Irell Convinces U.S. Supreme Court to Reject USPTO’s Legal Fees Rule

12.2019

On December 11, 2019, the U.S. Supreme Court unanimously sided with Irell client NantKwest Inc. and struck down the U.S. Patent and Trademark Office’s policy that applicants who appeal to a district court must foot the USPTO’s legal bills – no matter who wins or loses. The justices’ decision came two months after Morgan Chu argued the case before the nation’s highest court.  

In the court’s decision, Justice Sonia Sotomayor wrote that the USPTO’s policy would violate the “American Rule,” under which parties are bound to cover their own fees unless Congress explicitly says otherwise. Allowing an unsuccessful party to recover attorney’s fees from a prevailing party, Justice Sotomayor wrote, “would be a radical departure from longstanding fee-shifting principles adhered to in a wide range of contexts.”

In July 2018, Irell helped NantKwest secure a 7-4 en banc ruling from the Federal Circuit that rejected the USPTO's position, which holds that Congress intended to include attorney’s fees when it included language in the Patent Act and Lanham Act that mandates appealing applicants pay “all expenses of the proceeding" regardless of the outcome. Both acts had previously required that applicants who file a de novo appeal to a district court — versus an appeal directly to the Federal Circuit — pay "all expenses," but the USPTO had previously interpreted that provision only includes things like expert fees. However, in 2013, the agency began asking for attorney fees even if it lost.  

Morgan argued the case before the en banc Federal Circuit panel on March 8, 2018, and the decision was handed down on July 27, 2018. The ruling created a circuit split with the Fourth Circuit, which had decided in favor of the USPTO, making the case ripe for a U.S. Supreme Court decision. The USPTO petitioned the Supreme Court for review in December 2018. The high court win for NantKwest preserves the ability of small inventors to choose a Section 145 appeal without having to pay the USPTO's attorney’s fees if they lose. The case is Peter v. NantKwest Inc., 18-801.

The Irell team also included Alan Heinrich and Michael Harbour. News coverage of the case can be found here and here. Subscriptions are required.