Upcoming CLE Events

Although the USPTO is not yet requiring Continuing Legal Education hours, there is still lots to learn about the twists and turns of our patent system.  I will be speaking at a few upcoming CLE-events this fall:

I hope to see you there! Dennis Crouch

Property Rights, but only To the Extent Needed

 By Dennis Crouch

In addition to its patent law jurisprudence, the Federal Circuit also handles appeals from the US Court of Federal Claims (CFC).   The CFC hears monetary claims against the U.S. Government – including breach of contract, takings, and unlicensed patent use under 28 U.S.C. Section 1498. The CFC also meets in the same Madison Place building as the Federal Circuit.

The Federal Circuit’s new decision in Crow Creek Sioux Tribe v. United States, App. No. 2017-2340 (Fed. Cir. August 17, 2018), revolves around a water-rights takings claim against the U.S. Government.  The particular claim stems from two dams across the upper Missouri River that limit the Tribe’s ability to use and enjoy river water. The tribe sued in 2016. However, the case was dismissed for failure to state a claim.  The Federal Circuit has now affirmed that decision – holding that the tribal water rights are only a weak form of property.  In particular, the appellate held that the tribal property right in the water flow only extends to the amount of “to the extent needed to accomplish the purpose of the reservation.”  Quoting Winters v. United States, 207 U.S. 564 (1908) (known as “Winters rights” to water).  In Cappaert v. United States, 426 U.S. 128, 138 (1976), the court reiterated the winters rule – noting that Winters rights entitle a tribe to “that amount of water necessary to fulfill the purpose of the reservation, no more.”

Although so-called Winters rights are fully vested, the rights are only offended by government (or third-party) uses that impinge upon the Tribe’s needs for the water. There is no property right violation if the Tribe still has enough water for Reservation uses.  The complaint in this case does not allege that the water flow limits block any necessary Tribal function – as such the complaint fails to assert any legally cognizable harm.

The tribal rights here are greater than prior-appropriation rights common to Western-America states. Notably, Waters rights are set-aside for the reservation and are not abandoned by mere non-use.  In addition, because they were established pre-statehood, they are prior in time to almost all other nearby claims.

In many ways patents are treated as the complete opposite of the tribal water rights and serve as a speculative resource rather than a limited natural resource. A patentee has an exclusive right to control almost any non-licensed use – regardless of whether that use causes any direct harm to the patentee.  The one area where the water rights rules overlap is in equity – an injunction must be predicated by harm felt by the patent owner.

Day Three of PTO E-Filing Outages

We are now in Day Three of USPTO Computer System Failures:

A number of USPTO online business systems remain offline. We understand the impact to our users and the frustrations that come from having such systems down unexpectedly. The USPTO is working hard to resolve the issue and we will continue to provide updates to you. The latest information on alternative methods of filing and payment and our systems status can always be found on our website. More updates will be forthcoming.

Note that the system failures do not automatically serve as any excuse for filing delays. The Office of the Chief Information Officer (OCIO) is currently led by Acting Chief David Chiles and has a budget of $600 million.


En Banc: Court Rejects PTOs Narrow Reading of 1-Year Deadline for IPR Filing

by Dennis Crouch

In an unusual en banc footnote, the Federal Circuit has ruled that the litigation time-bar found in 35 U.S.C. § 315(b) applies even in cases where the plaintiff-patentee voluntarily dismisses the lawsuit without prejudice.  Click-to-Call Tech., LP v. Ingenio, Inc. and Iancu (Fed. Cir. 2018).

The statute provides:

An inter partes review (IPR) may not be instituted if the petition requesting the proceeding is filed more than 1 year after the date on which the petitioner, real party in interest, or privy of the petitioner is served with a complaint alleging infringement of the patent.

