Win or Lose, Trademark Applicants Must Pay USPTO’s Attorney Fees in District Court Appeals, Says Eastern District of Virginia

On October 26, 2017, the Eastern District of Virginia became the latest court to weigh in on the USPTO’s position regarding whether trademark applicants who appeal adverse TTAB decisions directly to a district court for de novo review must reimburse the USPTO’s attorney fees.

The Lanham Act and Patent Act allow unsuccessful trademark and patent applicants respectively to file an appeal either to a district court where new evidence may be introduced and which applies a de novo standard of review, or directly to the Federal Circuit which applies a more deferential standard of review limited to the existing record.  Both statutes state that in appeals to a district court, “all the expenses of the proceeding” shall be paid by the applicant.  For many years, the USPTO had interpreted these provisions as applying only to expenses such as travel costs and expert fees.  Starting around 2013, however, the USPTO began arguing that attorney fees should be covered as well.   

In this case, Booking.com B.V. applied to register four marks for BOOKING.COM, but its applied-for marks were initially refused as generic for travel agency and hotel reservation services.  On appeal, the Eastern District of Virginia reversed.  The USPTO then moved to be reimbursed for its costs for court reporter and transcription expenses, as well as expert and attorney/paralegal fees, citing the “all expenses” provision of 15 U.S.C. § 1071(b)(3). 

Citing Fourth Circuit precedent, the Court granted the USPTO’s motion.  The Fourth Circuit held in 2015 that “§ 1071(b)(3) requires a dissatisfied . . . trademark applicant who chooses to file an action in district court challenging the final decision of the PTO, to pay, as ‘all expenses of the proceeding,’ the salaries of the PTO’s attorneys and paralegals attributed to the defense of the action.”  In that case, the Fourth Circuit relied on the ordinary meaning of “expenses” as evidenced by definitions in standard dictionaries and treatises.  It further stated that the fact that Congress modified the term “expenses” with “all” showed that the common meaning of “expenses” should not be limited.

The Court rejected Booking.com’s argument that Section 1071(b)(3) violates the First Amendment by unconstitutionally burdening an applicant’s right to seek judicial review of USPTO decisions.  Not only has the Supreme Court stated that Congress may limit access to certain courts and constitutionally impose costs on such access, applicants desiring to appeal adverse USPTO decisions can avoid reimbursing the USPTO’s expenses by appealing directly to the Federal Circuit.  According to the Fourth Circuit, Section 1071(b)(3) was intended to be a “straightforward funding provision, designed to relieve the PTO of the financial burden that results from an applicant’s election to pursue the more expensive district court litigation.”

Notably, the Federal Circuit reached a similar conclusion earlier this year in Nantkwest, Inc. v. Matal interpreting the “all expenses” provision in the Patent Act, governing appeals from the PTAB.  That decision was recently vacated, pending en banc review by the Federal Circuit.  The Eastern District of Virginia specifically noted, however, that though the law is currently unclear as to the Patent Act’s “all expenses” provision, the Federal Circuit’s ultimate en banc decision would only be persuasive authority with respect to the interpretation of Lanham Act Section 1071(b)(3), where Fourth Circuit precedent controls.

The case is Booking.com B.V. v. Matal, Case No. 1:16-cv-425 (LMB/IDD) (Oct. 26, 2017).