Peter v. Nantkwest, Inc.

• Decision Date: 11 December 2019
• Docket Number: No. 18-801,18-801
• Citation: 140 S.Ct. 365,205 L.Ed.2d 304
• Parties: Laura PETER, Deputy Director, Patent and Trademark Office, Petitioner v. NANTKWEST, INC.
• Court: U.S. Supreme Court

140 S.Ct. 365

205 L.Ed.2d 304

Laura PETER, Deputy Director, Patent and Trademark Office, Petitioner

v.NANTKWEST, INC.

No. 18-801

Supreme Court of the United States.

Argued October 7, 2019

Decided December 11, 2019

Malcolm L. Stewart for the petitioner

Morgan Chu, Los Angeles, CA, for the respondent.

Sarah Harris, General Counsel, Thomas W. Krause, Solicitor, William LaMarca, Thomas L. Casagrande, Mai-Trang Dang, Associate Solicitors, United States Patent and, Trademark Office, Alexandria, VA, Noel J. Francisco, Solicitor General, Joseph H. Hunt, Assistant Attorney General, Malcolm L. Stewart, Deputy Solicitor General, Matthew Guarnieri, Assistant to the Solicitor, General, Mark R. Freeman, Charles W. Scarborough, Jaynie Lilley, Attorneys, Department of Justice, Washington, DC, for the Petitioner.

Morgan Chu, Gary N. Frischling, Alan J. Heinrich, Lauren N. Drake, Michael D. Harbour, John P. Long, Irell & Manella LLP, Los Angeles, CA, for Respondent NantKwest, Inc.

Justice SOTOMAYOR delivered the opinion of the Court.

Section 145 of the Patent Act affords applicants "dissatisfied with the decision of the Patent Trial and Appeal Board" an opportunity to file a civil action in the United States District Court for the Eastern District of Virginia. 35 U.S.C. § 145. The statute specifies that "[a]ll the expenses of the proceedings shall be paid by the applicant." Ibid. The question presented in this case is whether such "expenses" include the salaries of attorney and paralegal employees of the United States Patent and Trademark Office (PTO). We hold that they do not.

I

A

The Patent Act creates two mutually exclusive pathways to challenge an adverse decision by the PTO. The first permits judicial review by direct appeal to the United States Court of Appeals for the Federal Circuit. § 141. There is "no opportunity for the applicant to offer new evidence" in a § 141 proceeding, and the Federal Circuit "must review the PTO's decision on the same administrative record that was before the [agency]." Kappos v. Hyatt , 566 U.S. 431, 434, 132 S.Ct. 1690, 182 L.Ed.2d 704 (2012) ; 35 U.S.C. § 144.

The second pathway allows applicants to file a new civil action against the Director of the PTO in federal district court. § 145. Unlike § 141, § 145 "permits the applicant to present new evidence ... not presented to the PTO." Kappos , 566 U.S. at 435, 132 S.Ct. . 1690. The district court "acts as a factfinder when new evidence is introduced in a § 145 proceeding" and must make de novo determinations that take into account "both the new evidence and the administrative record before the PTO." Id. , at 444, 446, 132 S.Ct. 1690.

The parties may appeal the district court's final decision to the Federal Circuit. 28 U.S.C. § 1295(a)(4)(C).

Because § 145 does not limit an applicant's ability to introduce new evidence to challenge the denial of a patent, Kappos , 566 U.S. at 439, 132 S.Ct. 1690, it can result in protracted litigation. As a condition for permitting such extensive review, the Patent Act requires applicants who avail themselves of § 145 to pay "[a]ll the expenses of the proceedings." 35 U.S.C. § 145.

B

After the PTO denied respondent NantKwest, Inc.’s patent application directed to a method for treating cancer

, NantKwest filed a complaint against the PTO Director in the Eastern District of Virginia under § 145. The District Court granted summary judgment to the PTO, and the Federal Circuit affirmed. NantKwest, Inc. v. Lee , 686 Fed.Appx. 864 (2017). The PTO moved for reimbursement of expenses that included—for the first time in the 170-year history of § 145 —the pro rata salaries of PTO attorneys and a paralegal who worked on the case.

The District Court denied the PTO's motion to recover its pro rata legal fees as "expenses" of the § 145 proceeding. The court concluded that the statutory language referencing expenses was not clear enough to rebut the "American Rule"—the background principle that parties are responsible for their own attorney's fees. NantKwest, Inc. v. Lee , 162 F.Supp.3d 540, 542 (E.D. Va. 2016). A divided Federal Circuit panel reversed, with Judge Stoll dissenting. NantKwest, Inc. v. Matal , 860 F.3d 1352 (2017). The majority expressed "substantial doub[t]" that § 145 even implicated the American Rule's presumption against fee shifting in a case in which the payment was not made to a prevailing party. Id., at 1355. The majority concluded that, even assuming the American Rule presumption applied, the term "expenses" in § 145 "specific[ally]" and "explicit[ly]" authorized an award of fees. Id. , at 1356.

