Peter v. NantKwest, Inc. , 205 L. Ed. 2d 304 ( 2019 )

(Slip Opinion) OCTOBER TERM, 2019 1
Syllabus
NOTE: Where it is feasible, a syllabus (headnote) will be released, as is
being done in connection with this case, at the time the opinion is issued.
The syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
See United States v. Detroit Timber & Lumber Co., 200 U.S. 321, 337.
SUPREME COURT OF THE UNITED STATES
Syllabus
PETER, DEPUTY DIRECTOR, PATENT AND
TRADEMARK OFFICE v. NANTKWEST, INC.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FEDERAL CIRCUIT
No. 18–801. Argued October 7, 2019—Decided December 11, 2019
The Patent Act provides two mutually exclusive methods for challenging
an adverse decision by the Patent and Trademark Office (PTO). A dis-
satisfied applicant may appeal directly to the Federal Circuit, 35
U.S. C. §141, or, as relevant here, may file a new civil action against
the PTO Director in the United States District Court for the Eastern
District of Virginia, §145. Under this second proceeding, the applicant
must pay “[a]ll the expenses of the proceedings.” Ibid.
Respondent NantKwest, Inc., filed a §145 civil action after its patent
application was denied. The District Court granted summary judg-
ment to the PTO, and the Federal Circuit affirmed. The PTO moved
for reimbursement of expenses, including the pro rata salaries of PTO
attorneys and a paralegal who worked on the case. The District Court
denied the motion, concluding that the statutory language referencing
expenses was not sufficient to rebut the “American Rule” presumption
that parties are responsible for their own attorney’s fees. The en banc
Federal Circuit affirmed.
Held: The PTO cannot recover the salaries of its legal personnel under
§145. Pp. 3–10.
(a) The “American Rule”—the bedrock principle that “[e]ach litigant
pays his own attorney’s fees, win or lose, unless a statute or contract
provides otherwise,” Hardt v. Reliance Standard Life Ins. Co., 560
U.S. 242, 253—provides the starting point for assessing whether §145
authorizes payment of the PTO’s legal fees. Contrary to the Govern-
ment’s view, this Court has never suggested that any statute is exempt
from the presumption against fee shifting or limited its American Rule
inquiries to prevailing party statutes. Rather, it has developed a line
of precedents addressing statutory deviations from the American Rule
2 PETER v. NANTKWEST, INC.
Syllabus
that do not limit attorney’s fees awards to prevailing parties. See, e.g.,
id., at 254. The presumption against fee shifting is particularly im-
portant here because reading §145 to permit an unsuccessful govern-
ment agency to recover attorney’s fees from a prevailing party “would
be a radical departure from longstanding fee-shifting principles ad-
hered to in a wide range of contexts.” Ruckelshaus v. Sierra Club, 463
U.S. 680, 683. Pp. 3–6.
(b) Section 145’s plain text does not overcome the American Rule’s
presumption against fee shifting. Definitions of “expenses,” while ca-
pacious enough to include attorney’s fees, provide scant guidance. The
mere failure to foreclose a fee award “neither specifically nor explicitly
authorizes courts to shift [fees].” Baker Botts L. L. P. v. ASARCO LLC,
576 U.S. 121, ___. The complete phrase “expenses of the proceeding”
would not have been commonly understood to include attorney’s fees
at the time §145 was enacted. Finally, the modifier “all” does not
transform “expenses” to reach an outlay it would not otherwise in-
clude.
In common statutory usage, the term “expenses” alone has never
been considered to authorize an award of attorney’s fees with sufficient
clarity to overcome the American Rule presumption. The appearance
of “expenses” and “attorney’s fees” together across various statutes in-
dicates that Congress understands the terms to be distinct and not in-
clusive of each other. See, e.g., 11 U.S. C. §363(n). Other statutes that
refer to attorney’s fees as a subset of expenses show only that “ex-
penses” can include attorney’s fees when so defined. See, e.g., 28
U.S. C. §361. Nor do this Court’s cases further the Government’s po-
sition that the Court has used “expenses” to mean “attorney’s fees.”
