Peter v. NantKwest, Inc.

Peter v. NantKwest, decided December 11th, 2019. A unanimous Supreme Court, in an opinion by Justice Sotomayor, affirmed the en banc Federal Circuit and held that the Patent and Trademark Office cannot recover the salaries of its attorneys and paralegals as "expenses" under Section 145 of the Patent Act. The American Rule — each litigant pays its own attorney's fees — controls, and "expenses" does not clearly displace it. Here's the brief.

The Patent Act gives an applicant who loses at the Patent Trial and Appeal Board two paths. One is a direct appeal to the Federal Circuit on the existing record. The other, Section 145, lets the applicant file a new civil action against the PTO Director in district court, where new evidence may be introduced and the judge decides the question de novo. As a condition of that broader review, Section 145 requires the applicant to pay the expenses of the proceedings, win or lose.

NantKwest took the Section 145 path after the PTO denied its application for a method of treating cancer. The district court granted summary judgment to the PTO, and the Federal Circuit affirmed. The PTO then moved to recover its expenses — and, for the first time in the roughly 170-year history of Section 145, it included the pro-rata salaries of the agency attorneys and a paralegal who worked on the case. The district court refused, finding the statute not clear enough to overcome the American Rule. A divided panel reversed, but the en banc Federal Circuit agreed with the district court. The Court granted cert.

The question was whether the word "expenses" in Section 145 reaches the salaries of the PTO's own attorneys and paralegals. The governing framework is the American Rule.

That presumption, the Court explained, is the starting point for reading any fee provision — not only statutes that shift fees to a prevailing party. To overcome it, Congress must give a specific and explicit indication of its intent. The Government argued the American Rule did not apply at all, because Section 145 makes the applicant pay regardless of who wins. The Court rejected that: it has never treated any statute as exempt from the presumption against fee shifting. It had already held, in Sebelius v. Cloer, that the presumption applies even to statutes that award fees to parties who do not prevail. The American Rule thus set the baseline: absent a clear signal from Congress, no fee shifting.

On the merits, the Court held that Section 145's text does not clearly authorize the PTO's attorney's fees. Definitions of "expenses," standing alone, gave scant guidance — broad enough to include attorney's fees, but the mere failure to foreclose a fee award does not specifically authorize one. Reading the word in context pointed the other way.

That phrase historically referred to a class of recoverable costs to which attorney's fees did not traditionally belong. And the modifier "all," the Court added, conveys breadth but cannot transform "expenses" into an outlay it would not otherwise include. Statutory usage reinforced the point: "expenses" and "attorney's fees" appear as distinct terms across the U.S. Code, which shows Congress treats them as separate. Finally, the Patent Act's own history confirmed it. There was no evidence that the PTO's predecessor had ever paid its personnel out of sums collected from adverse parties, and the agency had never sought its fees under Section 145 until this case — a track record suggesting financial necessity did not require reading the statute to shift fees. And when Congress meant to provide attorney's fees in the Patent Act, it said so expressly, as in Section 285.

The decision was unanimous, with no separate writings. Peter v. NantKwest sits in the Court's American Rule line alongside Baker Botts and Rimini Street. It confirms that a statute shifts attorney's fees only when it does so specifically and explicitly, and that the bare word "expenses" does not clear that bar. Because Section 145 was the vehicle, the holding also settles that an applicant who takes the district-court route bears the agency's ordinary litigation expenses — but not the salaries of its lawyers.

Peter v. NantKwest, Inc., 589 U.S. 23, decided December 11th, 2019. I'm Kyle Coleman. Thanks for watching.