The en banc Federal Circuit voted sua sponte to rehear the case and reversed the panel over a dissent. NantKwest, Inc. v. Iancu , 898 F.3d 1177, 1184 (2018). The majority opinion—now authored by Judge Stoll—held that the American Rule presumption applied to § 145 because it is "the starting point whenever a party seeks to shift fees from one side to the other in adversarial litigation." Id. , at 1184 (citing Baker Botts L. L. P. v. ASARCO LLC , 576 U. S. 121, ––––, 135 S.Ct. 2158, 2165, 192 L.Ed.2d 208 (2015) ). After examining the plain text and statutory history of § 145, the judicial and congressional understanding of similar language, and overarching policy considerations, the majority concluded that "[a]warding ‘[a]ll the expenses’ simply cannot supply the ‘specific and explicit’ directive from Congress to shift attorneys’ fees, and nothing else in the statute evinces congressional intent to make them available." 898 F.3d at 1196 (quoting Alyeska Pipeline Service Co. v. Wilderness Society , 421 U.S. 240, 260, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975) ). We granted certiorari, 586 U. S. ––––, 139 S.Ct. 1292, 203 L.Ed.2d 413 (2019), and now affirm.

II

This Court's " ‘basic point of reference’ when considering the award of attorney's fees is the bedrock principle known as the ‘ "American Rule" ’: Each litigant pays his own attorney's fees, win or lose, unless a statute or contract provides otherwise." Hardt v. Reliance Standard Life Ins. Co. , 560 U.S. 242, 252–253, 130 S.Ct. 2149, 176 L.Ed.2d 998 (2010) (quoting Ruckelshaus v. Sierra Club , 463 U.S. 680, 683, 103 S.Ct. 3274, 77 L.Ed.2d 938 (1983) ).

The American Rule has "roots in our common law reaching back to at least the 18th century." Baker Botts , 576 U. S., at ––––, 135 S.Ct., at 2164 (citing Arcambel v. Wiseman , 3 Dall. 306, 1 L.Ed. 613 (1796) ); see also Summit Valley Industries, Inc. v. Carpenters , 456 U.S. 717, 721, 102 S.Ct. 2112, 72 L.Ed.2d 511 (1982) (observing that the American Rule "has been consistently followed for almost 200 years"); Alyeska Pipeline , 421 U.S. at 257, 95 S.Ct. 1612 (referring to the presumption against shifting attorney's fees as a "general" rule).

The Government does not dispute this principle or its pedigree, but argues instead that it does not apply at all. Because the American Rule presumption is most often overcome when a statute awards fees to a "prevailing party," the Government maintains, the presumption applies only to prevailing-party statutes. And because § 145 requires one party to pay all expenses regardless of outcome, the argument goes, it is not a statute subject to the presumption.

That view is incorrect. This Court has never suggested that any statute is exempt from the presumption against fee shifting. Nor has it limited its American Rule inquiries to prevailing-party statutes. Indeed, the Court has developed a "line of precedents" "addressing statutory deviations from the American Rule that do not limit attorney's fees awards to the ‘prevailing party.’ " Hardt , 560 U.S. at 254, 130 S.Ct. 2149 ; see also Baker Botts , 576 U. S., at –––– – ––––, 135 S.Ct., at 2164-2166 (analyzing a bankruptcy provision that did not mention prevailing parties under the American Rule's presumption against fee shifting).

Sebelius v. Cloer , 569 U.S. 369, 133 S.Ct. 1886, 185 L.Ed.2d 1003 (2013), confirms that the presumption against fee shifting applies to all statutes—even those like § 145 that do not explicitly award attorney's fees to "prevailing parties." In Cloer , the Court interpreted a provision of the National Childhood Vaccine Injury Act that permitted courts to "award attorney's fees ... ‘incurred [by a claimant] in any proceeding on’ an unsuccessful vaccine-injury ‘petition ... brought in good faith [with] a reasonable basis for the claim.’ " 569 U.S. at 371, 133 S.Ct. 1886 (quoting 42 U.S.C. § 300aa–15(e)(1) ). The Court held that the provision's clear language authorized attorney's fees, even though the statute exclusively applied to unsuccessful litigants. 569 U.S. at 372, 133 S.Ct. 1886.

Cloer establishes two points: First, contrary to the Government's suggestion, Congress has indeed enacted fee-shifting statutes that apply to nonprevailing parties. Second, and again contrary to the Government's view, the American Rule applies to such statutes. The Government itself argued in Cloer that the presumption against fee shifting applied by default, but maintained that the statute "depart[ed] so far from background principles about who pays a litigant's attorney's fees that it [could not] be justified without a clearer statement than the Act can supply.’ " Brief for Petitioner in Sebelius v. Cloer , O. T. 2012, No. 12236, p. 32. The Court acknowledged the Government's position but concluded that the "rul[e] of thumb" against fee shifting gave way because the "words of [the] statute [were] unambiguous." Cloer , 569 U.S. at 380–381, 133 S.Ct. 1886 (citing the Government's brief).

The dissenting en banc Federal Circuit Judges also doubted that the American Rule could apply to a § 145 action. They characterized the proceeding as an intermediate step in obtaining a patent and the payment of legal fees as a portion of the application costs. 898 F.3d at 1200 (opinion of Prost, J.). Yet § 145 has all the marks of the kind of adversarial litigation in which fee shifting, and the presumption against it, is common; the statute authorizes...