Federal Circuit Court reverses fee collection by U.S. Patent and Trademark Office, cites Pa. attorneys' amicus brief

By Nicholas Malfitano | Aug 21, 2018


LANCASTER – The court in charge of patent disputes recently cited an amicus brief authored by Lancaster lawyers from the firm Barley Snyder on behalf of the American Bar Association, when it reversed a landmark decision allowing for collection of attorneys fees by the U.S. Patent and Trademark Office (PTO).

The ABA amicus brief written in part by firm partners Joshua Schwartz and Salvatore Anastasi earlier this year was quoted by the U.S. Court of Apeals for the Federal Circuit when it reversed a previous decision reached in Nantkwest, Inc. v. Matal, which allowed the PTO to collect attorneys fees when certain cases were appealed to it from the U.S. District Court.

The Federal Circuit Court handles appeals that originate from the PTO, and the amicus brief to which Schwartz and Anastasi contributed, along with attorneys from Chicago, was one of seven that the Court received on the matter.

Anastasi serves as the chair of Barley Snyder’s Intellectual Property Practice Group, is involved with the ABA Intellectual Property Law Section and has worked with the ABA in advancing the interests of stakeholders in intellectual property systems around the globe.

Anastasi stated the Federal Circuit decision removes the hurdle of having to pay the USPTO’s attorney fees on appeal to a District Court.

“This is a win for access to justice. It was the theme of our brief and a core principle of the ABA. An award of attorney fees would simply serve as a deterrent to patent applicants who otherwise have the right of appeal under the statute,” Anastasi said.

Nantkwest, Inc. v. Iancu

When the PTO’s Patent Trial and Appeal Board upholds an examiner’s rejection of a patent application, Section 145 of the Patent Act allows the applicant to challenge the Board’s ruling in a U.S. District Court. Thus, applicants who cite Section 145 are required to fully reimburse the costs the PTO spends on participating in the proceedings, no matter the final result.

“Historically, the PTO has relied on this provision to recover sums it spent on travel and printing and, more recently, expert witnesses. In Nantkwest, the issue before the court was whether Section 145 also compelled the applicant to pay attorney’s fees incurred by the PTO,” said A. John Murray, of Brinks Gilson & Lione.

The contested patent application in Nantkwest dealt with treating cancer using natural killer cells; one which was rejected as “obvious” by a PTO examiner in 2010 and which was upheld by their Patent Trial and Appeal Board in 2013.

Nantkwest then cited Section 145 to challenge the rejection in the U.S. District Court for the Eastern District of Virginia, where the PTO motioned for summary judgment, labeling the patent’s claims once again as “obvious.” The PTO won their summary judgment motion, then cited Section 145 themselves and applied for reimbursement of their expenses – including attorney’s fees.

Yet, the court held that Section 145’s stipulation that “all the expenses of the proceedings shall be paid by the applicant” does not contain congressional authority needed to trump the American Rule – which provides that each party pay its own attorney’s fees, unless “specific authority” allowed by law or contract permits assessment of those fees against the other party.

The majority view of the Federal Circuit, in reviewing other statutes governing this same area, found that generally, the right to expenses does not include an implied authorization to award attorney’s fees.

However, Chief Judge Sharon Prost wrote a long dissent to the majority view, joined by her colleague judges Timothy B. Dyk, Jimmie V. Reyna and Todd M. Hughes. The gist of Prost’s dissent was that Congress intended “all the expenses” to mean just that, departing from the American Rule and including attorney’s fees.

Prost pointed out that the PTO retained government attorneys paid on salary to represent them in the litigation, attorneys who were then not able to take on other cases and thus lost out on legal fees.

The PTO may appeal the July 27th decision, which, along with the noted dissent of the Federal Circuit judiciary, could potentially send the case to the U.S. Supreme Court.

The attorneys who wrote the brief stated there was “no evidence Congress intended Section 145 to be a roadblock to justice, and [the] court should not interpret it that way,” adding that concurring with the PTO’s stance “will close the Section 145 avenue to many, if not most, individuals, small businesses, and non-profit organizations.” 

“The implications of doing so are of grave concern to the ABA. Equal access to justice is not merely an aspiration, but the cornerstone of the American justice system. Critical to the notion of equal access is that those with fewer resources not be dissuaded from seeking redress from the courts by financial impediments to justice. It is pursuant to this principle that courts waive filing, court, and transcript fees for the indigent,” the brief read.

“Contrary to these foundational principles, the interpretation advocated by the PTO would shut the door to the Congressionally created Section 145 pathway for all except those who can afford to pay not only their own legal fees but also those of the federal government, and regardless of the outcome.”

According to Schwartz, Anastasi and their colleagues, applicants who don't have enough money to pay for their adversary’s lawyers would be stopped from utilizing the benefits of Section 145 pathway, including de novo review of the denial of their applications and the opportunity to introduce new evidence in District Court, just because of their inability to pay.” 

“This will disproportionately impact individuals, small businesses, and non-profit organizations. Meanwhile, those benefits would remain open to large corporations and affluent individuals who can afford to shoulder the burden of paying for the government’s lawyers,” the brief stated.

“Congress made the civil action route available to patent applicants for a reason – to allow them to persuade a district court, in a trial setting and limited only by the Federal Rules of Civil Procedure and the Federal Rules of Evidence, that they deserved patents denied by the PTO. Congress surely did not provide this route to patent applicants and then erect a roadblock that would eliminate its use. A decision favoring that roadblock would have an unjust chilling effect on small businesses, sole inventors, and others who cannot afford the additional costs of the agency’s attorneys’ fees, regardless of the merits of their inventions and civil actions. These implications must be avoided; the doors of justice must be open to all, regardless of individual prosperity.”

U.S. Court of Appeals for the Federal Circuit case 16-1794

U.S. District Court for the Eastern District of Virginia case 1:13-cv-01566

From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nickpennrecord@gmail.com

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