When a patent application is rejected, do you have to pay to appeal the rejection? IANCU v. NANTKWEST

An inventor can get a United States patent on an invention that they have created by filing a patent application with the United States Patent and Trademark Office. A patent is a complex document that has a specific format and must conform to the requirements of United States patent law. When an applicant seeks a patent, the United States Patent and Trademark Office assigns an examiner to study the application and determine whether a patent should be granted. An examiner can grant the patent application, raise objections which an applicant can fix, or reject the patent application. If an applicant is dissatisfied with the examiner’s decision the applicant may appeal to the Patent Trial and Appeal Board, an administrative body within the United State Patent and Trademark Office. The Patent Trial and Appeal Board can agree with the examiner’s decision or make modifications to the examiner’s decision. An applicant who is dissatisfied with the Patent Trial and Appeal Board’s decision may seek judicial review through either of two avenues: a direct appeal to the Federal Circuit or a civil action in district court.

In a direct appeal under 35 U.S.C. 141, the Federal Circuit reviews the Patent Trial and Appeal Board’s decision on the based on record from the United States Patent and Trademark Office. The Federal Circuit must apply the deferential standards of review prescribed by the Administrative Procedure Act, and may set aside the United State Patent and Trademark Office’s findings of fact only if they are “unsupported by substantial evidence.”

Alternatively, 35 U.S.C. 145 allows a patent applicant to bring a civil action against the Director of the United State Patent and Trademark Office in the United States District Court for the Eastern District of Virginia. In a Section 145 action, unlike in a direct appeal under Section 141, the patent applicant may conduct discovery and may introduce evidence that the United State Patent and Trademark Office had no opportunity to consider. If the applicant introduces new evidence, the district court must make de novo factual findings that take account of both the new evidence and the administrative record before the United State Patent and Trademark Office.

Section 145 states that the applicant must pay all the expenses of the proceedings regardless of the outcome of the suit. This would include the expenses incurred by United State Patent and Trademark Office. Section 141 does not require an applicant to pay such expenses. Traditionally the United States Patent and Trademark Office did not demand that a patent applicant pay the Office’s fees when the patent applicant won a civil action under Section 145. In 2013, the United State Patent and Trademark Office began seeking to recover the personnel-related expenses, including attorneys fees, that the Office incurred in Section 145 proceedings. This means that even if the patent applicant won their appeal, they would have to pay the United State Patent and Trademark Office’s costs.

Section 145’s requirement that a patent applicant pay the expenses of the United States Patent and Trademark Office regardless of who is the prevailing party at trial is unique. There is increasing resistance among patent applicants to pay the United State Patent and Trademark Office’s expenses for a Section 145 appeal. This resistance is based on a concept know as the American Rule—i.e., the “rule that each side must pay its own attorney’s fees,” “absent explicit statutory authority” for a fee award.

IANCU, v. NANTKWEST, INC., 18-801 (US 2018) is a case before the United States Supreme Court which deals with this issue. The respondent in this case is the assignee of a patent for treating cancer which was originally rejected for being obvious. During the patent examination process the patent applicant relied solely on the testimony of the inventor. The respondent appealed the United State Patent and Trademark Office’s rejection of the patent under Section 145. At the district court hearing the respondent introduced a new expert witness, and the United State Patent and Trademark Office retained an expert to respond; both experts produced extensive reports and participated in lengthy depositions with United State Patent and Trademark Office attorneys.

The district court granted summary judgement in favor of the United State Patent and Trademark Office. The district court granted the United State Patent and Trademark Office’s request for reimbursement of expert-witness fees but denied the request for reimbursement of personnel expenses. The Patent Office appealed this decision to the Federal Circuit.

The Federal Circuit held that Section 145 lacks the ‘specific and explicit’ congressional authorization required
to displace the American Rule. It noted that some statutes authorize the award of both expenses and attorney’s fees, whereas other statutes define expenses to include attorney’s fees explicitly. The Federal Circuit concluded that the term expenses in Section 145 is at best ambiguous with respect to attorney’s fees. The Federal Circuit also stated that, because Section 145 would have a patent applicant pay the government’s attorneys’ fees even when the patent applicant succeeds, it would be a particularly unusual divergence from the American Rule.

The United States Patent and Trademark Office has now appealed this decision the United States Supreme Court. It will be up to the Supreme Court to decide whether Section 145 requires a patent applicant to pay for the United State Patent and Trademark Office’s expenses regardless of who wins an appeal.

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