from the United States District Court for the Eastern
District of Virginia in No. 1:13-cv-01566-GBL-TCB, Judge
Gerald Bruce Lee.
Chu, Irell & Manella LLP, Los Angeles, CA, argued for
plaintiff-appellee. Also represented by Lauren Nicole Drake,
Gary N. Frischling, Alan J. Heinrich; Sandra Haberny, Newport
Randall Lilley, Appellate Staff, Civil Division, United
States Department of Justice, Washington, DC, argued for
defendant-appellant. Also represented by Benjamin C. Mizer,
Dana J. Boente, Mark R. Freeman; Thomas W. Krause, Thomas L.
Casagrande, Office of the Solicitor, United States Patent and
Trademark Office, Alexandria, VA.
Anthony J. Dreyer, Skadden, Arps, Slate, Meagher & Flom
LLP, New York, NY, for amicus curiae International Trademark
Association. Also represented by Mark N. Mutterperl, Zeisler
PLLC, New York, NY.
William P. Atkins, Pillsbury Winthrop Shaw Pittman LLP,
McLean, VA, for amicus curiae Federal Circuit Bar
Association. Also represented by William K. West, Jr.,
Washington, DC; Martin Scott High, Martin S. High, P.C.,
Tottis, TottisLaw, Chicago, IL, for amicus curiae American
Intellectual Property Law Association. Also represented by
Monica L. Thompson, Rachel M. Vorbek; Lisa K. Jorgenson,
American Intellectual Property Law Association, Arlington,
Gregory A. Castanias, Jones Day, Washington, DC, for amicus
curiae Intellectual Property Owners Association. Also
represented by Daniel Kazhdan; Henry S. Hadad, Bristol-Myers
Squibb Company, Princeton, NJ; Mark W. Lauroesch,
Intellectual Property Owners Association, Washington, DC;
Steven W. Miller, Global Legal Department, Procter &
Gamble Company, Cincinnati, OH.
Hilarie Bass, Greenberg Traurig, P.A., Miami, FL, for amicus
curiae American Bar Association. Also represented by
Salvatore Anastasi, Barley Snyder, Malvern, PA; Joshua
Schwartz, Lancaster, PA; Donald W. Rupert, Marshall, Gerstein
& Borun LLP, Chicago, IL; Charles W. Shifley, Banner
& Witcoff, Ltd., Chicago, IL.
Margaret Mary Duncan, McDermott Will & Emery LLP,
Chicago, IL, for amicus curiae Intellectual Property Law
Association of Chicago. Also represented by David Mlaver,
Washington, DC; Robert H. Resis, Charles W. Shifley, Banner
& Witcoff, Ltd., Chicago, IL.
Charles Eric Miller, Eaton & Van Winkle LLP, New York,
NY, for amicus curiae Association of Amicus Counsel. Also
represented by Kelly L. Morron, Law Offices of Kelly L.
Morron, Wilton, CT; Jonathan E. Moskin, Foley & Lardner
LLP, New York, NY; Robert Joseph Rando, The Rando Law Firm
P.C., Syosset, NY; Alan M. Sack, SACK IP Law PC, Syosset, NY.
Patrick Richard Delaney, Ditthavong & Steiner, P.C.,
Alexandria, VA, for amicus curiae Realvirt, LLC.
Charles Eric Miller, Eaton & Van Winkle LLP, New York,
NY, for amici curiae Isshiki & Co., Hiraide &
Prost, Chief Judge, Newman, Lourie, Dyk, Moore, O'Malley,
Reyna, Wallach, Taranto, Hughes, and Stoll, Circuit Judges.
the United States Patent and Trademark Office's Patent
Trial and Appeal Board ("Board") affirms an
examiner's rejection of a patent application, § 145
of the Patent Act permits the disappointed applicant to
challenge the Board's decision in district court.
