This case looks at the very narrow question of whether the law authorizes the United States Patent and Trademark Office (PTO) to collect attorney's fees from patent-seekers who pursue an appeal of an adverse PTO decision. I discussed this case after oral arguments in this post back in October. From an analysis perspective, the article holds up. Unfortunately my prediction was massively wrong. I projected at the time that Justice Thomas would write a 6-3 opinion allowing the PTO to recover attorney's fees in appeals cases. Instead, the result of this case was 9-0, with Justice Sotomayor writing the opinion on behalf of the unanimous court upholding the long-standing understanding that attorney fees were not compensable in patent appeals.
Preliminarily, it is important to understand what kind of appeal we are dealing with in these cases. When someone bring an application in front of the PTO that is turned down, there are two routes to appeal. The first is to appeal directly to the US District Court for the Federal Circuit. Such an appeal is limited to the same evidence that was presented previously to the PTO in establishing the administrative record. However, a second option is available in which a patent applicant can seek review in front of a federal district court, in which case the applicant can go outside of the administrative record to introduce new evidence, with the district court acting as a fact-finder. The administrative record in this case acts only as additional evidence to be considered by the district court. Once this proceeding is done, the losing party can appeal to the Federal Circuit.
With the first option, which is based on already existing evidence and so requires relatively minimal fees to bring forth, there is no fee shifting contemplated in the statute authorizing the appeal. The second option, however, contemplates a completely new fact-finding process, one which could potentially result in a significant amount of fees being accrued. As a result, the statute authorizing this appeals path provides that a patent applicant seeking this path be responsible for "all the expenses of the proceeding." Historically, the patent office has interpreted that as not including attorney's fees, despite its seemingly all inclusive nature. This is as a result of something known as the "American Rule," which states that as a general principle, parties pay their own attorney's fees in court, and in order for such fees to shift by statute, the statute must be explicit about its intent to complete such a shift.
The Court analyzed the American rule and batted down the argument that it didn't apply because the fee shifting statute question here applies to all parties and not just prevailing parties, which the Government argued was necessary for the American Rule. However, the Court established precedent that fee shifting statutes implicating the American Rule were not limited to prevailing party case, but could apply to administrative actions or to unsuccessful litigants as well. The Court also analyzed the phrasing used here and determined that "expenses," historically, has not included attorney's fees - hence the requirement for the statutory language to specifically announce that fees were shifting in order to have that effect - and that nothing here in this statute accomplishes that goal.
Finally, looking at historical instances of fee shifting by statute, the Court noted that usage of the terms "expenses" and "attorney's fee" appear together in numerous statues. If the courts were to hold that expenses included attorney's fees, then, the court would effectively be nullifying Congress's authority to set the bounds of fee shifting in this way. Congress legislates against the same background of law that the courts operate against, and as a result the presumption should be made that Congress knows all about the American Rule and in NOT specifically including an attorney fee shifting provision has done so intentionally, intending to leave the American Rule in place.
While this ruling seems to go against common sense interpretation of statutory language, it actually serves as a good example of why "common sense" isn't always a good guide. When you realize that since the start of the Republic there has been a presumption against shifting attorney fees, and that the Courts have long required Congress to be specific when it intends to overcome that common law principle, it becomes easier to understand the result of this case. Situations like this are why it is a bad idea to defend yourself in court ... because without solid research on this issue, you just can't reach the right result, no matter how solid your logic.
Preliminarily, it is important to understand what kind of appeal we are dealing with in these cases. When someone bring an application in front of the PTO that is turned down, there are two routes to appeal. The first is to appeal directly to the US District Court for the Federal Circuit. Such an appeal is limited to the same evidence that was presented previously to the PTO in establishing the administrative record. However, a second option is available in which a patent applicant can seek review in front of a federal district court, in which case the applicant can go outside of the administrative record to introduce new evidence, with the district court acting as a fact-finder. The administrative record in this case acts only as additional evidence to be considered by the district court. Once this proceeding is done, the losing party can appeal to the Federal Circuit.
With the first option, which is based on already existing evidence and so requires relatively minimal fees to bring forth, there is no fee shifting contemplated in the statute authorizing the appeal. The second option, however, contemplates a completely new fact-finding process, one which could potentially result in a significant amount of fees being accrued. As a result, the statute authorizing this appeals path provides that a patent applicant seeking this path be responsible for "all the expenses of the proceeding." Historically, the patent office has interpreted that as not including attorney's fees, despite its seemingly all inclusive nature. This is as a result of something known as the "American Rule," which states that as a general principle, parties pay their own attorney's fees in court, and in order for such fees to shift by statute, the statute must be explicit about its intent to complete such a shift.
The Court analyzed the American rule and batted down the argument that it didn't apply because the fee shifting statute question here applies to all parties and not just prevailing parties, which the Government argued was necessary for the American Rule. However, the Court established precedent that fee shifting statutes implicating the American Rule were not limited to prevailing party case, but could apply to administrative actions or to unsuccessful litigants as well. The Court also analyzed the phrasing used here and determined that "expenses," historically, has not included attorney's fees - hence the requirement for the statutory language to specifically announce that fees were shifting in order to have that effect - and that nothing here in this statute accomplishes that goal.
Finally, looking at historical instances of fee shifting by statute, the Court noted that usage of the terms "expenses" and "attorney's fee" appear together in numerous statues. If the courts were to hold that expenses included attorney's fees, then, the court would effectively be nullifying Congress's authority to set the bounds of fee shifting in this way. Congress legislates against the same background of law that the courts operate against, and as a result the presumption should be made that Congress knows all about the American Rule and in NOT specifically including an attorney fee shifting provision has done so intentionally, intending to leave the American Rule in place.
While this ruling seems to go against common sense interpretation of statutory language, it actually serves as a good example of why "common sense" isn't always a good guide. When you realize that since the start of the Republic there has been a presumption against shifting attorney fees, and that the Courts have long required Congress to be specific when it intends to overcome that common law principle, it becomes easier to understand the result of this case. Situations like this are why it is a bad idea to defend yourself in court ... because without solid research on this issue, you just can't reach the right result, no matter how solid your logic.
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