The United States Patent and Trademark Office (“USPTO”) cannot recover the salaries of its legal personnel in actions under 35 USC § 145. The Supreme Court came to that conclusion in Peter v. NantKwest, Inc., No. 18-801 (Dec. 11, 2019)—the Court’s second opinion of this year’s term.

A patent applicant dissatisfied with the USPTO’s decision has two statutory methods of appeal: she may appeal directly to the Federal Circuit or she may file a new civil action against the Director of the USPTO in the Eastern District of Virginia. The latter option requires the applicant to pay “[a]ll the expenses of the proceedings.” In Peter, NantKwest chose that option and initiated a civil suit under § 145 after the USPTO denied its patent application directed to a method of treating cancer.

The District Court found in favor of the USPTO, and the Federal Circuit affirmed. At the close of the Federal Circuit appeal, the USPTO moved for reimbursement of its expenses under the statute—including pro rata salaries of its attorneys and paralegals who worked on the case. The District Court found that those salaries were not the type of “expenses” contemplated by § 145 and denied the motion; the en banc Federal Circuit affirmed. The USPTO appealed to the Supreme Court.

A unanimous Court affirmed the Federal Circuit in a concise opinion written by Justice Sotomayor. The Court’s opinion relied heavily on the “American Rule”—the principle of American law that each party pays its own attorney’s fees, win or lose. To overcome the heavy presumption against fee-shifting, statutory language must be particularly clear.

Here, however, the Court held that the scant plain text of § 145 could not overcome the presumption against fee-shifting. Outside the plain text, definitions of the word “expenses” were broad and unhelpful, and the common understanding of the phrase “expenses of the proceeding” would not include attorney’s fees. And other portions of the Patent Act specifically stated “attorney’s fees,” indicating that Congress did not intend to include attorney’s fees in § 145. Thus, a plain reading of the Patent Act did not support the USPTO’s position.

Justice Sotomayor also emphasized that in the 170-year history of § 145, the USPTO has never sought reimbursement for the salaries of its legal staff. Thus, the history of the Patent Act also did not support the USPTO’s position. And after Peter, it is now clear that the USPTO may not recover the salaries of its legal personnel in actions under 35 USC § 145.