Applicants who invoke § 145 are required by statute to
pay "[a]ll the expenses of the proceedings"
incurred by the U.S. Patent and Trademark Office
("PTO") in defending the Board's decision,
regardless of the outcome. Historically, the agency relied on
this provision to recover sums it spent on travel and
printing and, more recently, expert witnesses. Now, 170 years
after Congress introduced § 145's predecessor, the
agency argues that § 145 also compels applicants to pay
its attorneys' fees. We hold that it does not, for the
American Rule prohibits courts from shifting attorneys'
fees from one party to another absent a "specific and
explicit" directive from Congress. The phrase
"[a]ll the expenses of the proceedings" falls short
of this stringent standard. Accordingly, we affirm the
district court's judgment.
Patent Act gives applicants two mutually exclusive options
for judicial review of an adverse Board decision. First, the
applicant may appeal directly to this court. 35 U.S.C. §
141. Second, the applicant may file a civil action against
the Director of the PTO in the United States District Court
for the Eastern District of Virginia. 35 U.S.C. § 145.
We, in turn, have jurisdiction over subsequent appeals from
the district court under 28 U.S.C. § 1295(a)(1).
141 provides standard judicial review of an agency decision
under the Administrative Procedure Act. We review the
Board's legal determinations de novo, Honeywell
Int'l Inc. v. Mexichem Amanco Holding S.A. DE C.V.,
865 F.3d 1348, 1353 (Fed. Cir. 2017), and we "set aside
the PTO's factual findings only if they are
'unsupported by substantial evidence, '"
Kappos v. Hyatt, 566 U.S. 431, 435 (2012) (quoting
Dickinson v. Zurko, 527 U.S. 150, 152 (1999)).
Importantly, appellate review in § 141 proceedings is
confined to the record before the PTO. 35 U.S.C. § 144.
145, by contrast, authorizes a more expansive challenge to
the Board's decision and is generally more time
consuming. For example, patent applicants can conduct
discovery and introduce new evidence. And once an applicant
submits new evidence on a disputed factual question,
"the district court must make a de novo
finding." Hyatt, 566 U.S. at 434-35 ("This
opportunity . . . is significant, not the least because the
PTO generally does not accept oral testimony."). The
parties may also engage in motion practice, and the
proceeding can culminate in a full-blown trial. Congress set
the price for engaging the PTO in this type of litigation:
"All the expenses of the proceedings shall be paid by
the applicant." 35 U.S.C. § 145. Thus, an applicant
who proceeds under § 145 must shoulder not only his own
significant expenses and fees, but also the PTO's
"expenses of the proceedings."
introduced § 145's predecessor in 1839,
over the years, the PTO has relied on these
"expenses" provisions to recover PTO attorneys'
travel expenses to attend depositions, see Robertson v.
Cooper, 46 F.2d 766, 769 (4th Cir. 1931), printing
expenses, cf. Cook v. Watson, 208 F.2d 529, 530
(D.C. Cir. 1953), court reporter fees, and reasonable fees
for expert witnesses, see Sandvik Aktiebolag v.
Samuels, CIV. A. No. 89-3127-LFO, 1991 WL 25774, at *1
(D.D.C. Feb. 7, 1991). For more than 170 years, however, the
PTO never sought-and no court ever awarded-attorneys'
fees under § 145 or its predecessor.
name suggests, the American Rule is a "bedrock
principle" of this country's jurisprudence.
Hardt v. Reliance Standard Life Ins. Co., 560 U.S.
242, 253 (2010). It provides that, in the United States,
"[e]ach litigant pays his own attorney's fees, win
or lose." Baker Botts L.L.P. v. ASARCO LLC, 135
S.Ct. 2158, 2164 (2015) (quoting Hardt, 560 U.S. at
253). The American Rule may only be displaced by an express
grant from Congress. Id. And it serves as the
"basic point of reference" whenever a court
"consider[s] the award of attorney's fees."
Id. (quoting Hardt, 560 U.S. at 252-53).
rationale supporting the American Rule is rooted in fair
access to the legal system, as well as the difficulty of
litigating the fee question:
[S]ince litigation is at best uncertain one should not be
penalized for merely defending or prosecuting a lawsuit, and
. . . the poor might be unjustly discouraged from instituting
actions to vindicate their rights if the penalty for losing
included the fees of their opponents' counsel. Also, the
time, expense, and difficulties of proof inherent in
litigating the question of what constitutes reasonable
attorney's fees would pose substantial burdens for
Fleischmann Distilling Corp. v. Maier Brewing Co.,
386 U.S. 714, 718 (1967) (citations omitted). In the context
of this case, the American Rule preserves access to district
courts for small businesses and individual inventors seeking
to avail themselves of § 145's benefits.
