bedrock principle” of American jurisprudence, it will only consider displacing it when Congress has granted clear approval to do so. The Court noted that in other statutes, Congress has made a clear distinction between expenses and attorneys’ fees, shifting the burden as it deemed necessary to balance competing social policy outcomes. Quoting Fleischmann Distilling Corp. v. Maier Brewing Co.,386 U.S. 714, 718 (1967), the Court stated that some of these policy concerns include ensuring access to justice for poorer litigants, the unjustness of imposing a high financial penalty on litigants for merely prosecuting or defending their rights, and the increased burden on courts of litigating what constitutes reasonable attorneys’ fees in each case.

The USPTO argued that the American Rule only applies to statutes that specifically entitle a “prevailing party” to attorneys’ fees, which §145 does not. In the alternative, the USPTO said the statutory text of §145 displaces the application of the American Rule. The Court rejected these lines of reasoning as inconsistent with Supreme Court jurisprudence, which has applied the American Rule to a wide range of statutes without regard for whether they reference a “prevailing party.”  Without a “specific and explicit” directive from Congress, the Court said, the American Rule may be applied.

Posted in: Intellectual Property - Patents, PTAB