See, e.g., Taniguchi v. Kan Pacific Saipan, Ltd., 566 U.S. 560, 573.
The Patent Act’s history reinforces that Congress did not intend to
shift attorney’s fees in §145 actions. There is no evidence that the orig-
inal Patent Office ever paid its personnel from sums collected from ad-
verse parties. Neither has the PTO, until this litigation, sought its
attorney’s fees under §145. When Congress intended to provide for
attorney’s fees in the Patent Act, it has stated so explicitly. See, e.g.,
35 U.S. C. §285. Pp. 6–10.
898 F.3d 1177, affirmed.
SOTOMAYOR, J., delivered the opinion for a unanimous Court.
Cite as: 589 U. S. ____ (2019) 1
Opinion of the Court
NOTICE: This opinion is subject to formal revision before publication in the
preliminary print of the United States Reports. Readers are requested to
notify the Reporter of Decisions, Supreme Court of the United States, Wash-
ington, D. C. 20543, of any typographical or other formal errors, in order that
corrections may be made before the preliminary print goes to press.
SUPREME COURT OF THE UNITED STATES
_________________
No. 18–801
_________________
LAURA PETER, DEPUTY DIRECTOR, PATENT
AND TRADEMARK OFFICE, PETITIONER v.
NANTKWEST, INC.
ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FEDERAL CIRCUIT
[December 11, 2019]
JUSTICE SOTOMAYOR delivered the opinion of the Court.
Section 145 of the Patent Act affords applicants “dissat-
isfied with the decision of the Patent Trial and Appeal
Board” an opportunity to file a civil action in the United
States District Court for the Eastern District of Virginia.
35 U.S. C. §145. The statute specifies that “[a]ll the ex-
penses of the proceedings shall be paid by the applicant.”
Ibid. The question presented in this case is whether such
“expenses” include the salaries of attorney and paralegal
employees of the United States Patent and Trademark Of-
fice (PTO). We hold that they do not.
I
A
The Patent Act creates two mutually exclusive pathways
to challenge an adverse decision by the PTO. The first per-
mits judicial review by direct appeal to the United States
Court of Appeals for the Federal Circuit. §141. There is “no
opportunity for the applicant to offer new evidence” in a
§141 proceeding, and the Federal Circuit “must review the
PTO’s decision on the same administrative record that was
2 PETER v. NANTKWEST, INC.
Opinion of the Court
before the [agency].” Kappos v. Hyatt, 566 U.S. 431, 434
(2012); 35 U.S. C. §144.
The second pathway allows applicants to file a new civil
action against the Director of the PTO in federal district
court. §145. Unlike §141, §145 “permits the applicant to
present new evidence . . . not presented to the PTO.” Kap-
pos, 566 U.S., at 435. The district court “acts as a factfinder
when new evidence is introduced in a §145 proceeding” and
must make de novo determinations that take into account
“both the new evidence and the administrative record be-
fore the PTO.” Id., at 444, 446. The parties may appeal the
district court’s final decision to the Federal Circuit. 28
U.S. C. §1295(a)(4)(C).
Because §145 does not limit an applicant’s ability to in-
troduce new evidence to challenge the denial of a patent,
Kappos, 566 U.S., at 439, it can result in protracted litiga-
tion. As a condition for permitting such extensive review,
the Patent Act requires applicants who avail themselves of
§145 to pay “[a]ll the expenses of the proceedings.” 35
U.S. C. §145.
B
After the PTO denied respondent NantKwest, Inc.’s pa-
tent application directed to a method for treating cancer,
NantKwest filed a complaint against the PTO Director in
the Eastern District of Virginia under §145. The District
Court granted summary judgment to the PTO, and the Fed-
eral Circuit affirmed. NantKwest, Inc. v. Lee, 686 Fed.
Appx. 864 (2017). The PTO moved for reimbursement of
expenses that included—for the first time in the 170-year
history of §145—the pro rata salaries of PTO attorneys and
a paralegal who worked on the case.
