A trademark applicant who challenged the Trademark Office’s refusal to register its mark in district court now seeks U.S. Supreme Court review of the novel attorneys’ fees award to the USPTO for defense of that refusal.  If upheld, the fee-shifting provisions at issue must be another factor to consider when deciding whether to seek judicial review of an administrative decision by first filing suit in district court, rather than by direct appeal to Federal Circuit. 

Under the decision being urged for review, attorneys’ fee awards to the USPTO are triggered by the applicant’s choice of forum for initially challenging a USPTO decision, and are not dependent upon outcome.  A patent or trademark registration applicant dissatisfied with an adverse USPTO ruling may seek judicial review of that decision.  Two paths are available under the governing patent and trademark statutes:  a direct appeal from the Patent Trial and Appeal Board or Trademark Trial and Appeal Board to the Court of Appeals for the Federal Circuit; or a de novo civil suit filed in federal district court.  However, both the patent and trademark statutes contain cost-shifting provisions for the option of civil suit against the USPTO.  The relevant portion of the patent statute, dating from at 1836 and retained in the 1952 Patent Act, simply states:

All the expenses of the proceedings shall be paid by the applicant.

The trademark provision, codified in the 1946 Lanham Act, expressly states that the applicant’s payment of the USPTO’s expenses is not conditioned on success:

[U]nless 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.

Thus, unlike the “prevailing party” fee-shifting in civil suits between private parties, a civil suit against the USPTO from an adverse, administrative decision triggers fee-shifting to the applicant of the USPTO’s expenses regardless of whether the USPTO wins or loses.

“All the expenses,” according to one reviewing court, includes allocated attorneys’ fees and does not contravene the “American Rule” that disfavors fee-shifting.  Under the American Rule, legislatures are expected to “speak with heightened clarity” in statutory provisions allowing an award of attorneys’ fees, “to overcome the presumption of the American Rule” that attorneys’ fees – typically for the prevailing party, only – are not encompassed by statutory cost-shifting unless explicitly identified.  In the case being submitted to the Supreme Court for review, the unsuccessful trademark applicant was charged with over $36,000.00 for prorated salaries of Solicitor General attorneys and paralegals that defended the USPTO’s decision, and less than $400.00 of actual “expense” (for photocopying).  The Court of Appeals for the Fourth Circuit affirmed the district court ruling, holding that the expense award was an unconditional compensatory charge resulting from the applicant’s choice to file suit (emphasis in original):

[T]he imposition of all expenses on a plaintiff in an ex parte proceeding, regardless of whether he wins or loses, does not constitute fee-shifting that implicates the American Rule but rather an unconditional compensatory charge imposed on a dissatisfied applicant who elects to engage the PTO in a district court proceeding.

“Expenses,” the Court ruled, could include attorneys’ fees without the explicit statutory reference to such fees normally required under the American Rule due to the nature of that action and the alternatives available to the applicant: 

At bottom, we conclude that [the trademark expense provision] requires a dissatisfied ex parte trademark applicant who chooses to file an action in a district court challenging the final decision of the PTO, to pay, as “all the expenses of the proceeding,” the salaries of the PTO’s attorneys and paralegals attributed to the defense of the action.

If the Supreme Court declines review or upholds the prior ruling, the USPTO can be expected to seek attorneys’ fees in every civil action on an adverse decision.

Various factors play into the rare election to file suit rather than merely appeal an adverse USPTO decision directly.  Importantly, a civil suit in district court allows the applicant to submit new evidence (without raising new issues) beyond the evidence previously submitted to the USPTO during administrative proceedings.  Under the novel cost-shifting interpretation now being maintained, the cost of paying for government attorneys’ salaries will be another factor.