American Rule traces its origins back to at least the late
1700s. In Arcambel v. Wiseman, the circuit court
included $1, 600 in counsel's fees as part of the
damages. 3 U.S. (3 Dall.) 306, 306 (1796). The assessment of
attorneys' fees, the Supreme Court concluded, could not
be allowed because the "general practice of the United
States is in opposition to it; and even if that practice were
not strictly correct in principle, it is entitled to the
respect of the court, till it is changed, or modified, by
statute." Id. "[O]ur courts have generally
resisted any movement" toward the English system-which
permits the award of attorneys' fees to successful
parties in litigation-ever since. Fleischmann, 386
U.S. at 717; see Runyon v. McCrary, 427 U.S. 160,
185 (1976) ("[T]he law of the United States . . . has
always been that absent explicit congressional authorization,
attorneys' fees are not a recoverable cost of
Congress "has the power and judgment to pick and choose
among its statutes and to allow attorneys' fees under
some, but not others." Alyeska Pipeline, 421
U.S. at 263. Congress has not "extended any roving
authority to the Judiciary to allow counsel fees as costs or
otherwise whenever the courts might deem them
warranted." Id. at 260. Thus, the Supreme Court
has held that the American Rule presumptively applies and any
statutory deviations from it must be "specific and
explicit." Id. at 260-62, 269.
to the Supreme Court, one "good example of the clarity .
. . required to deviate from the American Rule" can be
found in the Equal Access to Justice Act's attorneys'
fees provision. Baker Botts, 135 S.Ct. at 2164. That
provision commands courts to "award to a prevailing
party other than the United States fees and other
expenses . . . incurred by that party in any civil
action," so long as certain conditions are met.
Id. at 2164 (emphasis added) (quoting 28 U.S.C.
§ 2412(d)(1)(A)). As the Supreme Court explained,
"there could be little dispute that this provision-which
mentions 'fees,' a 'prevailing party,' and a
'civil action'-is a 'fee-shifting statut[e]'
that trumps the American Rule." Id. (alteration
fee-shifting statutes follow this template though. For
example, the Supreme Court has a separate line of precedent
"addressing statutory deviations from the American Rule
that do not limit attorney's fees awards to the
'prevailing party.'" Hardt, 560 U.S. at
254. In Hardt, the Court analyzed whether Congress
deviated from the American Rule when it passed a statute
providing that a "court in its discretion may allow a
reasonable attorney's fee and costs of action to either
party." Id. at 251-52 (quoting 29 U.S.C. §
1132(g)(1)). The same is true in Ruckelshaus v. Sierra
Club, where the Court examined a provision of the Clean
Air Act allowing a court to "award costs of litigation
(including reasonable attorney and expert witness fees)
whenever it determines that such an award is
appropriate." 463 U.S. 680, 682-83 (1983) (emphasis
omitted) (quoting 42 U.S.C. § 7607(f)).
while the American Rule sets a high bar for shifting
attorneys' fees, it does not impose a magic words
requirement so long as Congress's intent is
"specific and explicit." See Summit Valley
Indus., Inc. v. Local 112, United Bhd. of Carpenters,
456 U.S. 717, 721-22 (1982). As the Supreme Court
acknowledged in Key Tronic Corp. v. United States,
"[t]he absence of [a] specific reference to
attorney's fees is not dispositive if the statute
otherwise evinces an intent to provide for such fees."
511 U.S. 809, 815 (1994); see Baker Botts, 135 S.Ct.
at 2165 (discussing statute providing for "reasonable
compensation for actual, necessary services rendered by"
various "professional person[s]," including
"attorney[s]" (emphasis omitted) (quoting 11 U.S.C.
brings us to the procedural background of the current case.