The District Court denied the PTO’s motion to recover its
pro rata legal fees as “expenses” of the §145 proceeding.
The court concluded that the statutory language referenc-
ing expenses was not clear enough to rebut the “American
Cite as: 589 U. S. ____ (2019) 3
Opinion of the Court
Rule”—the background principle that parties are responsi-
ble for their own attorney’s fees. NantKwest, Inc. v. Lee,
162 F. Supp. 3d 540, 542 (ED Va. 2016). A divided Federal
Circuit panel reversed, with Judge Stoll dissenting.
NantKwest, Inc. v. Matal, 860 F.3d 1352 (2017). The ma-
jority expressed “substantial doub[t ]” that §145 even impli-
cated the American Rule’s presumption against fee shifting
in a case in which the payment was not made to a prevailing
party. Id., at 1355. The majority concluded that, even as-
suming the American Rule presumption applied, the term
“expenses” in §145 “specific[ally]” and “explicit[ly]” author-
ized an award of fees. Id., at 1356.
The en banc Federal Circuit voted sua sponte to rehear
the case and reversed the panel over a dissent. NantKwest,
Inc. v. Iancu, 898 F.3d 1177, 1184 (2018). The majority
opinion—now authored by Judge Stoll—held that the
American Rule presumption applied to §145 because it is
“the starting point whenever a party seeks to shift fees from
one side to the other in adversarial litigation.” Id., at 1184
(citing Baker Botts L. L. P. v. ASARCO LLC, 576 U.S. 121,
___ (2015)). After examining the plain text and statutory
history of §145, the judicial and congressional understand-
ing of similar language, and overarching policy considera-
tions, the majority concluded that “[a]warding ‘[a]ll the ex-
penses’ simply cannot supply the ‘specific and explicit’
directive from Congress to shift attorneys’ fees, and nothing
else in the statute evinces congressional intent to make
them available.” 898 F.3d, at 1196 (quoting Alyeska Pipe-
line Service Co. v. Wilderness Society, 421 U.S. 240, 260
(1975)). We granted certiorari, 586 U. S. ___ (2019), and
now affirm.
II
This Court’s “ ‘basic point of reference’ when considering
the award of attorney’s fees is the bedrock principle known
4 PETER v. NANTKWEST, INC.
Opinion of the Court
as the ‘ “American Rule” ’: Each litigant pays his own attor-
ney’s fees, win or lose, unless a statute or contract provides
otherwise.” Hardt v. Reliance Standard Life Ins. Co., 560
U.S. 242, 252–253 (2010) (quoting Ruckelshaus v. Sierra
Club, 463 U.S. 680, 683 (1983)). The American Rule has
“roots in our common law reaching back to at least the 18th
century.” Baker Botts, 576 U. S., at ___ (slip op., at 3) (citing
Arcambel v. Wiseman, 3 Dall. 306 (1796)); see also Summit
Valley Industries, Inc. v. Carpenters, 456 U.S. 717, 721
(1982) (observing that the American Rule “has been consist-
ently followed for almost 200 years”); Alyeska Pipeline, 421
U.S., at 257 (referring to the presumption against shifting
attorney’s fees as a “general” rule).
The Government does not dispute this principle or its
pedigree, but argues instead that it does not apply at all.
Because the American Rule presumption is most often over-
come when a statute awards fees to a “prevailing party,” the
Government maintains, the presumption applies only to
prevailing-party statutes. And because §145 requires one
party to pay all expenses regardless of outcome, the argu-
ment goes, it is not a statute subject to the presumption.
That view is incorrect. This Court has never suggested
that any statute is exempt from the presumption against
fee shifting. Nor has it limited its American Rule inquiries
to prevailing-party statutes. Indeed, the Court has devel-
oped a “line of precedents” “addressing statutory deviations
from the American Rule that do not limit attorney’s fees
awards to the ‘prevailing party.’ ” Hardt, 560 U.S., at 254;
see also Baker Botts, 576 U. S., at ___–___ (slip op., at 5–7)
(analyzing a bankruptcy provision that did not mention pre-
vailing parties under the American Rule’s presumption
against fee shifting).