In this case, the Board acknowledged that a qualifying prior infringement lawsuit had been filed and served upon the prior-interest holder of the petitioner.  However, the Board allowed the IPR to move forward because of the voluntary dismissal — noting that “[t]he Federal Circuit consistently has interpreted the effect of such dismissals as leaving the parties as though the action had never been brought.”  Here, the en banc court has reversed that judgment — holding that the IPR must be dismissed.

The short en banc footnote was signed by ten members of the court.  That footnote did not explain the reasons for its legal conclusions.  Judge O’Malley filed the panel opinion in the case — offering a justification for the interpretation as did Judge Taranto in a concurring opinion.  The two dissenters — Judges Dyk and Lourie  — argue that the statute should be interpreted in light of tradition: “Courts have typically treated voluntary dismissals without prejudice as restoring the parties to the situation that existed before the case had ever been brought.”

= = = = =

The actual facts here are a bit convoluted.  The challenged patent (U.S. Patent No. 5,818,836) was originally owned by its inventor Stephen DuVal and exclusively licensed to InfoRocket.  Back in 2001, InfoRocket sued Keen for infringement.  Keen then purchased InfoRocket and the case was voluntarily dismissed.  Keen then changed its name to Ingenio.  Although Ingenio then had rights to the patent — it apparently wanted to escape from paying royalties and so filed for reexamination. Meanwhile DuVal had gone through a bankruptcy but emerged still as the patent owner.  That prior dispute resulted in an interesting 5th Circuit licensing decision. DuVal Wiedmann, LLC v. InfoRocket.com, Inc., 620 F.3d 496, 498 (5th Cir. 2010) (licensee did not accrue obligations to pay after date of filing reexam request).  The IPR at issue here is a continuation of that longstanding battle.

= = = = =


This Self Referencing Database is Not Patent Eligible

BSG Tech v. BuySeasons, Inc. (Fed. Cir. 2018)

On appeal here, the Federal Circuit affirms a lower court ruling that the claims of BSG’s three asserted patents are invalid as ineligible under 35 U..S.C.  § 101. U.S. Patent Nos. 6,035,294, 6,243,699, and 6,195,652.

The claims relate to indexing a database according to “relative historical usage information.”  Thus, in an automobile database with a “model” parameter, the system could display index by the popularity of the various models.  In the claims, the popularity is measured by prior users of the system.  Note here – the claims don’t technically require indexing by the frequency, only being able to access that information.

The patents here have been asserted in 50+ lawsuits – the vast majority of these cases settled up until E.D.Tex. Judge Schroeder ruled them ineligible.

On appeal, the Federal Circuit made fairly quick work of the patents finding:

  1. The asserted claims are directed to the abstract idea of considering historical usage information while inputting data; and
  2. The claims do not include anything beyond the abstract idea sufficient to transform the claim into a patent-eligible invention.

In making its determination, the court distinguished DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014) — holding here that the use of historical information is not “rooted in computer technology.” “Whether labeled as a fundamental, long-prevalent practice or a well-established method of organizing activity, this qualifies as an abstract idea.”

Enfish was a similar case — also involving a self-referential database structure.  That case, the court determined that the focus was on database function and machine efficiency. Here, on the other hand, the historical information is stored just like any other data. “The claims do not recite any improvement to the way in which such databases store or organize information analogous to the self-referential table in Enfish or the adaptable memory caches in Visual Memory.”

Although the court recognized that underlying factual determinations may inform the legal decision of eligibility — especially whether the “something more” is merely routine application of conventional technology — a court is free to decide the issue as a full question of law if the only inventive concept identified in the claim is the ineligible abstract idea.

Here, the only alleged unconventional feature of BSG Tech’s claims is the requirement that users are guided by summary comparison usage information or relative historical usage information. But this simply restates what we have already determined is an abstract idea. At Alice step two, it is irrelevant whether considering historical usage information while inputting data may have been non-routine or unconventional as a factual matter. As a matter of law, narrowing or reformulating an abstract idea does not add “significantly more” to it.

Ineligiblity affirmed.


