How a Patent Legal Fee Fight Could Disrupt the Robotics Industry
May 20, 2019      
Bryan Wheelock, Harness Dickey

A U.S. Supreme Court case could decide whether a patent applicant is required to pay legal fees for the U.S. Patent and Trademark Office if they sue the Patent Office. Beyond the case, however, are implications that could harm healthy competition in the robotics industry.

While such lawsuits are relatively rare — fewer than 20 have been filed in the past five years — suing the patent office pursuant to 35 USC §145 is one of two ways applicants can gain an independent review of the office’s decisions. The other is to appeal to the Court of Appeals for the Federal Circuit, pursuant to 35 USC §141. The ability to seek independent review keeps the system “honest.” Additional barriers to this review, such as the Patent Office’s attempts to foist its legal fees on applicants, threatens the system.

The initial case – patent rejection

The case began in 2001, when Dr. Hans Klingemann filed a patent application directed to a method of treating cancer by administering natural killer cells. He eventually assigned the patent application to NantKwest. After a long and complicated examination, the Patent Office issued a final rejection in 2010, which was affirmed in 2013 by the appeals board within the Patent Office, known as the Patent Trial and Appeal Board (PTAB). NantKwest subsequently sued the Patent Office rather than appealing the rejection to the Court of Appeals.

The lawsuit allowed NantKwest to introduce new evidence, including testimony from a person of ordinary skill in the art to rebut the Patent Office’s position that the invention was obvious. Unfortunately for NantKwest, the district court found that even considering the new evidence, the claimed invention was unpatentable.

The Patent Office then filed a motion for reimbursement of the “expenses of the proceeding,” including nearly $79,000 for the salaries of two attorneys and a paralegal who worked on the case. The court rejected the request for reimbursement, citing the American Rule that in most circumstances, each litigant bears its own attorneys’ fees, and finding that “expenses” does not encompass personnel expenses, because the statute does not clearly address the shifting of attorneys’ fees.

The Patent Office persisted, appealing the district court’s decision to the Court of Appeals, where a three-judge panel agreed with the Patent Office that expenses as used in the statute includes the Patent Office’s own personnel expenses. NantKwest requested that the entire court review the decision (en banc), and the Court affirmed the denial of the request for attorneys’ fees. In January 2019, the Patent Office asked the Supreme Court to review the case, and it agreed in March.

Recovering expenses

The provision that allows recovery of all of the Patent Office’s expenses has been around since 1839. Relying on the provision, the Patent Office has recovered expenses such as travel, printing, court reporting fees, and even expert witness fees. For more than 170 years, however, the office never sought, and no court ever awarded, attorneys’ fees under §145 or its predecessor.

While it is hard to quibble with the rare government agency that seeks to fund itself, this change in position has a definite anti-inventor effect one would not expect from an agency charged with promoting progress of “science and the useful arts.”

Is this worth $79,000?

NantKwest has undoubtedly already spent far more money on the appeal and the reconsideration en banc. However, what is at stake is far more important than the $79,000 — it is the availability of judicial review of the Patent Office’s decisions. Having to pay the Patent Office’s attorneys’ fees in addition to its own attorneys’ fees and expenses puts district court action much further out of reach for most applicants.

In addition, the expenses provision in the statute is independent of whether the applicant wins or loses. This means an applicant who persuades the court to order the Patent Office to issue a patent still has to pay for the Patent Office’s unsuccessful defense of their improper rejections.

The possibility of review is what keeps any administrative agency on point. A total of 643,349 patent applications were filed last year, but only 9,284 rejections were appealed to the PTAB, a rate of only 1.5%. It is the mere availability of such appeals, despite their relatively low numbers, that keeps Examiners from adhering to improper rejections. In addition, appeals result in a reversal of the Examiner at least 38.4% of the time, and 28.3% of appeals lead to a complete reversal. Appeals to the PTAB therefore serve a vital function. Because the PTAB can be challenged in district court or the Court of Appeals also helps keep their decisions in line.

An effect on robotics

For the robotics industry, patent applications in the field of robotics and surgical robots fall into the Patent Office’s Technology Center 3700, which is responsible for more than 20% of the appeals to the PTAB. A decision in favor of the Patent Office could do tremendous harm to healthy competition in the overall industry if certain companies are priced out of suing the Patent Office when their applications are improperly refused.

NantKwest is fighting for more than $79,000; they are fighting to keep district court review of the Patent Office affordable. For this, all robotics manufacturers and innovators — and all other patent applicants, really — should be grateful.

Bryan WheelockAbout the author: Bryan Wheelock is a Principal in the St. Louis office of Harness, Dickey & Pierce, P.L.C. He is a registered patent attorney whose practice includes the preparation and prosecution of patent and trademark applications for clients in diverse industries. Bryan regularly drafts intellectual property agreements, such as non-compete agreements, and is a frequent speaker on the subject of intellectual property law.