Monday, June 26, 2017

CAFC in Nantkwest: “[a]ll expenses of the proceedings” under § 145 includes the pro-rata share of the attorneys’ fees the USPTO incurred to defend applicant’s appeal.

The outcome Nantkwest v. Matal :

Nantkwest, Inc. appeals from a decision of the United
States District Court for the Eastern District of Virginia
granting-in-part and denying-in-part the United States
Patent and Trademark Office (“USPTO”) Director’s motion
for fees. In its order, the district court granted the
Director’s requested witness’ fees but denied the requested
attorneys’ fees. The Director appeals the court’s denial
of attorneys’ fees. We reverse.

Some history

Section 145 provides that an applicant dissatisfied
with the PTAB’s decision may appeal directly to the
United States District Court for the Eastern District of
Virginia in lieu of immediate appeal to this court. 35
U.S.C. § 145. The statute further provides that the applicant
must pay “[a]ll of the expenses of the proceeding,”
id., “regardless of the outcome,” Hyatt v. Kappos, 625 F.3d
1320, 1337 (Fed. Cir. 2010) (en banc), aff’d and remanded,
132 S. Ct. 1690 (2012). After prevailing at the district
court on the merits, the Director filed a motion to recover
$111,696.39 of the USPTO’s fees under the § 145 expense
provision. See J.A. 84 (seeking $78,592.50 in attorneys’
fees (including paralegal fees) and $33,103.89 in expert


The district court concluded that the “[a]ll expenses” provision of the
statute was neither sufficiently specific nor explicit
enough for the authorization of attorneys’ fees under this
Rule. Id. On appeal, the Director argues that the district
court erred by excluding the USPTO’s attorneys’ fees
under § 145. We have jurisdiction under 28 U.S.C.
§ 1295(a)(4)(C).

The main issue in the case:

The principal issue on appeal is whether § 145’s “[a]ll
expenses of the proceedings” provision authorizes an
award of the USPTO’s attorneys’ fees under this section.

Justice Scalia might have enjoyed this case:

The definitions and explanations that standard legal
dictionaries and treatises provide for the term “expense”
support this conclusion. Wright & Miller on Federal
Practice and Procedure, for example, defines this term as
“includ[ing] all the expenditures actually made by a
litigant in connection with the action,” including “attorney’s
fees.” 10 Charles Alan Wright et al., Federal Practice
and Procedure § 2666 (3d ed. 1998). Similarly, Black’s
Law Dictionary defines “expenses” as “expenditure[s] of
money, time, labor, or resources to accomplish a result.”
Black’s Law Dictionary 698 (10th ed. 2014) (“Black’s”)
(emphasis added).

The dissent summarily dismisses these definitions,
declaring that “they are not contemporaneous with Congress’s
introduction of the word ‘expenses’ into the Patent
Act in 1839.”
Dissenting Op. 14. Relying on Nineteenth
Century dictionaries instead, the dissent concludes that
“the words ‘expense,’ ‘cost,’ and ‘damage’ were considered
synonymous around the time of the 1839 Amendments.”5
Id. at 6. Not so. The Patent Act of 1836 specifically distinguished
among these three terms. Compare Act of July 4,
1836, ch. 357, 5 Stat. 117, § 9 (“[M]oneys received into the
Treasury under this act shall constitute a fund for the
payment of salaries of the officers and clerks herein
provided for, and all other expenses of the Patent Office.”
(emphasis added)), with id. § 14 (“[W]henever, in any
action for damages for making, using, or selling the thing
whereof the exclusive right is secured by any patent . . . ,
a verdict shall be rendered . . . , it shall be in the power of
the court to render judgment for any sum above the
amount found by such verdict as the actual damages
sustained . . . , not exceeding three times the amount
thereof, according to the circumstances of the case, with
costs.” (emphases added)). The historical statute that the
dissent relies on simply does not support its conclusion. If
anything, this statute lends support to the majority’s
position by expressly characterizing the salaries of
USPTO officers and clerks and as “expenses.” Id. § 9. The
Supreme Court has observed the distinction between
“expenses” and “costs” recently, providing an interpretation
that comports with the modern definitions that the
dissent disregards.

Note footnote 5:

The dissent’s position here not only lacks support
in the briefing, but also directly undermines the party’s
position it purports to advance. Specifically, in arguing
that § 145 does not include attorneys’ fees, Nantkwest
cited the same dictionary and definitions that the dissent
now concludes bear no relevance to the interpretation of
this statute.

The bottom line

Accordingly, we hold that “[a]ll expenses of the proceedings”
under § 145 includes the pro-rata share of the
attorneys’ fees the USPTO incurred to defend applicant’s
appeal. To conclude otherwise would conflict with Hyatt,
where we recognized the “heavy economic burden” that
§ 145 shifts onto applicants for electing this favorable
appellate path. Hyatt, 625 F.3d at 1337.

The dissent noted:

This presumption against fee
shifting in American litigation dates back more than 200
years to Arcambel v. Wiseman, 3 U.S. (3 Dall.) 306 (1796).
“[T]he law of the United States, but for a few wellrecognized
exceptions not present [here], has always been
that absent explicit congressional authorization, attorneys’
fees are not a recoverable cost of litigation.” Runyon
v. McCrary, 427 U.S. 160, 185 (1976) (footnote omitted).


It is a fundamental principle of statutory interpretation
that, “[w]here 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, 464 U.S. 16,
23 (1983) (quoting United States v. Wong Kim Bo,
472 F.2d 720, 722 (5th Cir. 1972)).


Finally, if § 145 were a fee-shifting statute, it would represent a
particularly unusual divergence from the American Rule because it obligates
even successful plain-tiffs to pay the PTO’s attorneys’ fees.
“[W]hen Congress has chosen to depart from the American rule by statute,
virtually every one of the more than 150 existing federal fee-shifting
provisions predicates fee awards on some success by the claimant.”
Ruckelshaus v. Sierra Club, 463 U.S. 680, 684 (1983); see also Baker Botts, 135 S. Ct. at 2164
(recognizing deviations from American Rule “tend to authorize
the award of ‘a reasonable attorney’s fee,’ ‘fees,’ or ‘litigation costs,’
and usually refer to a ‘prevailing party’ in the context of an adversarial ‘action.’”).
Nothing in § 145 confines the award of expenses to a prevailing party.
Instead, it requires the applicant to pay “[a]ll the expenses of the proceedings,”
which according to the majority means the applicant pays for the PTO’s attor-neys’
fees in every § 145 proceeding. In these atypical circumstances,
I think Congress’s intent to award the PTO attorneys’
fees in every case should have been more clear.
I cannot agree that Congress used the word “ex-penses”
to effect such an unusual departure from the American Rule—
a departure that would saddle even prevailing applicants with the PTO’s attorneys’ fees.


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