Shammas v. Focarino

• Decision Date: 23 April 2015
• Docket Number: No. 14–1191.,14–1191.
• Parties: Milo SHAMMAS, Plaintiff–Appellant, v. Margaret A. FOCARINO, Commissioner of Patents, Defendant–Appellee, and David Kappos, Director of the United States Patent and Trademark Office ; Teresa Stanek Rea, Acting Director of the United States Patent and Trademark Office, Defendants. International Trademark Association, Amicus Supporting Appellant.
• Court: U.S. Court of Appeals — Fourth Circuit

784 F.3d 219

114 U.S.P.Q.2d 1489

Milo SHAMMAS, Plaintiff–Appellant

v. Margaret A. FOCARINO, Commissioner of Patents, Defendant–AppelleeandDavid Kappos, Director of the United States Patent and Trademark Office ; Teresa Stanek Rea, Acting Director of the United States Patent and Trademark Office, Defendants.International Trademark Association, Amicus Supporting Appellant.

No. 14–1191.

United States Court of Appeals, Fourth Circuit.

Argued Dec. 10, 2014.

Decided April 23, 2015.

ARGUED:Aaron M. Panner, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington, D.C., for Appellant. Jaynie Randall Lilley, United States Department of Justice, Washington, D.C., for Appellee. ON BRIEF:William C. Steffin, Armin Azod, Steffin Lelkes Azod LLP, Century City, California; Wendy McGuire Coats, McGuire Coats LLP, Lafayette, California; W. Joss Nichols, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington, D.C.; John N. Jennison, Jennison & Shultz, P.C., Arlington, Virginia, for Appellant. Nathan K. Kelley, Solicitor, Thomas W. Krause, Deputy Solicitor, Christina J. Hieber, Associate Solicitor, Thomas L. Casagrande, Associate Solicitor, United States Patent And Trademark Office, Alexandria, Virginia; Stuart F. Delery, Assistant Attorney General, Mark R. Freeman, Civil Division, United States Department of Justice, Washington, D.C.; Dana J. Boente, Acting United States Attorney, Office Of The United States Attorney, Alexandria, Virginia, for Appellee. Anthony J. Dreyer, Jordan A. Feirman, Katelyn N. Andrews, Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York; Mark N. Mutterperl, David J. Ball, Jessica S. Parise, Bracewell & Giuliani LLP, New York, New York, for Amicus Curiae.

Before WILKINSON, NIEMEYER, and KING, Circuit Judges.

Opinion

Affirmed by published opinion. Judge NIEMEYER wrote the majority opinion, in which Judge WILKINSON joined. Judge KING wrote a dissenting opinion.

NIEMEYER, Circuit Judge:

The Lanham Act, 15 U.S.C. §§ 1051 –1141n, provides that a dissatisfied trademark applicant may seek review of an adverse ruling on his trademark application either by appealing the ruling to the Court of Appeals for the Federal Circuit, id. § 1071(a)(1), or by commencing a de novo action in a federal district court, id. § 1071(b)(1). If he elects to proceed in a district court and no adverse party opposed his application before the Patent and Trademark Office (“PTO”), the applicant must name the Director of the PTO as a defendant and pay “all the expenses of the proceeding,” whether he succeeds in the action or not, unless the expenses are unreasonable. Id. § 1071(b)(3) (emphasis added).

In this case, Milo Shammas, a dissatisfied applicant in an ex parte trademark proceeding, elected to commence a de novo action in the district court. At the end of the proceeding, the Director of the PTO sought “all the expenses of the proceeding” from Shammas, including salary expenses of the PTO attorneys and a paralegal who were required to defend the Director. The district court granted the Director's request and ordered Shammas to pay the PTO a total of $36,320.49 in expenses.

On appeal, Shammas argues that the district court erred in “shifting” the PTO's attorneys fees to him, contrary to the “American Rule” under which each party bears his own attorneys fees, because the governing statute does not expressly provide for the shifting of attorneys fees.

We reject this argument and affirm, concluding that the imposition of all expenses on a plaintiff in an ex parte proceeding, regardless of whether he wins or loses, does not constitute fee-shifting that implicates the American Rule but rather an unconditional compensatory charge imposed on a dissatisfied applicant who elects to engage the PTO in a district court proceeding. And we conclude that this compensatory charge encompasses the PTO's salary expenses for the attorneys and paralegals who represent the Director.

I

In June 2009, Shammas filed a federal trademark application for the mark “PROBIOTIC” for use in connection with fertilizer products manufactured by his company, Dr. Earth, Inc. In an ex parte proceeding, a trademark examining attorney for the PTO denied Shammas' application on the ground that the term was generic and descriptive. The Trademark Trial and Appeal Board affirmed.

