Background
NantKwest, Inc. applied for a patent covering a method of treating cancer using natural killer (NK) cells. The USPTO’s Patent Trial and Appeal Board (PTAB) affirmed the examiner’s rejection, and NantKwest filed a civil action in federal district court under 35 U.S.C. § 145 — a statutory avenue that allows applicants to bypass the Federal Circuit and challenge USPTO rejections directly in district court by presenting new evidence.
NantKwest lost in district court, and the USPTO sought to recover not only its expert witness expenses but also its attorney’s fees as part of the “expenses of the proceeding” that § 145 requires unsuccessful applicants to pay. The district court awarded the attorney’s fees, and the Federal Circuit, sitting en banc, affirmed. NantKwest petitioned the Supreme Court, arguing that the American Rule — the bedrock principle that each party pays its own attorney’s fees absent an explicit statutory exception — barred the USPTO from recovering attorney’s fees under the general “expenses” language of § 145.
The Court’s Holding
The Supreme Court reversed unanimously. Writing for the Court, Justice Sotomayor held that the American Rule requires a clear and specific statutory authorization before a court may shift attorney’s fees to the losing party. General expense-shifting statutes do not satisfy that standard. The “all expenses of the proceeding” language in § 145 is not a sufficiently explicit congressional mandate to override the American Rule and require applicants to pay the USPTO’s attorney’s fees.
The Court reasoned that attorney’s fees are categorically different from other “expenses” — they are generally understood to require a specific statutory provision that expressly authorizes fee-shifting. The word “expenses” in ordinary usage typically refers to out-of-pocket costs like travel, filing fees, and expert witness expenses, not to attorney’s fees. Congress knows how to authorize fee-shifting when it wants to, and § 145 does not do so expressly. The Court’s interpretation preserved the well-settled understanding that each party bears its own litigation costs unless Congress clearly departs from that rule.
Key Takeaways
- The American Rule — each party pays its own attorney’s fees — requires clear, explicit statutory authorization before attorney’s fees can be shifted to the losing party.
- General “expense” shifting language in a statute does not constitute the explicit authorization needed to overcome the American Rule and require payment of attorney’s fees.
- § 145 civil actions — in which patent applicants sue in district court to challenge USPTO rejections — will not result in the applicant being required to pay the government’s legal fees if they lose, though they still owe other expenses.
- The decision affects the cost calculus for applicants considering § 145 actions: the threat of bearing the USPTO’s attorney’s fees is removed, making such civil actions slightly more accessible.
Why It Matters
Peter v. NantKwest resolved a significant question about the cost of appealing USPTO rejections via the § 145 civil action route. Before this decision, the Federal Circuit’s en banc ruling had made § 145 actions financially perilous: an applicant who lost not only bore the cost of its own attorneys but also risked paying the government’s legal fees. The Supreme Court’s reversal removed that uncertainty and restored a more predictable cost framework for the § 145 pathway.
The ruling also reaffirmed the Supreme Court’s consistent vigilance in protecting the American Rule from erosion through broad statutory language. Courts and agencies cannot use general expense-shifting provisions to impose attorney’s fees on losing parties — only clear, specific statutory directives will do. For patent applicants, especially those in high-stakes prosecution with novel subject matter, the decision preserves the § 145 route as a viable (though costly) alternative to Federal Circuit appeal when fresh evidence could change the outcome.