Introduction

Peter v. NantKwest, Inc. (140 S. Ct. 365) is a landmark case decided by the United States Supreme Court on December 11, 2019. The dispute centered around whether the United States Patent and Trademark Office (PTO) could recover its legal expenses, including the salaries of its attorney and paralegal employees, after denying a patent application. NantKwest, Inc., an applicant, challenged the PTO's denial of its patent for a cancer treatment method and subsequently filed a complaint under 35 U.S.C. § 145, seeking a civil action in federal court to contest the decision. The crux of the case was interpreting the term "expenses" within the statute to determine if they encompassed the PTO's legal personnel costs.

Summary of the Judgment

The Supreme Court, in an opinion delivered by Justice Sotomayor, affirmed the decision of the Court of Appeals for the Federal Circuit. The Court held that the term "expenses" in 35 U.S.C. § 145 does not include the salaries of the PTO's attorney and paralegal employees. This interpretation aligns with the "American Rule," which presumes that each party bears its own legal fees unless a statute explicitly states otherwise. The Court analyzed the statutory language, historical context, and relevant precedents, concluding that Congress did not intend for § 145 to authorize the PTO to recover its legal fees from applicants.

Analysis

Precedents Cited

The Court extensively referenced several key precedents to support its decision:

• Hardt v. Reliance Standard Life Ins. Co. (560 U.S. 242): Established the "American Rule" as the default principle where each party pays its own attorney's fees unless a statute specifies otherwise.
• Baker Botts L.L.P. v. ASARCO LLC (576 U.S. 121): Reinforced the application of the American Rule, emphasizing that statutes must clearly and explicitly indicate any departure from this presumption.
• Sebelius v. Cloer (569 U.S. 369): Demonstrated that the presumption against fee shifting applies to all statutes, including those not limited to prevailing parties.
• Alyeska Pipeline Service Co. v. Wilderness Society (421 U.S. 240): Highlighted the necessity for clear statutory language to override the American Rule.
• Kappos v. Hyatt (566 U.S. 431): Differentiated between the appellate pathway (§ 141) and the civil action pathway (§ 145) for challenging PTO decisions.

Legal Reasoning

The Court's reasoning was methodical and grounded in statutory interpretation principles. It began by reaffirming the American Rule, which assigns the responsibility of legal fees to each party unless explicitly stated otherwise. The Court scrutinized the language of § 145, focusing on the term "expenses." Although this term could broadly encompass various costs, the Court found that, historically and contextually, "expenses" in similar statutes do not include attorney's fees unless specifically mentioned.

The Court examined statutory definitions and historical usage, noting that terms like "expenses of the proceeding" have traditionally excluded attorney's fees. Furthermore, the Court considered the legislative history of the Patent Act, observing that Congress has explicitly addressed attorney's fees in other sections when intended. The lack of such specificity in § 145 led the Court to conclude that including attorney salaries as recoverable expenses was not Congress's intent.

Impact

The decision in Peter v. NantKwest, Inc. has significant implications for patent applicants and the PTO:

• Clarification of Fee Recovery: Reinforces the American Rule within the context of patent litigation, ensuring that applicants are not burdened with the PTO's legal fees unless explicitly authorized by statute.
• Litigation Strategy: Applicants can pursue civil actions under § 145 without the fear of substantial financial penalties in the form of the PTO's legal expenses, potentially encouraging more robust challenges to PTO decisions.
• Regulatory Interpretation: Sets a precedent for how similar statutes will be interpreted regarding fee shifting, emphasizing the need for clear legislative language to alter default legal principles.
• Federal Circuit Jurisprudence: Affirms and clarifies the Federal Circuit's earlier position, maintaining consistency in appellate decisions related to patent law.

Complex Concepts Simplified

The American Rule

The American Rule is a fundamental principle in U.S. law stating that each party involved in a lawsuit is responsible for paying their own attorney's fees, regardless of who wins or loses the case. This rule contrasts with the "English Rule," where the losing party typically pays the prevailing party's legal fees.

35 U.S.C. § 145

This section of the United States Code allows a patent applicant who is dissatisfied with a decision by the Patent Trial and Appeal Board (PTAB) to file a civil lawsuit in the U.S. District Court for the Eastern District of Virginia. The statute mandates that the applicant bears all the costs associated with the proceedings.

Fee Shifting

Fee shifting refers to the legal mechanism by which one party in a lawsuit is required to pay the legal fees of the other party. This is typically only permitted when explicitly authorized by statute or contract.

Conclusion

The Supreme Court's decision in Peter v. NantKwest, Inc. underscores the enduring relevance of the American Rule in federal litigation, particularly within the realm of patent law. By affirming that 35 U.S.C. § 145 does not encompass the PTO's attorney and paralegal salaries as recoverable expenses, the Court has safeguarded applicants from potential financial burdens that were not explicitly legislated. This ruling not only clarifies the scope of fee recovery under § 145 but also reinforces the necessity for clear statutory language when altering foundational legal principles. Consequently, the judgment maintains the balance between encouraging applicants to challenge PTO decisions and protecting them from unforeseen financial liabilities.