Nantkwest, Inc. v. Matal

• Decision Date: 23 June 2017
• Docket Number: 2016-1794
• Citation: 860 F.3d 1352
• Parties: NANTKWEST, INC., Plaintiff-Appellee v. Joseph MATAL, performing the functions and duties of the Under Secretary of Commerce for Intellectual Property and Director, U.S. Patent and Trademark Office, Defendant-Appellant
• Court: U.S. Court of Appeals — Federal Circuit

860 F.3d 1352

NANTKWEST, INC., Plaintiff-Appellee

v.Joseph MATAL, performing the functions and duties of the Under Secretary of Commerce for Intellectual Property and Director, U.S. Patent and Trademark Office, Defendant-Appellant

2016-1794

United States Court of Appeals, Federal Circuit.

Decided: June 23, 2017

Alan J. Heinrich , Irell & Manella LLP, Los Angeles, CA, argued for plaintiff-appellee. Also represented by Morgan Chu, Lauren Nicole Drake, Gary N. Frischling ; 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 Mark R. Freeman, Dana J. Boente, Benjamin C. Mizer ; Nathan K. Kelley, Thomas W. Krause, Scott C. Weidenfeller, Thomas L. Casagrande , Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA.

Mark N. Mutterperl , Zeisler PLLC, New York, NY, for amicus curiae International Trademark Association.

Before Prost, Chief Judge, Dyk and Stoll, Circuit Judges.

Dissenting opinion filed by Circuit Judge Stoll.

Prost, Chief Judge.

Nantkwest, Inc. appeals from a decision of the United States District Court for the Eastern District of Virginia granting-in-part and denying-in-part the United States Patent and Trademark Office ("USPTO") Director's motion for fees. In its order, the district court granted the Director's requested witness' fees but denied the requested attorneys' fees. The Director appeals the court's denial of attorneys' fees. We reverse.

I

In 2001, Dr. Hans Klingemann filed a patent application directed to a method of treating cancer

by administering natural killer cells. After several years of examination, the USPTO rejected Dr. Klingemann's application on obviousness grounds. The Patent and Trial Appeal Board ("PTAB") affirmed the examiner's rejection and Nantkwest, as assignee of the application, appealed to the district court under 35 U.S.C. § 145. We have provided a summary of the technology and the proceedings at the USPTO and district court in Nantkwest's companion appeal. NantKwest, Inc. v. Michelle K. Lee , 686 Fed.Appx. 864, 865–68, 2017 WL 1735330 (Fed. Cir. May 3, 2017).

Section 145 provides that an applicant dissatisfied with the PTAB's decision may appeal directly to the United States District Court for the Eastern District of Virginia in lieu of immediate appeal to this court. 35 U.S.C. § 145. The statute further provides that the applicant must pay "[a]ll of the expenses of the proceeding," id. , "regardless of the outcome," Hyatt v. Kappos , 625 F.3d 1320, 1337 (Fed. Cir. 2010) (en banc), aff'd and remanded , 566 U.S. 431, 132 S.Ct. 1690, 182 L.Ed.2d 704 (2012). After prevailing at the district court on the merits, the Director filed a motion to recover $111,696.39 of the USPTO's fees under the § 145 expense provision. See J.A. 84 (seeking $78,592.50 in attorneys' fees (including paralegal fees) and $33,103.89 in expert fees).¹

Although the district court granted the USPTO's expert fees, it denied its requested attorneys' fees, citing the "American Rule." J.A. 10–11. Under this Rule, litigants pay their own attorneys' fees, win or lose, unless a statute or contract provides otherwise. Hardt v. Reliance Standard Life Ins. Co. , 560 U.S. 242, 252–53, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010). Applying this Rule, the court found that in order to recover these fees, "[d]efendants must be able to articulate a statutory provision that clearly and explicitly allows them to recovery attorneys' fees from Plaintiff." J.A. 3–4. The district court concluded that the "[a]ll expenses" provision of the statute was neither sufficiently specific nor explicit enough for the authorization of attorneys' fees under this Rule. Id. On appeal, the Director argues that the district court erred by excluding the USPTO's attorneys' fees under § 145. We have jurisdiction under 28 U.S.C. § 1295(a)(4)(C).

II

The principal issue on appeal is whether § 145's "[a]ll expenses of the proceedings" provision authorizes an award of the USPTO's attorneys' fees under this section.²

We review a district court's interpretation of a statute de novo. Weatherby v. Dep't of the Interior , 466 F.3d 1379, 1383 (Fed. Cir. 2006). "In construing a statute or regulation, we begin by inspecting its language for plain meaning." Meeks v. West , 216 F.3d 1363, 1366 (Fed. Cir. 2000) (citation omitted). In the absence of a definition of a term, courts give the words their "ordinary, contemporary, common meaning." Williams v. Taylor , 529 U.S. 420, 421, 120 S.Ct. 1479, 146 L.Ed.2d 435 (2000).