Teaching a Result vs Guaranteeing a Result

In re Facebook (Fed. Cir. 2018) (nonprecedential opinion)

Facebook’s U.S. Patent Application No. 13/715,636 claims a method for displaying a set of images after reshuffling or resizing the images.  The Examiner rejected Claim 1 (below) as anticipated; and that rejection was affirmed by the Patent Trial and Appeal Board.  Now on appeal, the Federal Circuit has reversed and remanded — finding that the USPTO had too loosely interpreted the prior art.

The claimed image rendering process begins with a sequence of images. Each image is assigned a “first position” within an “array of contiguous image elements” — in other words, the images are put in a particular order.  When a user adjusts the position or size of an image — there may be a need for reshuffling of the images into “second positions.”  The claimed method includes a requirement that the reshuffled sequence “be contiguous.” — i.e., no gaps in the array.

Notice the reshuffle above that occurred from 1A to 1B when a user resized image 130.

The claims expressly require that the reshuffle retain contiguity.  The problem for the PTO is that the identified prior art (Perrodin) did not require contiguity “in all cases.”   The court wrote:

Nothing about Perrodin’s algorithm required contiguity. It is true that the example depicted in Figures 18 and 19 happened to result in contiguity. But that cannot represent a general rule that would demand contiguity for all images, as required by the claims here. . . . Perrodin’s algorithm could not guarantee contiguity.

So, we have a situation here where the prior art teaches contiguity-after-reshuffle, but is also open to situations where a reshuffle might result in non-contiguity.  The claims – on the other hand – include “a rule requiring [contiguity].”  Since the prior art does not include the rule requiring contiguity, it cannot anticipate.

The court here did not discuss obviousness because the PTO had conceded that “the anticipation and obviousness rejections rise and fall together.”

= = = = =

Claim 1 of the Facebook application reads as follows:

1. A method comprising:

by a computing device, determining a sequence of image elements;

by the computing device, determining, for each image element in the sequence, a first position in an array of contiguous image elements, the first position being based on a size of the image element, an order of the image element in the sequence, and dimensions of the array;

by a computing device, determining, in response to an instruction to adjust the position or size of a first image element, a second position in the array for at least one second image element, the second position determined based on a rule requiring the image elements to be contiguous such that each available image position between the first image element in the sequence and the last image element in the sequence is occupied by an image element; and

by the computing device, providing information to render the array of contiguous image elements.

Coming Soon: Annual Bar Dues and CLE Requirements

The USPTO has quietly proposed adding new annual bar dues ($240 – $410) for patent practitioners as well a continuing legal education (CLE) requirement.  The proposal is buried in the Table of Proposed Fees that will serve as the basis for an upcoming September 6, 2018 PPAC meeting on fees.

The Agency has not yet released any other information regarding the proposal. However, the suggestion from the fee requirement here is that the CLE requirement would only be a “soft” requirement — if you complete the CLE then the Annual Active Patent Practitioner Fee would be reduced.  The USPTO previously proposed annual fees back in 2003.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:

Commentary and Journal Articles:

New Job Postings on Patently-O:

Rejoining Written Description and Enablement in Amgen v. Sanofi

by Dennis Crouch

In July 2018, Amgen filed its petition for certiorari asking the Supreme Court to reject the Federal Circuit’s imposition of separate “written description” and “enablement” requirements along with their various requirements and standards.  Amgen argues that the Court should simply follow the statute — requiring “a written description of the invention . . . in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains . . . to make and use the same.”  Amgen Inc. v. Sanofi, Aventisub LLC, SCT Docket No. 18-127 (Petition filed July 23, 2018) (Cert Petition).

The basic push here is against the “possession” standard that serves as the core of the Federal Circuit’s written description requirement.  Apart from any policy arguments — Amgen argues that the statute spells out the test — and it is enablement, not possession.  Rather than focusing on what the inventor possesses, the Act requires the specification simple teach others — “as to enable an person skilled in the art . . . to make and use” the invention.

