The Supreme Court, in a unanimous decision entitled “Peter v. Nantkwest, Inc.,” held that the U.S. Patent and Trademark Office (the “USPTO”) cannot recover an award for attorney’s fees at the end of certain types of patent appeals on Dec. 11, 2019. Specifically, the case concerned an award of attorney’s fees to the USPTO for a direct appeal to a federal district court concerning the patentability of a patent application.

Direct appeals to district courts represent one of two types of appeals that an applicant can make, when the applicant is dissatisfied with a patentability decision by the Patent Trial and Appeal Board (the “PTAB”). The other type of appeal is an appeal to the Court of Appeals for the Federal Circuit (the “CAFC”) from the PTAB.

Some applicants prefer to appeal to district courts because applicants have the ability to obtain and to introduce new evidence in a district-court action. The CAFC can only consider evidence that is in the USPTO’s prosecution history of a patent application.

Unfortunately, litigating before a district court is substantially more expensive than appealing a decision to the USPTO. As a result, a statute, 35 U. S. C. §145, provides the USPTO with the ability to recover the “expenses” that are associated with district-court appeals. Interestingly, the statute provided for such awards even when the USPTO loses.

In the Peter decision, the Supreme Court considered whether the term “expenses” included attorney’s fees. Such a finding would run counter to the “American rule” of fee shifting, which holds that, generally, each party will pay their own attorney’s fees unless a contract or a statute covers such an award.

The American rule is different from the “English rule,” which provides for an award of attorney’s fees to the prevailing party in most cases. Not surprisingly, American courts generally follow the American rule, and English courts follow the English rule.

The Supreme Court held the relevant statute, in this case, did not overcome the American rule. In other words, the Court recognized that the term “expenses” does not cover attorney’s fees.