Under 35 U.S.C. § 145,

[a]n applicant dissatisfied with the decision of the [PTAB] ... may, unless appeal has been taken to the United States Court of Appeals for the Federal Circuit, have remedy by civil action against the Director in the United States District Court for the Eastern District of Virginia.... All the expenses of the proceedings shall be paid by the applicant .

Id . (emphasis added).

At the outset, we observe that we have previously construed other portions of § 145. See, e.g., Hyatt , 625 F.3d at 1322. Although Hyatt resolved a different issue than the one presented here, we based our holding, in part, on our recognition of the breath of the "all expenses" provision and the substantial financial burden that applicants must bear for initiating § 145 appeals. Id. at 1337. "To deter applicants from exactly the type of procedural gaming that concerns the Director, Congress imposed on the applicant the heavy economic burden of paying ‘[a]ll the expenses of the proceedings' regardless of the outcome." Id. (alteration in original) (citing 35 U.S.C. § 145 ). Put another way, Congress intended that all applicants unconditionally assume this financial burden when seeking review directly in district court—whether they win, or lose. We thus concluded that Congress drafted this provision without requiring any degree of success on the merits (much less a prevailing party) as a necessary precedent for shifting this "heavy economic burden" onto the applicant. Id.

A

Before determining whether § 145 authorizes an award of the USPTO's attorneys' fees, we first address the government's argument that the American Rule does not apply to these proceedings. Like the Fourth Circuit, we have substantial doubts that this provision even implicates this Rule. See Shammas v. Focarino , 784 F.3d 219, 223 (4th Cir. 2015), cert. denied sub nom. Shammas v. Hirshfeld , ––– U.S. ––––, 136 S.Ct. 1376, 194 L.Ed.2d 360 (2016) (concluding that a nearly identical statutory provision governing Trademark appeals (15 U.S.C. § 1071(b)(3) ) does not "operate[ ] against the backdrop of the American Rule" because that provision made no reference to prevailing parties).

In response to the government's arguments, Nantkwest relies on Baker Botts L.L.P. v. ASARCO LLC to support its position that the American Rule applies whenever a litigant seeks to recover attorneys' fees. ––– U.S. ––––, 135 S.Ct. 2158, 2164, 192 L.Ed.2d 208 (2015).³ Baker Botts , however, does not stand for a general proposition that courts must apply the American Rule's specific and explicit requirements to all fee statutes irrespective of a prevailing party as Nantkwest contends. Rather, it demonstrates that a statute must meet these requirements before a party may recover its fees when attempting to extend its reach to ancillary litigation Congress never intended. See id. at 2165. Nevertheless, despite our doubts as to the applicability of the American Rule here, we analyze § 145's "[a]ll expenses of the proceeding" provision assuming the Rule applies, as we conclude that even under this Rule, the expenses at issue here include the USPTO's attorneys' fees.

B

Under the American Rule, "the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys' fee from the loser." Alyeska Pipeline Serv. Co. v. Wilderness Soc'y , 421 U.S. 240, 247, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975). Courts uniformly recognize an exception to this general proposition, however: when the statute itself "specific[ally]" and "explicit[ly]" authorizes an award of fees, the prevailing party may be entitled to collect its fees. Id. at 260, 95 S.Ct. 1612. In agreement with two other circuits, we conclude that "expenses" here includes attorneys' fees. See Shammas, 784 F.3d at 222–23 (holding that the term "expenses" covers the USPTO's attorneys' fees); United States v. 110-118 Riverside Tenants Corp. , 886 F.2d 514, 520 (2d Cir. 1989) (observing that attorneys' fees are "expenses of the proceedings" under § 6342 of the Internal Revenue Code ).⁴

The definitions and explanations that standard legal dictionaries and treatises provide for the term "expense" support this conclusion. Wright & Miller on Federal Practice and Procedure, for example, defines this term as "includ[ing] all the expenditures actually made by a litigant in connection with the action," including "attorney's fees." 10 Charles Alan Wright et al., Federal Practice and Procedure § 2666 (3d ed. 1998). Similarly, Black's Law Dictionary defines "expenses" as "expenditure[s] of money, time, labor , or resources to accomplish a result." Black's Law Dictionary 698 (10th ed. 2014) ("Black's ") (emphasis added).

The dissent summarily dismisses these definitions, declaring that "they are not contemporaneous with Congress's introduction of the word ‘expenses' into the Patent Act in 1839." Dissenting Op. 1367. Relying on Nineteenth Century dictionaries instead, the dissent concludes that "the words ‘expense,’ ‘cost,’ and ‘damage’ were considered synonymous around the time of the 1839 Amendments."⁵ Id. at 1363. Not so. The Patent Act of 1836 specifically distinguished among these three terms. Compare Act of July 4, 1836, ch. 357, 5 Stat. 117, § 9 ("[M]oneys received into the Treasury under this act shall constitute a fund for the payment of salaries of the officers and clerks herein provided for, and all other expenses of...