Rather than appeal the adverse ruling to the Federal Circuit, as allowed by 15 U.S.C. § 1071(a)(1), Shammas elected to commence this de novo civil action against the PTO in the district court, pursuant to § 1071(b)(1). The district court granted the PTO's motion for summary judgment by order dated October 15, 2013, holding that Shammas had failed to cast doubt on the finding that “PROBIOTIC” was a generic term.

At the conclusion of the proceeding, the PTO filed a motion, pursuant to § 1071(b)(3), for reimbursement of $36,320.49 in expenses that it had incurred in the proceeding, including the prorated salaries of two attorneys, in the amount of $32,836.27, and one paralegal, in the amount of $3,090.32. The PTO calculated these sums by dividing the employees' annual salaries by 2,000 hours and multiplying the results by the number of hours expended by the employees in defending the action, a total of 518 hours in this case. The PTO also claimed $393.90 for photocopying expenses.

Shammas opposed the motion, arguing that the PTO was in essence seeking attorneys fees and that § 1071(b)(3) did not, in authorizing the recovery of all expenses of the proceeding, explicitly provide for the shifting of attorneys fees as, he argued, would be required to overcome the American Rule.

Following a hearing, the district court granted the PTO's motion in its entirety. It reasoned:

[T]he plain meaning of the term “expenses,” by itself, would clearly seem to include attorney's fees. But if any doubt remains about that inclusion, it is removed by Congress's addition of the word “all” to clarify the breadth of the term “expenses.” When the word “expenses” is prefaced with the word “all,” it is pellucidly clear Congress intended that the plaintiff in such an action pay for all the resources expended by the PTO during the litigation, including attorney's fees.

Shammas v. Focarino, 990 F.Supp.2d 587, 591–92 (E.D.Va.2014).

From the district court's order, dated January 3, 2014, Shammas filed this appeal, challenging the district court's authority to award attorneys fees and paralegals fees under § 1071(b)(3).

II

Section 1071(b)(3) provides in relevant part, “In any case where there is no adverse party, ... all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not.”

While Shammas acknowledges that “expenses” is a sufficiently broad term that, “in ordinary parlance,” includes attorneys fees, he argues that in the context of the American Rule—i.e., that “the prevailing party may not recover attorneys' fees as costs or otherwise,” Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 245, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975) —the statute is not sufficiently clear to reverse the presumption created by that Rule. He argues that “a district court may not read a federal statute to authorize attorney-fee-shifting unless the statute makes Congress's intention clear by expressly referring to attorney's fees.” (Emphasis added).

We agree with Shammas that, in ordinary parlance, “expenses” is sufficiently broad to include attorneys fees and paralegals fees. See American Heritage Dictionary 624 (5th ed.2011) (defining expense as “[s]omething spent to attain a goal or accomplish a purpose,” such as “an expense of time and energy on [a] project”); Black's Law Dictionary 698 (10th ed.2014) (defining expense as “[a]n expenditure of money, time, labor, or resources to accomplish a result”); accord U.S. ex rel. Smith v. Gilbert Realty Co., 34 F.Supp.2d 527, 529–30 (E.D.Mich.1998) (noting that “a legal fee would certainly seem to be” an “expense[ ] which a person incurs in bringing an action” under the plain meaning of that phrase). Moreover, in this statute, Congress modified the term “expenses” with the term “all,” clearly indicating that the common meaning of the term “expenses” should not be limited.

And even though the PTO's attorneys in this case were salaried, we conclude that the PTO nonetheless incurred expenses when its attorneys were required to defend the Director in the district court proceedings, because their engagement diverted the PTO's resources from other endeavors. See Wisconsin v. Hotline Indus., Inc., 236 F.3d 363, 365 (7th Cir.2000) (“[S]alaried government lawyers ... do incur expenses if the time and resources they devote to one case are not available for other work” (emphasis added)).

Shammas' argument in this case depends on the assumption that if § 1071(b)(3) were to be construed to include attorneys fees, it would constitute a fee-shifting statute that would need to refer explicitly to attorneys fees in order to overcome the presumption of the American Rule. This assumption, however, is misplaced under the circumstances of this case.

To be sure, where the American Rule applies, Congress may displace it only by expressing its intent to do so “clearly and directly.” In re Crescent City Estates, 588 F.3d 822, 825 (4th Cir.2009). But the American Rule provides only that “the prevailing party may not recover attorneys' fees” from the losing party. Alyeska Pipeline, 421 U.S. at 245, 95 S.Ct. 1612 (emphasis added); see also, e.g., Buckhannon Bd. & Care Home, Inc. v. W. Va. Dep't of Health & Human Res., 532 U.S. 598, 602, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) (“[T]he prevailing party is not entitled to collect [attorneys fees] from the loser”); E. Associated Coal Corp. v. Fed. Mine Safety & Health Review Comm'n, 813 F.2d 639, 643 (4th Cir.1987) (similar). The requirement that Congress speak with heightened clarity to overcome the presumption of the American Rule thus applies only where the award of attorneys fees turns on whether a...