Oral arguments commenced on October 7, 2019 in Peter v. NantKwest at the Supreme Court of the United States. For a brief summary of the issues, see the author’s previous post here. Appearing before the Supreme Court were Malcolm Stewart, representing the United States Patent and Trademark Office (USPTO), and Morgan Chu, representing NantKwest, Inc.
While legal fees may not be the most riveting of topics, the 55-minute oral argument certainly was not short of scrutinizing questioning from the Justices. Stewart, the attorney for the USPTO, highlighted three principal reasons why a patent applicant—even a successful one—must pay all the expenses, including attorneys’ fees, for a proceeding under 35 U.S.C. Section 145 (filing a civil action in the United States District Court for the Eastern District of Virginia).
First, he argued the term “expenses” unambiguously encompasses costs, which includes costs paid to employees or personnel to accomplish a particular task. Second, the inclusion of attorneys’ fees is consistent with the overall statutory scheme as supported by Congress, directing the USPTO to charge fees that are sufficient to cover its operating costs. And third, applicants have an alternative means of seeking judicial review through 35 U.S.C. Section 141 (appealing to the Court of Appeals for the Federal Circuit) where there is no requirement that the applicant must pay the USPTO’s personnel expenses.
From there, Stewart’s arguments seemed to lose traction. When asked why the government had not been requesting attorneys’ fees for the past 170 years, Stewart repeatedly admitted “we don’t have a good explanation,” and further could not provide a single example of any other federal statutes where the term “expenses” alone also encompassed attorneys’ fees. Instead, Stewart emphasized that Section 145 proceedings should be treated as a continuation of the patent application process, where the Applicant has an obligation to pay fees based on the level of work required by the USPTO, and not treated as adversarial litigation.
Chu, the attorney for the patent applicant, centered his arguments around the American Rule, arguing “the American Rule is a bedrock principle, and this Court has recognized and applied that rule for two centuries.” Chu further noted that there are currently 3,274 federal statutory provisions that use the word “expenses” without any reference to attorneys’ fees or counsel fees. When pushed back with questions regarding whether the Section 145 proceedings could be treated just like a filing fee in the application process, Chu countered by stating, “this is not a filing fee. It’s a claim for attorneys’ fees against the strong backdrop of the American Rule . . . This is adversarial litigation.”
The outcome of this case will certainly be one to watch, especially as it could impact strategic planning for Applicants seeking to appeal a decision from the Patent Trial and Appeal Board. Updates will be provided with the outcome of the case as it proceeds to a final decision.