Under the American Rule “each litigant pays his own expense, win or lose, unless a statute or contract provides otherwise.” But recently the United States Patent and Trademark Office (USPTO) has sought to flip the American Rule by seeking to recover its attorney’s fees even when it loses.
EXPENSES UNDER THE LANHAM ACT AND PATENT ACT
Parties seeking to register a trademark (symbols or words representing a company, product or service) or a patent (exclusive right to use of invention) must register their applications with the USPTO. If the USPTO rejects their applications, the parties can appeal to their local federal district court or the Federal Circuit Court of Appeals. The Lanham Act, which governs trademarks, provides that “all the expenses of the proceeding shall be paid by the party bringing the case…” 15 U.S.C. 107(b)(3); The Patent Act, which governs patent applications, provides that “[a]ll the expenses of the proceedings shall be paid by the applicant. 35 U.S.C §145.
Historically, the USPTO only sought reimbursement of costs (travel, expert fees, etc.) borne from opposing these trademark or patent appeals, but in 2013, the USPTO began seeking reimbursement of its attorney’s fee as well.
WHEN YOU LOSE, YOU LOSE
In Nankwest, Inc. v. Matal,(E.D. Virginia 2016) 162 F. Supp.3d 540, the applicant challenged the USPTO’s decision regarding patent infringement. The trial court rejected the challenge, upholding the USPTO’s decision. The USPTO sought to recover its attorney’s fees along with its other costs, but the trial court rejected the USPTO’s request, finding that such fees are “authorized only when there is a specific and explicit provision for the allowance of attorney’s fees under the selected statute.” Id. at 543.
The USPTO appealed to the Federal Circuit, which reversed the trial court, Nankwest, Inc. v. Matal (Fed. Cir. 2017) 860 F.3d. 1352., concluding that “Given the Supreme Court’s construction of ‘expenses,’ the guidance dictionary and treatises provide on the term, and the context in which Congress applied it, we conclude the term ‘expenses’ includes the USPTO’s attorney’s fees under § 145.” Id. at 1358 Two months later the entire Federal Circuit vacated the panel’s decision and set the matter for en banc review. So stay tuned on the final word from the Federal Circuit.
EVEN WHEN YOU WIN, YOU LOSE
In August of this year, in Booking.com B.V. v. Matal (E.D. Virginia 2017) 2017 WL 3425167 a trademark applicant appealed the USPTO’s refusal to register four trademark applications. The Court granted summary judgement for the applicant for two of the four marks and remanded consideration as to the other two marks back to the USPTO. Despite “losing” the appeal, the USPTO filed a motion for expenses, including its attorney’s fees. In October, the court granted the USPTO’s attorney’s fees, 2017 WL 4853755. The Court noted that the issue was subject to en banc review by the Federal Circuit, but held that it was bound by Fourth Circuit precedent that “compels the Court to find that [the USPTO’s] attorneys’ fees are recoverable under §1071(b)(3).”
Ultimately it appears the Supreme Court will need to determine whether the statutory term “expenses” includes the USPTO’s attorneys’ fees. Until then, to quote the Grateful Dead, trademark and patent applicants “can’t win for losing.”