Opinion analysis: Court makes short work of easy case: Government cannot collect in-house attorneys fees from litigant challenging denial of patent application

My assessment of the argument in Peter v. NantKwest viewed the case as a likely candidate for an early decision. To be sure, this mornings opinion wasnt the first of the 2019 calendar, but it was a close second coming only one day after Tuesday’s decision in Rotkiske v Klemm.

A brief overview of the case confirms why it was so easy for the court to resolve quickly. The case involves an eccentric provision of the Patent Act (Section 145) that deals with procedures for disappointed patent applicants. Typically, a failed applicant appeals the decision of the Patent and Trademark Office to the U.S. Court of Appeals for the Federal Circuit (in Washington, D.C.), which reviews the PTO decision on the administrative record. Section 145 gives the applicant a second route: a lawsuit in the federal district court for the Eastern District of Virginia (think Richmond, Norfolk or Alexandria). Because that lawsuit offers a chance for the trappings of conventional civil litigation (discovery, expert reports, motion practice, zzzz), it has the potential to be much more expensive. Responding to that possibility, the statute always has provided (since its first adoption more than 180 years ago) that disappointed applicants, win or lose, must pay the governments expenses.

Let me add a few words about the American Rule, under which litigants in American (as opposed to British) courts ordinarily pay their own attorneys fees, even if they win. The Supreme Court has taken a clear-statement approach to the American Rule, under which a federal statute will be construed to require one litigant to pay the other sides attorneys fees only if the statute includes a clear or explicit statement to that effect.

So it should be no surprise that Justice Sonia Sotomayor was able to release a brief and unanimous opinion less than 10 weeks after the argument, concluding that the reference in Section 145 to expenses is not enough to justify obligating the private litigant to pay the attorneys fees of the PTO (in this case, the allocable time of the in-house attorneys that the PTO employs). Her opinion predictably started from the American Rule, for her a bedrock principle and basic point of reference. She dismissed as incorrect the governments argument that the American Rule applies only to statutes that shift fees to favor a prevailing party (as opposed to a statute like Section 145 that awards fees without regard to the result of the suit), pointing to a line of precedents that confirms that the presumption against fee shifting applies to all statutes.

Turning to the language of Section 145, Sotomayor had no trouble concluding that the unadorned reference to expenses does not exhibit the clarity that earlier cases have required to deviate from the American Rule. The ability of the government to offer numerous general definitions of expenses sufficiently capacious to include attorneys fees provides, in Sotomayors view, only scant guidance. As she explained, the failure to foreclose a fee award is not enough to justify a departure from the American Rule. Nor is it important that the statute refers to all expenses: Although the word [all] conveys breadth, it cannot transform expenses to reach an outlay it would not otherwise include. In sum, she concludes, Section 145s plain text does not overcome the American Rules presumption against fee shifting to permit the PTO to recoup its legal personnel salaries.

The history of the provision certainly didnt help the PTOs case. For one thing as Sotomayor pointedly noted this case seems to be the first time in the 170-year history of 145 that the PTO included attorneys fees in a reimbursement request. For another, Congress has explicitly provided for attorneys fee awards in five distinct provisions of the Patent Act. Congress[] fail[ure] to make its intention similarly clear in 145 provides yet more support for the courts decision.

Perhaps the most surprising thing about this case is that the government appealed, and the Supreme Court chose to review, the Federal Circuits en banc decision refusing to award the fees the government sought.