Win Or Lose, Trademark Applicants Must Pay PTO Attorney Fees In Appeals To District Court, Fourth Circuit Says

In a 2-1 decision issued on April 23, 2015, the Fourth Circuit held that a trademark applicant who appeals an adverse ex parte decision of the Trademark Trial and Appeal Board (TTAB) to a U.S. District Court must pay the prorated fees for attorneys from the U.S. Patent and Trademark Office (PTO) who defend the case. The obligation to pay the fees arises regardless of whether the appeal is successful. The decision in Shammas v. Focarino makes it likely that trademark appellants will choose the District Court route, rather than a straightforward appeal to the Federal Circuit, only in unusual, high-profile cases.

In this case, Milo Shammas filed an application to register PROBIOTIC for fertilizer products. The PTO examining attorney refused registration on the ground that the term was generic and descriptive. The TTAB affirmed the decision.

Under Section 21 of the Lanham Act, Mr. Shammas could elect to have review of the TTAB decision through one of two means. One was by direct appeal to the Court of Appeals for the Federal Circuit, which would decide the case solely on the record before the TTAB. The other was to file a de novo civil action against the PTO in U.S. District Court, in which each party could supplement the record. Mr. Shammas chose the latter option. Section 21(b)(3) provides that the appellant must pay "all the expenses of the proceeding...whether the final decision is in favor of such party or not."

The U.S. District Court for the Eastern District of Virginia granted the PTO's motion for summary judgment, dismissing the appeal. It went on to grant the PTO's motion for an award of more than $36,000 in expenses, which included the prorated salaries of two PTO attorneys and a paralegal. The Court reasoned that "all expenses" should be read literally and that Congress intended for the PTO to be made whole when it incurred the extra expense of defending a de novo civil action rather than an appeal based on the TTAB record.

Mr. Shammas, supported by an amicus brief filed by the International Trademark Association, appealed. They argued that the "American Rule" — in which each party pays its own attorneys' fees — may not be abrogated unless the controlling statute in the case expressly does so. Since the Lanham Act makes express references to awards of attorneys' fees elsewhere in the statute, they said, the failure to mention them in Section 21(b)(3) meant that attorneys' fees were not to be included in an award of "expenses."

The...