Nantkwest, Inc. v. Matal
860 F.3d 1352
| Fed. Cir. | 2017Background
- Dr. Hans Klingemann’s patent application (natural killer cell cancer treatment) was rejected by the PTAB; NantKwest (assignee) sued under 35 U.S.C. § 145 in the E.D. Va. and prevailed on the merits.
- Section 145 requires that an applicant who elects district-court review pay “All the expenses of the proceedings.”
- The USPTO (Director) moved to recover $111,696.39 as § 145 “expenses” (about $78,592.50 claimed as attorneys’/personnel expenses and the remainder as expert fees).
- The district court awarded expert witness fees but denied recovery of the USPTO’s attorneys’ fees, invoking the American Rule’s requirement that a statute must be specific and explicit to authorize fee-shifting.
- The Director appealed; the Federal Circuit reversed, holding that § 145’s “all the expenses of the proceedings” includes the USPTO’s pro rata attorneys’ fees (including salaried government attorneys’ diverted time).
Issues
| Issue | Plaintiff's Argument (NantKwest) | Defendant's Argument (Director/USPTO) | Held |
|---|---|---|---|
| Whether § 145’s phrase “all the expenses of the proceedings” authorizes awarding the USPTO’s attorneys’ fees | "Expenses" is ambiguous and insufficiently specific under the American Rule; Congress didn’t say "attorneys’ fees" | "Expenses" in ordinary and legal usage includes attorneys’ fees; Congress’ use of "all expenses" was broad and fits the administrative context of salaried USPTO counsel | Held: § 145’s "all expenses" includes the USPTO’s attorneys’ fees; reversal of district court |
| Whether the American Rule’s “specific and explicit” requirement bars recovery here | The American Rule requires express statutory reference to attorneys’ fees or clear intent; absence here precludes fee-shifting | Even assuming the American Rule applies, the term "expenses" is sufficiently specific in context to overcome it | Held: Even under the American Rule, "expenses" covers the USPTO’s attorneys’ fees in § 145 proceedings |
| Whether salaried government attorneys’ time can be recovered as “expenses of the proceedings” | Salaries are paid regardless; diverting salaried staff isn’t an expense caused by the suit | Pro rata share of diverted salaried attorneys’/paralegals’ time is an expense (opportunity cost/overhead) and recoverable | Held: Pro rata compensation for diverted salaried USPTO counsel is recoverable as an expense |
| Whether awarding USPTO attorneys’ fees contradicts precedent or policy (deterrence of appeals) | Awarding fees deters meritorious appeals, departs from ordinary fee-shifting practice, and increases litigation costs for applicants | § 145 already imposes a heavy economic burden; including attorneys’ expenses effectuates Congress’s allocation of costs for electing district-court review | Held: Policy concerns do not outweigh statutory text and context; award affirmed as consistent with § 145’s burden-shifting purpose |
Key Cases Cited
- Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. 2010) (discussing § 145’s "all expenses" and the economic burden on applicants)
- Baker Botts L.L.P. v. ASARCO LLC, 135 S. Ct. 2158 (U.S. 2015) (explaining the American Rule and when statutory language must be specific to permit fee recovery)
- Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240 (U.S. 1975) (establishing that statutes must be "specific and explicit" to overcome the American Rule)
- Taniguchi v. Kan Pacific Saipan, Ltd., 566 U.S. 560 (U.S. 2012) (distinguishing taxable costs from broader "expenses," recognizing attorneys’ fees as part of nontaxable expenses)
- Shammas v. Focarino, 784 F.3d 219 (4th Cir. 2015) (construing a similar "all expenses" provision under the Lanham Act to include attorneys’ fees)
- Raney v. Federal Bureau of Prisons, 222 F.3d 927 (Fed. Cir. 2000) (permitting allocation of salaried attorneys’ time as recoverable where litigation diverted their resources)