Fed. Cir. To Re-Hear Decision Mandating Payment of USPTO Attorneys' Fees on District Appeal

The full Federal Circuit made a decision this Thursday to challenge a panel ruling that applicants, who appeal a United States Patent & Trademark Office (USPTO) decision to district court, must pay the USPTO’s attorneys fees, win-or-lose. In June, a three-judge Fed. Cir. Panel had ruled in favor of the USPTO. However, the full Federal Circuit has now decided to re-hear the case, without a request from either party, thus vacating the previous panel's ruling.

Trademark applicants, who are initially denied registration by the USPTO, may appeal the decision directly to the Trademark Trial and Appeal Board

(TTAB). If the Board upholds the decision to refuse registration, the applicant may choose to appeal the refusal, either to the Federal Circuit Court of Appeals, or to the Eastern District Court of Virginia. Appealing directly to the Federal Circuit is limited, in that the Federal Circuit may only decide if the TTAB acted in error in making its ruling. Whereas, appealing to district court allows an applicant to have the entirety of the case heard “de novo”, enabling the applicant to provide additional evidence and arguments in front of the district judge.

Both the Patent Act (governing patents) and Lanham Act (governing trademarks) contain language saying that applicants who file “de novo” appeals of USPTO decisions to district court must pay “all the expenses of the proceeding . . . whether the final decision is in favor of such party or not”. Up until four years ago the “all expenses” language was deemed to only include costs for things like travel expenses, filings and expert fees. However, in 2013, the USPTO began asking applicants, who appeal decisions to district court, for reimbursement of all attorneys’ fees, in addition to travel costs and trial expenses. The USPTO argued it should not be placed in a position to be forced to “subsidize the expenses” of applicants who choose the more expensive and time consuming “de novo” appeal.

Since that time, two Circuit Courts of Appeals (the 4th Cir. and Fed. Cir.) have sided with the USPTO in awarding the agency all attorneys’ fees, win-or-lose. In April of 2015, the Fourth Circuit found in favor of the USPTO in the context of a trademark appeal. See Milo Shammas v. Margaret A. Focarino et al., case number 14-1191. In June, the three-judge Federal Circuit panel found in favor of the USPTO in the context of a patent appeal for the case at issue. See NantKwest Inc. v. Matal, case number 16-1794. Critics of the decisions have warned such broad interpretations will dramatically increase costs, and thus will make “de novo” appeals too expensive for all but the most wealthy applicants.

The Federal Circuit’s decision to re-hear the NantKwest v. Matal case, en banc, in front of the full panel of Circuit judges, is significant. Although the Federal Circuit failed to give a reason why it chose to re-hear the NantKwest case, it typically only does so in instances where it believes a decision has far reaching ramifications for many people. The last time the Federal Circuit overturned a panel's decision, en banc, was in In Re: Simon Shiao Tam, where it ruled the Disparagement Clause of the Lanham Act violated the First Amendment. That ruling, striking down the Disparagement Clause as unconstitutional, was subsequently upheld by the U.S. Supreme Court this year. If the Fed. Cir. overturns the prior panel’s decision in NantKwest, it would, in essence, create a Circuit split between the 4th and Fed. Circuits over the meaning of the “all expenses” language in the comparable Patent and Lanham Acts, perhaps also warranting Supreme Court review.

The law offices of Reyes & Schroeder Associates, P.C. will continue to monitor this situation, bringing you updates as they develop. If you have a trademark, slogan or logo you wish to protect, call us at 818-253-1641, or send an email to info@rslawca.com. We are highly experienced in trademark prosecution and litigation services, resulting in successful trademark registrations and enforcement efforts for our clients. Our qualified attorneys will ensure you receive the highest quality legal counsel, which is essential for the proper protection of your marks.

About the Author: Michael W. Schroeder is a licensed attorney in good standing in the State of California with extensive experience in trademark prosecution and litigation legal services.