The Patent Act provides two options for patent applicants seeking judicial review of an adverse decision by the USPTO Patent Trial and Appeal Board: (i) directly appealing to the Court of Appeals for the Federal Circuit under 35 U.S.C. § 141, or (ii) filing a civil action, pursuant to 35 U.S.C. § 145, against the Director of the USPTO in a United States district court. Under the latter option, § 145 states that “[a]ll the expenses of the proceedings shall be paid by the applicant” (i.e., even if the applicant prevails). In the 170 years since the predecessor to § 145 was enacted, the USPTO has recovered various district court litigation expenses under § 145 and its predecessor, such as expenses for travel, court reporters, and expert witnesses, but has never sought or received attorneys’ fees. In Nantkwest, the USPTO sought to recover its attorneys’ fees from a § 145 district court case in which Nantkwest had tried, unsuccessfully, to challenge the USPTO’s obviousness rejection of its patent application.

Judge Stoll authored the Federal Circuit’s majority opinion, joined by Judges Newman, Lourie, Moore, O’Malley, Wallach, and Taranto. The majority held that § 145’s “expenses” do not include attorneys’ fees because (i) any statute seeking to depart from the default “American Rule”—under which each litigant bears its own attorneys’ fees, win or lose—must do so using “specific and explicit” language, and (ii) § 145 lacked such specific and explicit language. As to the first point, the majority held that the American Rule applies to “win or lose” cases such as those brought under § 145, rejecting the USPTO’s argument that the American Rule “only governs the interpretation of statutes that shift fees from a prevailing party to a losing party.” In support of that argument, the USPTO relied on Shammas v. Focarino, a Fourth Circuit decision holding that the American Rule did not apply to similar language from the Lanham Act. The majority rejected the Shammas decision as being inconsistent with Supreme Court precedent resisting the shifting of attorneys’ fees. As to the second point, the majority distinguished § 145 from various statutes authorizing the award of both “expenses” and “attorney’s fees” as separate recovery items, and various other statutes explicitly defining “expenses” to include attorneys’ fees. The majority further noted that 35 U.S.C. § 285 of the Patent Act expressly provides for recovery of attorneys’ fees in exceptional cases. In comparison with those statutes, the majority concluded that the language of § 145 at best is ambiguous as to whether “expenses” encompasses attorneys’ fees, and falls short of the “specific and explicit” language required to depart from the American Rule.

Judge Prost dissented, joined by Judges Dyk, Reyna, and Hughes. According to the dissent, § 145 includes attorneys’ fees because it refers to “all” expenses, and the ordinary meaning of “expenses” encompasses expenditures for personnel. The dissent noted that USPTO salaried employees, including its attorneys, do not bill individual hours or collect fees, and asserted that their overhead is more akin to a USPTO “expense” rather than a “fee.” The dissent also criticized the majority’s reliance on § 285, asserting that § 285 applies to patent litigation, whereas § 145 applies to disputes over patent examination.