The brief provides a statutory linguistic argument that makes sense — the “grammatical structure [is] inescapable” and shows that statute provides one standard for judging the written description — the enablement standard.

This statutory argument goes a long way, but in my view will lack compelling force to the Supreme Court (as it did for the Federal Circuit in Ariad).  Rather, for 112(a), historical cases are the key since the language of 112(a) all stems directly from the Patent Act of 1793.  A grammar diagram (seemingly based upon modern language usage) is a rather weak argument for interpreting this olde language.  Rather, a successful argument here should seen in light of the history of the statute and how it has been directly addressed by the Supreme Court over the past 225 years.  In Ariad, the Supreme Court looked particularly to the Supreme Court decision in Schriber-Schroth Co. v. Cleveland Trust Co., 305 U.S. 47 (1938) as recognizing a separate written description (possession) requirement that goes beyond mere enablement.  Although the cert petition repeatedly cites Schriber-Schroth it doesn’t actually address the portion relied upon by the Federal Circuit that served as the crux of its decision.


Takings: A Costly Screen for IPRs.

by Dennis Crouch

In Oil States, the patentee lost its broad challenge to the AIA Post Issuance trial system. However the majority opinion penned by Justice Thomas hinted that other collateral attacks on the system could find more success.  Particularly, the court wrote that “our decision [finding that patents are public rights] should not be misconstrued as suggesting that patents are not property for purposes of the Due Process Clause or the Takings Clause.”

A Costly Screen: The takings clause is an interesting limit on government power. Rather than serving as an absolute limit, the clause creates a costly screen.  Although the government has power to take private property for public use, it is required to provide “just compensation” for every such taking.  “[N]or shall private property be taken for public use, without just compensation.” U.S. Const. 5th Amendment (1791).

If the government cancels my land ownership rights to instead create a public commons — the takings clause would require just compensation.  Imagine for a moment that the PTO’s cancellation of established patent rights is also categorized as a taking — the PTO would need to provide just compensation to the patentee.  The question now being raised in various cases — including the recent petition in Advanced Audio Devices, LLC v. HTC Corp.

One starting point: It is certainly a taking for the government to cancel patent rights in merely because it wants to use the invention or to give the public free access to the invention.  IPRs also involve cancelling patent rights.  However, in IPRs the patents are cancelled based upon a different justification — a non-patentability determination rather than merely a desire for unfettered public use of the invention.  The question though is whether this different justification will serve as a cognizable distinction.

The Advanced Audio petition adds the additional twist that its patents were filed pre-AIA.  Thus, the patentee asks the following question:

Whether inter partes review (“IPR”) of patents filed before enactment of the Leahy-Smith America Invents Act (“AIA”) violates the Takings Clause of the Fifth Amendment to the U.S. Constitution.

[Advanced Audio Devices SCOTUS Cert Petition (Final)].  Similar arguments are being raised in other cases, including the class action Christy v. USA.

Just Compensation for Cancelling My Patent

Put it Into Hyperdrive: New Car

by Dennis Crouch

I just bought my first electric car – 2018 Honda Clarity.  Love it.  I should say that it is not fully electric — rather it is a PHEV (Plug-in Hybrid Electric Vehicle).  When fully charged, the car goes about 50 miles on battery — then becomes a hybrid vehicle once the battery juice is spent.  Since we generally drive less than 50 miles per day, the car has used almost no gasoline — although the engine will kick-in as a support at times when you need extra power.

The dual power vehicle system has been the subject of lots of patent litigation stemming from Paice LLC’s enforcement of its U.S. Patent Nos. 7,237,634 and 8,214,097.  The Paice inventor, Alex Severinsky, claims to have invented the “hyperdrive power-amplified internal combustion engine power train” that uses a variety of metrics to determine whether to use the Battery, the Engine, or Both Simultaneously.