In 2001, Dr. Hans Klingemann filed a patent application
directed to a method for treating cancer using natural killer
cells. Dr. Klingemann's application was eventually
assigned to NantKwest, Inc. The examiner rejected the
application as obvious in 2010, and the Board affirmed the
rejection in 2013.
to § 145, NantKwest challenged the Board's decision
by filing a complaint against the Director of the PTO in the
U.S. District Court for the Eastern District of Virginia.
Discovery ensued and the PTO moved for summary judgment that
the application's claims would have been obvious. The
district court granted the PTO's motion, and we affirmed.
See NantKwest, Inc. v. Lee, 686 Fed.Appx. 864, 865
(Fed. Cir. 2017). After prevailing on the merits, the PTO
filed a motion for reimbursement of the "expenses of the
proceedings" under § 145. The $111, 696.39 sum
sought by the PTO included $78, 592.50 in attorneys'
fees-calculated based on the pro rata salaries of the two PTO
attorneys and one paralegal who worked on the case-and $33,
103.89 in expert witness fees.
district court denied the PTO's motion with respect to
attorneys' fees, citing the American Rule.
Nan[tK]west, Inc. v. Lee, 162 F.Supp.3d 540, 542-43
(E.D. Va. 2016). In the court's view,
"Congress's reference to 'all . . . the
expenses' merely points to a collection of the
expenses used, commonly understood to encompass . . .
printing, travel, and reasonable expert witness
expenses." Id. at 543. The district court noted
that "[i]n § 145 Congress neither used the phrase
'attorneys' fees' nor 'fees' nor any
alternative phrase demonstrating a clear reference to
attorneys' fees." Id. at 545. It then
concluded that the "ambiguity regarding the exact reach
of the term 'expenses' means § 145 does not meet
the Supreme Court's Baker Botts standard and
therefore, cannot deviate from the American Rule."
appealed the denial of its motion to recover attorneys'
fees, and a divided panel of this court reversed the district
court's judgment. The majority relied on the Fourth
Circuit's opinion in Shammas v. Focarino, which
interpreted a nearly identical provision of the Lanham Act,
15 U.S.C. § 1071(b)(3). 784 F.3d 219, 223-24 (4th Cir.
2015). There, the Fourth Circuit held that the American Rule
only applies to statutes that refer to a "prevailing
party." Id. at 223. Referring to this language,
the majority here voiced "substantial doubts" that
§ 145 implicates the American Rule because it imposes
the PTO's expenses on applicants without referring to a
"prevailing party." NantKwest, Inc. v.
Matal, 860 F.3d 1352, 1355 (Fed. Cir. 2017).
Nevertheless, the majority assumed the American Rule applied
for purposes of its analysis and concluded that the word
"expenses" "'specific[ally]' and
'explicit[ly]' authorizes an award of fees."
Id. at 1356 (alterations in original) (quoting
Alyeska Pipeline, 421 U.S. at 260). For support, the
majority relied on dictionaries defining "expenses"
as "expenditure[s] of money, time, labor, or
resources to accomplish a result," id.
(alteration in original) (quoting Black's Law
Dictionary 698 (10th ed. 2014)), and a statement from
Taniguchi v. Kan.Pacific Saipan, Ltd.,
distinguishing "taxable costs" from
"nontaxable expenses," id. at 1357
(quoting 566 U.S. 560, 573 (2012)). Finally, the majority
rejected NantKwest's contention that pro-rata salaries of
the PTO's employees were not "expenses of the
proceedings." Id. at 1359.
court voted sua sponte to hear the appeal en banc and vacated
the panel's judgment. NantKwest, Inc. v. Matal,
869 F.3d 1327 (Fed. Cir. 2017). We requested briefing on a
single question: whether the panel "correctly
determine[d] that 35 U.S.C. § 145's '[a]ll the
expenses of the proceedings' provision authorizes an
award of the [PTO's] attorneys' fees."
Id. at 1327. In addition to the parties' briefs
and argument, we received seven amicus briefs, none of which
support the PTO's position. We now affirm the judgment of
the district court.
review de novo a district court's interpretation of a
statute. Boston Sci. Scimed, Inc. v. Medtronic
Vascular, Inc., 497 F.3d 1293, 1296 (Fed. Cir.
