Nantkwest, Inc. v. Iancu

898 F.3d 1177

NANTKWEST, INC., Plaintiff-Appellee

v.Andrei IANCU, Under Secretary of Commerce for Intellectual Property and Director if the United States Patent and Trademark Office, Defendant-Appellant

2016-1794

United States Court of Appeals, Federal Circuit.

Decided: July 27, 2018

Morgan 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 Beach, CA.

Jaynie 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., Clemson, SC.

Kevin 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, VA.

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 & Takahashi.

Before Prost, Chief Judge, Newman, Lourie, Dyk, Moore, O'Malley, Reyna, Wallach, Taranto, Hughes, and Stoll, Circuit Judges.^*

Dissenting opinion filed by Chief Judge Prost, in which Circuit Judges Dyk, Reyna, and Hughes join.

Stoll, Circuit Judge.

When 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.

I

A

The 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).

Section 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, 132 S.Ct. 1690, 182 L.Ed.2d 704 (2012) (quoting Dickinson v. Zurko , 527 U.S. 150, 152, 119 S.Ct. 1816, 144 L.Ed.2d 143 (1999) ). Importantly, appellate review in § 141 proceedings is confined to the record before the PTO. 35 U.S.C. § 144.

Section 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, 132 S.Ct. 1690 ("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."

Congress introduced § 145's predecessor in 1839,¹ and 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.

B

As its name suggests, the American Rule is a "bedrock principle" of this country's jurisprudence. Hardt v. Reli-ance Standard Life Ins. Co. , 560 U.S. 242, 253, 130 S.Ct. 2149, 176 L.Ed.2d 998 (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 , ––– U.S. ––––, 135 S.Ct. 2158, 2164, 192 L.Ed.2d 208 (2015) (quoting Hardt , 560 U.S. at 253, 130 S.Ct. 2149 ). 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, 130 S.Ct. 2149 ).

The 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 judicial administration.

Fleischmann Distilling Corp. v. Maier Brewing Co. , 386 U.S. 714, 718, 87 S.Ct. 1404, 18 L.Ed.2d 475 (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.

The 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, 1 L.Ed. 613 (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.²

Fleischmann , 386 U.S. at 717, 87 S.Ct. 1404 ; see Runyon v. McCrary , 427 U.S. 160, 185, 96 S.Ct. 2586, 49 L.Ed.2d 415 (1976) ("[T]he law of the United States ... has always been that absent explicit congressional authorization, attorneys' fees are not a recoverable cost of litigation.").

Only 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, 95 S.Ct. 1612. 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, 95 S.Ct. 1612. Thus, the Supreme Court has held that the American Rule...