USPTO Loses Its-Heads I Win, Tails You Lose Rule re: Attorneys’ Fee Awards

Jul 27, 2018

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Last year I wrote about the United States Patent and Trademark Office (USPTO) taking the position that even when it lost, the other side had to pay its attorneys’ fees.

Today, the Federal Circuit Court issued a decision rejecting the USPTO’s position.  In a split decision, the Court found that the “American Rule [that parties only pay their own attorneys] prohibits courts from shifting attorneys’ fees from one party to another absent a ‘specific and explicit’ directive from Congress” and that the language relied on by USPTO “falls short of this stringent standard.”

In Nankwest, Inc. v. Matal,(E.D. Virginia 2016) 162 F. Supp.3d 540, the USPTO rejected a patent application and the applicant appealed the USPTO’s decision to a federal district court. The district court partially affirmed and partially denied the USPTO’s decision.  The USPTO filed a motion to recover its costs from the patent applicant, including its attorneys’ fees, but the trial court refused to award the USPTO its attorneys’ fees.  The USPTO appealed to the Federal Circuit, which reversed and awarded the USPTO its attorney’s fees, finding that even when the USPTO lost, it was entitled to recover its attorneys’ fees.

That decision was widely criticized and the Federal Circuit withdrew its earlier decision and reviewed the issue en banc. On July 27, the Federal Circuit issued its en banc decision that the USPTO cannot recover its attorneys’ fees from applicants that appeal USPTO decisions to the federal courts, even when the applicant loses: “The American Rule is a bedrock principle of this country’s jurisprudence” that “in the United States each litigant pays his own attorney’s fees, win or lose.”  So as it’s often been asserted, in litigation everybody loses except the lawyers.

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