Nantkwest, Inc. v. Joseph Matal, et al. (USPTO)


Docket No. 2016-1794

PROST, DYK, STOLL (D)
June 23, 2017

Update (Aug. 31, 2017):  Decision vacated and appeal reinstated, to be heard en banc

Brief Summary: DC denial of USPTO’s request for attorney’s fees under § 145 reversed (“the applicant must pay ‘[a]ll of the expenses of” an appeal directly to the Eastern District of Virginia provided for by § 145 “‘regardless of the outcome’” (Hyatt, FC 2010)).

Summary: USPTO appealed DC denial of its motion for attorney’s fees after Nantkwest’s appeal to the DC under 35 USC § 145 after several years of unsuccessful prosecution of Dr. Hans Klingermann’s application directed to a method of treating cancer by administering natural killer cells. The substantive issues relating to the obviousness rejection are discussed in the FC May 3, 2017 non-precedential opinion (Docket No. 2015-2095 (“no material dispute that the combination…used here produced the invention and that persons of ordinary skill would have been motivated to combine” the references)). Section 145 provides that a dissatisfied applicant may appeal directly to the DC (ED VA) in lieu of an immediate appeal to the FC but also “that the applicant must pay ‘[a]ll of the expenses of the proceeding,’ id., ‘regardless of the outcome’” (Hyatt, FC 2010). In this dispute, the USPTO sought recovery of $111,686.39 in attorney, paralegal and expert fees. The DC awarded the expert fees ($33,103.89) but not the attorney/paralegal fees under the “American Rule” under which “litigants pay their own attorneys’ fees, win or lose, unless a statute or contract provides otherwise” (Hardt, US 2010). The FC panel explained that this dispute turns on whether § 145’s ‘[a]ll expenses of the proceedings’ provision authorizes an award of the USPTO’s attorney’s fees”. The DC’s decision “construing a statute or regulation” was reviewed de novo beginning “by inspecting [the statute’s or regulation’s] language for plain meaning” (Weatherby, FC 2006; Williams, US 2000). In enacting § 145, the FC panel found that “Congress intended that all applicants unconditionally assume [the] financial burden when seeing review directly in [DC]-whether they win, or lose” (“a necessary precedent for shifting this ‘heavy economic burden’ onto the applicant”). Nantkwest argued “that the term ‘expenses’ lacks the requisite specificity to overcome the presumption of the American Rule” but the FC panel disagreed since, e.g., “the ordinary meaning as defined in dictionaries and the Supreme Court’s interpretation of the term lend significant weight to the conclusion that when Congress used the phrase ‘all expenses,’ it meant to include attorneys’ fees.” The FC panel also disagreed with Nantkwest’s argument that the USPTO would have had to pay their employees regardless of whether this suit was filed since, e.g., “we have accorded similar relief in the past in the context of other salaried attorneys” (Raney, FC 2000) and “[t]o conclude otherwise would conflict with Hyatt, where we recognized the ‘heavy economic burden’ that § 145 shifts onto applicants for electing this favorable appellate path.” Thus, the FC panel awarded the USPTO $78,592.50. Judge Stoll’s dissent argued this should not have been allowed under the American Rule and that §145 “fails to provide the necessary congressional directive to overcome” that rule.

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