For decades, patent and trademark owners who appealed refusal of their sought-after registrations with the United States Patent and Trademark Office (USPTO) were responsible for their own costs, fees and certain expenses incurred by the USPTO (e.g. travel expenses, expert fees and copying), as required by Section 145 of the Patent Act (35 U.S.C §145) and Section 1071 of the Lanham Act (15 U.S.C. §1071). However, in 2013, the USPTO took on a new reading of the statute that called for applicants to pay “all expenses” of the appeal proceeding, which would, from then on, be interpreted to include the USPTO’s attorney fees.

In the years since, courts have been split over whether the USPTO’s new policy is a fair interpretation of the relevant provision. Now, the Supreme Court has been asked to weigh in following a Federal Circuit ruling that the new policy violated the age old “American Rule,” which says that litigants must cover their own attorney’s fees unless Congress expressly says otherwise.

Attorneys for the USPTO argued that the American Rule does not apply to the relevant Patent Act provision, saying that the rule only covers fee awards to prevailing parties and that the expenses provision in question is entirely different, as it applies regardless of which party prevails. Indeed, Section 145 of the Patent Act had been interpreted to require even a successful applicant to pay the fees incurred by an unsuccessful USPTO legal team. This argument was flatly rejected by the nation’s highest court.

Writing for the Court, Justice Sonia Sotomayer stated that “[t]he American Rule presumption against fee shifting not only applies, but is particularly important because the Patent Act permits an unsuccessful government agency to recover its expenses from a prevailing party.”[1]

The Court found it particularly problematic that the policy, as implemented, required even a successful appellate to pay fees that would essentially cover the salaries paid to USPTO attorneys who worked on the case. What’s more, the Court set this scenario apart from a developing line of precedent that addresses statutory deviations from the traditional American Rule, stating that “[t]he reference to ‘expenses’ in the Patent Act does not invoke attorney’s fees with the kind of clarity [the Court] has required to deviate from the American Rule.” This appears to support Federal Circuit Judge Kara Fernandez Stoll’s 2018 opinion, in which she wrote for the majority, saying that “[t]he American Rule can only be overcome if Congress makes a ’specific and explicit’ directive that attorney’s fees are available,” and that statute governing appeals from the USPTO “falls short of this stringent standard.”[2]

The holding, which unequivocally rebuffs the USPTO’s novel rereading of the Patent Act, applies equally to trademark appeals, as USPTO attorneys have cited identical language in the Lanham Act and have requested attorney’s fees based on the same. Further, as noted above, the Court’s holding settles the split among district courts that have previously addressed this issue. Therefore, with no room for error, the Supreme Court has declared that in appeals, win or lose, applicants do not have to pay the USPTO’s attorneys’ fees, and that to require otherwise is inapposite to the American Way. If you have any questions regarding this recent SCOTUS decision and/or related matters, please contact your Dinsmore attorney.