Back to my new Clarity.  I tend to be fairly slow to change cars – until last week I was still driving my 1998 Honda Civic from law school days.

In addition to the “Severenski hyperdrive” possibilities — I’m also enamored with the fact that I’ll only be stopping at the gas station when taking a road trip.  In general, electric motors are more efficient than gas engines. Electricity production tends to have a better environmental impact than burning gas, and the zero exhaust in my garage is really nice.  For this battery size, the car fully charges in about 6 hours with my ordinary 110 power supply.

I had been eyeing other PHEV’s such as Volvo’s XC90 or the Porsche Cayenne. However, those vehicles have a much lower electric-only range and are well beyond my law-professor-salary range.  In addition to being much cheaper, the Clarity also qualifies the buyer for a $7,500 federal tax credit.

Finally, I’ll note that the Clarity is my first electric car — but not my first electric vehicle.  I still ride my Volton eBike to the law school several days each week (depending on the weather).



Standing on Appeal: Being a Competitor with ongoing Product Development Not Sufficient for IPR Appellate Standing

JTEKT Corp. v. GKN Auto (Fed. Cir. 2018)

GKN’s Patent No. 8,215,440 covers a 2wd/4wd dual drivetrain.  This general type of drivetrain was already well known in the automotive industry — and the claims of the patent appear to my eyes to be quite broadly written.

JTEKT (a subsidiary of Toyota) makes automotive components.  Although JTEKT does not yet have a competing product on the market, saw the ‘440 patent as a major roadblock and filed an Inter Partes Review (IPR) proceeding — asking the USPTO to cancel the patent claims. During the IPR, GKN disclaimed the broadest claims — and the PTO confirmed the validity of the remaining claims. (The key limitation appears to be that the system coupling is “without a differential gearing”.)

On appeal the Federal Circuit has refused to hear the case — finding that the case lacked Constitutional standing since JTEKT had not alleged any “actual injury.”  The case here follows Phigenix, Inc. v. Immunogen, Inc., 845 F.3d 1168 (Fed. Cir. 2017).  In that case the patent challenger Phigenix was not planning to actually use the Immunogen patent, but argued its injury was based upon the competitive advantage that the patent gave to its owner.  Although that injury might be sufficient for standing purposes — the Federal Circuit still dismissed the case because Phigenix failed to present sufficient facts to make the injury plausible.

Standing is an oddball with IPRs.  Anyone can file an IPR request and the USPTO will consider that request.  The Patent Act directly states that a losing petitioner has a right to appeal if it loses the IPR.  (A party “who is dissatisfied with the final written decision of the Patent Trial and Appeal Board . . . may appeal the Board’s decision . . . to the United States Court of Appeals for the Federal Circuit.” 35 U.S.C. § 141(c).) Still, the Supreme Court has repeatedly held that the Constitution requires an actual controversy between the parties — and that the Article III courts cannot offer advisory opinions. A particular element in question for appellate IPR standing is injury-in-fact —  “an injury that is both ‘concrete and particularized.’” Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016)(non-IPR case).

In ordinary lawsuits, this sort of standing is established at the lower court level. Here, however, it must be done at the appellate level (since the PTO doesn’t worry about the issue).  On appeal, JTEKT was given an opportunity to provide evidence of injury-in-fact – but failed:

While JTEKT has submitted two declarations in support of its standing, JTEKT’s problem is that these declarations do not establish that its planned product would create a substantial risk of infringing [the particular claims on appeal] or likely lead to charges of infringement.

Appeal dismissed.

Note here – Folks interested in this issue should consider the pending Supreme Court petition in RPX Corporation v. ChanBond LLC (SCT Docket No. 17-2346).