Sebelius v. Cloer, 569 U.S. 369 (2013), confirms that the
presumption against fee shifting applies to all statutes—
even those like §145 that do not explicitly award attorney’s
fees to “prevailing parties.” In Cloer, the Court interpreted
Cite as: 589 U. S. ____ (2019) 5
Opinion of the Court
a provision of the National Childhood Vaccine Injury Act
that permitted courts to “award attorney’s fees . . . ‘incur-
red [by a claimant] in any proceeding on’ an unsuccessful
vaccine-injury ‘petition . . . brought in good faith [with] a rea-
sonable basis for the claim.’ ” 569 U.S., at 371 (quoting 42
U.S. C. §300aa–15(e)(1)). The Court held that the provi-
sion’s clear language authorized attorney’s fees, even
though the statute exclusively applied to unsuccessful
litigants. 569 U.S., at 372.
Cloer establishes two points: First, contrary to the Gov-
ernment’s suggestion, Congress has indeed enacted fee-
shifting statutes that apply to nonprevailing parties. Sec-
ond, and again contrary to the Government’s view, the
American Rule applies to such statutes. The Government
itself argued in Cloer that the presumption against fee
shifting applied by default, but maintained that the statute
“depart[ed] so far from background principles about who
pays a litigant’s attorney’s fees that it [could not] be justi-
fied without a clearer statement than the Act can supply.’ ”
Brief for Petitioner in Sebelius v. Cloer, O. T. 2012, No. 12–
236, p. 32. The Court acknowledged the Government’s po-
sition but concluded that the “rul[e ] of thumb” against fee
shifting gave way because the “words of [the] statute [were]
unambiguous.” Cloer, 569 U.S., at 380–381 (citing the Gov-
ernment’s brief ).
The dissenting en banc Federal Circuit Judges also
doubted that the American Rule could apply to a §145 ac-
tion. They characterized the proceeding as an intermediate
step in obtaining a patent and the payment of legal fees as
a portion of the application costs. 898 F.3d, at 1200 (opin-
ion of Prost, J.). Yet §145 has all the marks of the kind of
adversarial litigation in which fee shifting, and the pre-
sumption against it, is common; the statute authorizes fil-
ing a separate civil action where new evidence can be intro-
duced for de novo review by a district judge. Thus, the
presumption against fee shifting not only applies, but is
6 PETER v. NANTKWEST, INC.
Opinion of the Court
particularly important because §145 permits an unsuccess-
ful government agency to recover its expenses from a pre-
vailing party. Reading §145 to award attorney’s fees in that
circumstance “would be a radical departure from longstand-
ing fee-shifting principles adhered to in a wide range of con-
texts.” Ruckelshaus, 463 U.S., at 683.
The American Rule thus provides the starting point for
assessing whether §145 authorizes payment of the PTO’s
legal fees.
III
To determine whether Congress intended to depart from
the American Rule presumption, the Court first “look[s] to
the language of the section” at issue. Hardt, 560 U.S., at
254 (internal quotation marks omitted). While “[t]he ab-
sence of [a] specific reference to attorney’s fees is not dis-
positive,” Key Tronic Corp. v. United States, 511 U.S. 809,
815 (1994), Congress must provide a sufficiently “specific
and explicit” indication of its intent to overcome the Amer-
ican Rule’s presumption against fee shifting. Alyeska Pipe-
line, 421 U.S., at 260.
