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USPTO Can Demand Attorney Fee Awards, Even When it Loses the Case

Source: Dennis Crouch

Shammas v. Focarion (Lee) (4th Cir. 2015) [SHAMMAS v FOCARINO]

The Patent and Lanham (TM) acts each include a mechanism for filing a civil action when the USPTO refuses to grant/register the applied-for rights. See 35 U.S.C. 145 and 15 U.S.C. 1071(b) respectively.

Both provisions include cost-shifting that forces the applicant to pay the PTO’s expenses of the proceedings, win-or-lose.

Patent Cases : “All the expenses of the proceedings shall be paid by the applicant.”

Trademark Cases : “unless the court finds the expenses to be unreasonable, all the expenses of the proceeding shall be paid by the party bringing the case, whether the final decision is in favor of such party or not.”

The 4th Circuit case of Shammas v. Focarino involves a civil action to force the PTO to register the mark “PROBIOTIC.” The district court sided with the PTO that the mark was not registrable (it is generic) and then awarded attorney fees to the USPTO under the statute quoted above. On appeal, the 4th Circuit has affirmed – finding that the “all the expenses” provision of the statute includes attorney fees.

[I]n ordinary parlance, “expenses” is sufficiently broad to include attorneys fees and paralegals fees. Moreover, in this statute, Congress modified the term “expenses” with the term “all,” clearly indicating that the common meaning of the term “expenses” should not be limited. (internal citations omitted)

The appellate panel rejected the notion that “expenses” should be read as parallel to “taxable costs” that do not include attorney fees — suggesting that Congress wold have used the costs term it it meant costs. In reaching this decision, the court looked back to the statutory language origin found in the 1836 patent act and noted that – even there – the statute distinguished between expenses and costs.

The court also rejected the notion we would need a clearer statement from Congress in order to overcome the presumption against attorney fee shifting in American courts (the “American rule”). Here, the panel came to the odd conclusion that the American-rule presumption here does not apply because that presumption is about whether the loser pay’s the winner’s fees. This situation is different (according to the court) because one side always pays win-or-lose.

Thus, a statute that mandates the payment of attorneys fees without regard to a party’s success is not a fee-shifting statute that operates against the backdrop of the American Rule.

This appears to me an odd conclusion whose conclusion does not logically flow from the premise.

For litigators, the outcome is unsightly because of the rarity of such strict fee-shifting mechanisms within our court systems. For patent and trademark prosecutors, the statute appears more akin to a fee-for-service, which is entirely common within the system. One major difference between other PTO fees is uncertainty since the litigation costs will not be known until the litigation complete.

Whatever its justification, the outcome here obviously adversely impacts patent and trademark applicants considering the filing of a civil action to pursue their claims. (Within the PTO, direct appeal to the Federal Circuit under Section 144 does not directly result in a fee award).

My understanding is that Shammas will be filing a petition for writ of certiorari in the upcoming weeks now that his petition for rehearing was denied. INTA filed a brief in support during the appeal.

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