On December 11, 2019, the US Supreme Court ruled against the US Patent & Trademark Office’s recent practice of demanding its attorney fees for patent applications appealed to the U.S. District Court, regardless of whether the Patent Office won or lost. See Peter v. Nantkwest, Inc., No. 18-801.

35 U.S.C. 145 provides that a patent applicant dissatisfied with a decision of the Patent Trial and Appeal Board may file a civil action in the US District Court for the Eastern District of Virginia, as an alternative to filing an appeal to the Court of Appeals to the Federal Circuit. There are procedural differences between appeals to these two courts. This statute provides that the Patent Office is entitled to all its “expenses” for a case in the Virginia court.

In this case, the Patent Office prevailed in the District of Virginia, then moved for an award of its expenses, including attorney fees. The District Court denied the attorney fees, because the statute was not clear to rebut the “American rule” that each party bears their own attorney fees. On appeal, the three judge panel of the Federal Circuit reversed, but the Federal Circuit voted sua sponte to rehear the case, and then reversed the award of attorney fees to the Patent Office. The US Supreme Court granted certiorari.

The Supreme Court noted that the American rule of each party paying their own attorney fees, win or lose, is a bedrock principal, unless a statute or contract provides otherwise. This rule goes back to the 18th century. The Supreme Court reviewed its precedent and the legislative history of Section 145, ruling unanimously that this statute does not permit the Patent & Trademark Office to recoup the salaries of its legal personnel as “expenses” of the proceedings. The Court cited other statutes where “expenses” and “attorney fees” are both used, thus concluding that Congress understands the two terms to be distinct and not inclusive of one another. In short, the Court explained that the common statutory usage of “expenses” has never been interpreted to allow an award of attorney fees to overcome the American Rule.