A
The reference to “expenses” in §145 does not invoke attor-
ney’s fees with the kind of “clarity we have required to de-
viate from the American Rule.” Baker Botts, 576 U. S., at
___ (slip op., at 4).
Definitions of “expenses” provide scant guidance. The
term, standing alone, encompasses wide-ranging “expendi-
ture[s] of money, time, labor, or resources to accomplish a
result,” Black’s Law Dictionary 698 (10th ed. 2014),
“charges or costs met with in . . . doing one’s work,” Web-
ster’s New World College Dictionary 511 (5th ed. 2014), and
“outlay[s]” for labor, Merriam-Webster’s Dictionary of Law
180 (1996); see also N. Webster, An American Dictionary of
the English Language 319 (3d ed. 1830) (defining the term
Cite as: 589 U. S. ____ (2019) 7
Opinion of the Court
broadly to include “the employment and consumption, as of
time or labor,” or the “disbursing of money”). Though these
definitions are capacious enough to include attorney’s fees,
the mere failure to foreclose a fee award “neither specifi-
cally nor explicitly authorizes courts to shift [fees].” Baker
Botts, 576 U. S., at ___ (slip op., at 6).
Reading the term “expenses” alongside neighboring
words in the statute, however, supports a conclusion ex-
cluding legal fees from the scope of §145. The complete
phrase “expenses of the proceeding” is similar to the Latin
expensæ litis, or “expenses of the litigation.” This term has
long referred to a class of expenses commonly recovered in
litigation to which attorney’s fees did not traditionally be-
long. See Black’s Law Dictionary 461 (1891) (defining “ex-
pensæ litis” to mean “generally allowed” costs); 1 J. Bouvier,
Law Dictionary 392 (1839) (defining the term to mean the
“costs which are generally allowed to the successful party”);
id., at 244 (excluding from the definition of “costs” the “ex-
traordinary fees [a party] may have paid counsel”). These
definitions suggest that the use of “expenses” in §145 would
not have been commonly understood to include attorney’s
fees at its enactment.
Finally, the modifier “all” does not expand §145’s reach to
include attorney’s fees. Although the word conveys
breadth, it cannot transform “expenses” to reach an outlay
it would not otherwise include. Cf. Rimini Street, Inc. v.
Oracle USA, Inc., 586 U. S. ___, ___–___ (2019) (slip op., at
6–7) (“The adjective ‘full’ in §505 therefore does not alter
the meaning of the word ‘costs.’ Rather, ‘full costs’ are all
the ‘costs’ otherwise available under law”).
Section 145’s plain text thus does not overcome the Amer-
ican Rule’s presumption against fee shifting to permit the
PTO to recoup its legal personnel salaries as “expenses of
the proceedings.”
8 PETER v. NANTKWEST, INC.
Opinion of the Court
B
“The record of statutory usage” also illustrates how the
term “expenses” alone does not authorize recovery of attor-
ney’s fees. See West Virginia Univ. Hospitals, Inc. v. Casey,
499 U.S. 83, 88 (1991) (looking to statutory usage to deter-
mine whether attorney’s fees and expert fees were distinct
expenses in the fee-shifting context).
That “expenses” and “attorney’s fees” appear in tandem
across various statutes shifting litigation costs indicates
that Congress understands the two terms to be distinct and
not inclusive of each other. See, e.g., 898 F.3d, at 1188
(quoting 11 U.S. C. §363(n) (allowing trustee to recover
“any costs, attorneys’ fees, or expenses incurred”); 12
U.S. C. §1786(p) (permitting courts to “allow to any such
party such reasonable expenses and attorneys’ fees as it
deems just and proper”); 25 U.S. C. §1401(a) (allowing dis-
tribution of funds after payment of “attorney fees and liti-
gation expenses”); 26 U.S. C. §6673(a)(2)(A) (authorizing
recovery of “costs, expenses, and attorneys’ fees” against an
attorney who “unreasonably and vexatiously” multiplies
proceedings); 31 U.S. C. §3730(d)(1) (permitting recovery of
“reasonable expenses . . . plus reasonable attorneys’ fees
and costs”); 38 U.S. C. §4323(h)(2) (allowing courts to
award “reasonable attorney fees, expert witness fees, and
other litigation expenses”) (all internal quotation marks
omitted)).
While some other statutes refer to attorney’s fees as a
subset of expenses, they show only that “expenses” can in-
clude attorney’s fees when so defined. See, e.g., 28 U.S. C.