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:


Commentary and Journal Articles:

New Job Postings on Patently-O:


Updates from USPTO Public Meeting from Aug 2, 2018

By Dennis Crouch

(1) Under Dir. Iancu, the USPTO appears to be moving away from eligibility rejections. The chart below shows that the past year about 8% of all examiner rejections were eligibility rejections. Over the past three months, that statistic has dropped to about 6.6%. During that time, the PTO has officially changed its approach via the Berkheimer memo, and Dir. Iancu’s leadership lends authority to the Office’s approach to broader eligibility.

(2) AIA Trial institution rates continue to fall – although slightly. Post-Grant Review proceedings are not becoming popular. Several hundred patents have been subjected to multiple (3+) petitions challenging validity.

(3) Although I am not clear how this will happen, the USPTO expects that its spending and revenue will level out perfectly by the end of the fiscal year.

(4) Several bills are pending in Congress. None are currently likely to pass.

(5) Draft of 2018-2022 USPTO Strategic Plan to be released later in August.

(6) USPTO AI Conference set for December 5th, 2018, USPTO Madison Auditorium.

PTO: Patent Quality Chat and Fee Setting

Upcoming PTO Events in at the HQ in Arlington:

  1. August 2, 2018 (9 am to 3 pm ET): PPAC Meeting [Webcast]
  2. August 14, 2018 (Noon to 1 pm ET): Patent Quality Chat: AIA Trial Statistics from PTAB and Using AIA Trials to Enhance Patent Examination
  3. September 6, 2018 (9 am to 11 am ET): PPAC discussion of New FEES. 

USPTO is planning to exercise its fee setting authority to set or adjust patent fees. As part of the rulemaking proceeding for the issuance of regulations under Section 10, the USPTO will publish a proposed patent fee schedule and related supplementary information for public viewing no later than August 29, 2018.

Design Patent: Surrendering Scope During Prosecution

by Dennis Crouch

Advantek Mktg. v. Shanghai Walk-Long Tools (Fed. Cir. 2018)

Advantek’s U.S. Design Patent No. D715,008 covering the above-pictured “pet gazebo” that Advantek also sells as its flagship product. Long-Walk allegedly copied the design in its “pet companion” product.  However, the district court dismissed the case on the pleadings — finding that the prosecution history barred any infringement finding.  On appeal, however, the Federal Circuit has reversed.  This is one of the few cases considering prosecution history of a design patent.

The Prosecution: The design patent application included Figures 1-4 (kennel without a cover) as well as Figure 5 (kennel with a cover) and explained that the embodiments are identical except for the cover.  In its initial action, the Examiner issued a restriction requirement dividing between Group I – Figs 1-4 (kennel without a cover); and Group II – Fig 5 (Kennel with a cover) — finding that the two groups are distinct embodiments and further that the single claim requirement of design patent bars the inclusion of figures having distinct combinations of elements.  The applicant “disagreed” but still elected Group I and withdrew Figure 5.  The patent issued without the applicant filing a divisional application to cover the withdrawn claimed figure.  Note here that the figures of a design patent are effectively the claim — thus any amendment to the figures is also a change to the claim scope and coverage.

In the litigation, Walk-Long’s product does have a cover and the basic question is whether the design patent can cover a product with the cover — knowing that the patentee originally claimed a kennel with/without a cover – but but then dropped the with-a-cover portion.

Doctrine of Surrender: In Pacific Coast Marine Windshields Ltd. v. Malibu Boats, LLC, 739 F.3d 694 (Fed. Cir. 2014), the Federal Circuit explained that prosecution surrender does apply in design patent cases. Here, however, Advantek argues that its design without-a-cover is present in the accused kennel (as a substructure of the whole).  Although Walk-Long sells the kennel with a cover, it is first assembled without the cover — and remains without a cover until the cover is installed. Although eliminating the cover appears to actually broaden the claims — the appellate court did not particularly decide whether there was surrender. Rather, the Federal Circuit determined that at a minimum, anything surrendered was outside the scope of the accused product.