2007). Unless otherwise defined, words in a statute
"will be interpreted as taking their ordinary,
contemporary, common meaning." Summit Valley,
456 U.S. at 722 (quoting Perrin v. United States,
444 U.S. 37, 42 (1979)).
to the PTO, the American Rule does not govern our
interpretation of § 145. Even if it does, the PTO and
the dissent aver that the statutory text suffices to displace
this long-standing, common-law rule. We disagree on both
counts and address each issue in turn.
outset, we hold that the American Rule applies to § 145.
As noted, the American Rule provides that each litigant bears
its own attorneys' fees, win or lose, and a statute must
use "specific and explicit" language to depart from
this rule. The Supreme Court in Baker Botts
emphasized that the American Rule is the starting point
whenever a party seeks to shift fees from one side to the
other in adversarial litigation. 135 S.Ct. at 2164
(explaining that "when considering the award of
attorney's fees," the American Rule constitutes the
"basic point of reference" (quoting Hardt,
560 U.S. at 252-53)). Because the PTO contends that §
145 should be construed to shift its attorneys' fees to
the patent applicants bringing suit, the American Rule
necessarily applies. Accordingly, we must be able to discern
from § 145's text a "specific and
explicit" congressional directive to make an award of
attorneys' fees available. Alyeska Pipeline, 421
U.S. at 260.
not persuaded by the PTO's contrary arguments for why the
American Rule should not apply to litigation under §
145. The PTO begins by relying on the Fourth Circuit's
Shammas opinion for the proposition that the
American Rule only governs the interpretation of statutes
that shift fees from a prevailing party to a losing party.
Because § 145 imposes "[a]ll the expenses" on
the applicant, win or lose, the PTO asserts it is not a
fee-shifting statute that falls within the American
Rule's ambit. We disagree. Given the primary purpose of
the American Rule-protection of access to courts-the
PTO's alleged distinction makes little sense. We submit
that the policy behind the American Rule would be even more
strongly implicated where attorneys' fees would be
imposed on a winning plaintiff.
Shammas, a divided panel of the Fourth Circuit
awarded attorneys' fees to the PTO under 15 U.S.C. §
1071(b)(3)-the trademark analogue to § 145-which also
refers to "all the expenses of the proceeding." The
Shammas court reached this decision only by first
holding that the American Rule does not apply to §
1071(b)(3). 784 F.3d at 223. Based on a narrow interpretation
of the Supreme Court's statement in Alyeska
Pipeline, the Fourth Circuit held that "the
American Rule provides only that 'the prevailing
party may not recover attorneys' fees' from
the losing party." Id. (quoting
Alyeska Pipeline, 421 U.S. at 245). The Fourth
Circuit also relied on the Supreme Court's observation in
Ruckelshaus that "virtually every one of the
more than 150 existing federal fee-shifting provisions
predicates fee awards on some success by the
claimant" to conclude that a statute mandating fees
without regard to a party's success is not a fee-shifting
statute governed by the American Rule. Id. (quoting
Ruckelshaus, 463 U.S. at 684).
respectfully submit that Shammas's holding
cannot be squared with the Supreme Court's line of
non-prevailing party precedent applying the American Rule.
Although Alyeska Pipeline does refer to the American
Rule in the context of a "prevailing party," the
rule is not so limited. Rather, the Supreme Court has
consistently applied the rule broadly to any statute that
allows fee shifting to either party, win or lose. For
example, the Supreme Court in Hardt evaluated a
request for attorneys' fees under 29 U.S.C. §
1132(g)(1), which grants courts authority to award
"reasonable attorney's fee[s] . . . to either
party" at the court's "discretion." 560
U.S. at 251-52. The Supreme Court held that "a fee
claimant need not be a 'prevailing party' to be
eligible for an attorney's fees award under §
1132(g)(1)" because the statutory text contained no such
limitation. Id. at 252. But the absence of a
"prevailing party" requirement did not render the
American Rule inapplicable to the fee-shifting inquiry.