§361 (authorizing “reasonable expenses, including attor-
neys’ fees”); §1447(c) (“An order remanding the case may
require payment of just costs and any actual expenses, in-
cluding attorney fees, incurred as a result of the removal”);
29 U.S. C. §1370(e)(1) (“[T]he court in its discretion may
award all or a portion of the costs and expenses incurred in
connection with such action including reasonable attorney’s
Cite as: 589 U. S. ____ (2019) 9
Opinion of the Court
fees”); 42 U.S. C. §247d–6d(e)(9) (allowing a party to re-
cover “reasonable expenses incurred . . . , including a rea-
sonable attorney’s fee”).
The Government cites several decisions to argue how, on
occasion, this Court has used the term “expenses” to mean
“attorney’s fees.” None of the cases furthers its position.
See, e.g., Rimini Street, 586 U. S., at ___, ___ (slip op., at 4,
11) (reasoning that the term “costs” in the general federal
costs statutes does not include attorney’s fees); Taniguchi
v. Kan Pacific Saipan, Ltd., 566 U.S. 560, 573 (2012) (men-
tioning that a party may bear “expenses” related to attor-
neys, without specifying whether these “expenses” include
attorney’s fees); Arlington Central School Dist. Bd. of Ed. v.
Murphy, 548 U.S. 291, 297–303 (2006) (distinguishing “at-
torney’s fees” from “costs” and “costs” from “expenses,”
without indicating whether “expenses” encompasses attor-
ney’s fees); Casey, 499 U.S., at 99 (suggesting that an ex-
plicit reference to “expert witness fees” or “litigation ex-
penses” could shift expert fees in addition to attorney’s
fees—not that the term “litigation expenses” alone could
shift attorney’s fees).
Simply put, in common statutory usage, the term “ex-
penses” alone has never been considered to authorize an
award of attorney’s fees with sufficient clarity to overcome
the American Rule presumption.
C
In fact, the Patent Act’s history reinforces that Congress
did not intend to shift fees in §145 actions.
There is no evidence that the Patent Office, the PTO’s
predecessor, originally paid its personnel from sums col-
lected from adverse parties in litigation, or that the Office
initially even employed attorneys. See Act of July 4, 1836,
§9, 5 Stat. 121 (“[T]he moneys received into the Treasury
under this act shall constitute a fund for the payment of the
salaries of the officers and clerks herein provided for, and
10 PETER v. NANTKWEST, INC.
Opinion of the Court
all other expenses of the Patent Office, and to be called the
patent fund”). That salaries of PTO employees might have
qualified as an “expense” of the agency, however, does not
mean that they are an “expense” of a §145 proceeding. Nei-
ther has the PTO, until this litigation, sought its attorney’s
fees under §145. That the agency has managed to pay its
attorneys consistently suggests that financial necessity
does not require reading §145 to shift fees, either.
In later years, when Congress intended to provide for at-
torney’s fees in the Patent Act, it stated so explicitly. See,
e.g., 35 U.S. C. §285 (“The court in exceptional cases may
award reasonable attorney fees to the prevailing party”);
§271(e)(4) (“[A] court may award attorney fees under sec-
tion 285”); §273(f ) (same); §296(b) (same); §297(b)(1) (“Any
customer . . . who is found by a court to have been injured
by any material false or fraudulent statement . . . may re-
cover . . . reasonable costs and attorneys’ fees”). Because
Congress failed to make its intention similarly clear in
§145, the Court will not read the statute to “contravene fun-
damental precepts of the common law.” United States v.
Rodgers, 461 U.S. 677, 716 (1983).
The history of the Patent Act thus reaffirms the Court’s
view that the statute does not specifically or explicitly au-
thorize the PTO to recoup its lawyers’ or paralegals’
pro rata salaries in §145 civil actions.
* * *
For the foregoing reasons, we conclude that the PTO can-
not recover the pro rata salaries of its legal personnel under
§145 and therefore affirm the judgment of the Court of Ap-
peals for the Federal Circuit.
It is so ordered.