Regardless of whether Advantek surrendered claim scope during prosecution, the accused product falls outside the scope of the purported surrender, contrary to the district court’s conclusion. Advantek elected to patent the ornamental design for a kennel with a particular skeletal structure. A competitor who sells a kennel embodying Advantek’s patented structural design infringes the D’006 patent, regardless of extra features, such as a cover, that the competitor might add to its kennel.

On appeal, the Federal Circuit noted particularly that a claimed article of manufacture can include a whole product or components thereof. Samsung Electronics Co. v. Apple Inc., 137 S. Ct. 429 (2016); Gorham Manufacturing Co v. White, 81 U.S. 511 (1872).

As a footnote, the court tied-back to Samsung — noting in dicta that any damages collected should be on the profits of the structure without the cover.  “Of course, if the accused skeletal structure is only a component of an accused multicomponent product, Advantek would only be able to seek damages based on the value of the component, not the product as a whole.”


Patent Grants

With two-months left in the fiscal year, the USPTO is on-track for another 300,000+ patent year. The chart above shows the number of utility patents issued each fiscal year for the past two decades. The current forecast for FY2018 is a bit below FY2017 – but still the second highest number of patents issued in a single year. Examiners will push to make their quotas prior to the end of the year – however those will not be reflected in issued patents in FY18 because of the lag between allowance and issuance.

Patently-O Bits and Bytes by Juvan Bonni

Recent Headlines in the IP World:


Commentary and Journal Articles:

New Job Postings on Patently-O:

Patent Office Updates

  • The next PPAC Meeting will be on August 2, 2018 starting at 9:00 a.m. I usually attend via webcast that works well. [Agenda and Links]
  • Former Acting PTO Director Joseph Matal has moved into the role of Acting Solicitor of the agency as well as Acting Deputy General Counsel for Intellectual Property Law.  Congratulations Joe! Former Solicitor Nathan Kelley has left the office that he joined originally back in 1993 as an examiner.
  • EPO is highlighting its new office in The Hague. The Video below is worth watching if only for the dramatic background music.

En Banc Federal Circuit: PTO Does Not Automatically Get Attorney Fees in Appeals and Civil Action Claims

by Dennis Crouch

In its new en banc opinion, the Federal Circuit has confirmed that the Patent Act does not require patent applicants to pay the USPTO’s attorney fees in Section 145 actions.  The USPTO had requested $100,000+ to compensate for the time of its in-house attorneys.

NantKwest, Inc. v. Iancu, 16-1794, 2018 U.S. App. LEXIS 20932 (Fed. Cir. 2018) (en banc).

35 U.S.C. 145 provides an unsuccessful patent applicant with the option of either (a) appealing the PTAB decision to the Federal Circuit or (b) filing a “civil action” in district court.  One kicker though – the statute provides that “All the expenses of the proceedings shall be paid by the applicant.”

Back in 2010, the Federal Circuit ruled that the statute allows the USPTO to collect expenses “regardless of the outcome.” Hyatt v. Kappos, 625 F.3d 1320 (Fed. Cir. 2010) (en banc).

In NantKwest, the original panel split on the meaning of “all the expenses” — with the majority holding that “expenses” include USPTO attorney fees (including in-house salaried attorney fees)..  That panel decision has now been rejected in a 7-4 decision with Judge Stoll penning the majority decision. Chief Judge PROST wrote in dissent and was joined by Judges Dyk, Reyna, and Hughes.

The court’s reasoning here is that the “American rule” on fees (each party pays for its own attorney fees) is a strongly embedded and any statutory rejection of the rule must be “specific and explicit.” The “all the expenses” language here does not meet that requirement — especially since such an interpretation would render this the only federal statute requiring “a private litigant to pay the government’s attorneys’ fees without regard to the party’s success in the litigation.”

The bottom line here is that patent applicants who challenge a PTAB decision will still be forced to pay other expenses such as printing costs and expert fees — but will not be required to pay the PTO attorney fees as a matter of course.