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Dissatisfied Trademark Applicants Must Pay USPTO Attorneys' Fees in De Novo Action: Fourth Circuit
Practical Law Legal Update 6-610-1085 (Approx. 3 pages)
Dissatisfied Trademark Applicants Must Pay USPTO Attorneys' Fees in De Novo Action: Fourth Circuit
by Practical Law Intellectual Property & Technology
| Published on 24 Apr 2015 • USA (National/Federal) |
In Shammas v. Focarino, the US Court of Appeals for the Fourth Circuit affirmed the US District Court for the Eastern District of Virginia's decision ordering Shammas to pay US Patent and Trademark Office (USPTO) expenses, including attorneys' fees, incurred in defending the district court action brought by Shammas challenging an adverse ruling on his trademark application.
On April 23, 2015, in Shammas v. Focarino, the US Court of Appeals for the Fourth Circuit affirmed the US District Court for the Eastern District of Virginia's decision ordering Milo Shammas to reimburse the USPTO for expenses incurred in defending Shammas's district court action challenging an adverse ruling by the Trademark Trial and Appeal Board (TTAB) (784 F.3d 219 (4th Cir. 2015)).
Under the Lanham Act, a dissatisfied trademark applicant has two alternatives after receiving an adverse ruling by the USPTO Director or the TTAB:
- Appealing the decision to the US Court of Appeals for the Federal Circuit.
- Commencing a de novo district court action.
In this case, after the USPTO trademark examining attorney's denial of his application for the mark PROBIOTIC was affirmed by the TTAB, Shammas opted to commence a de novo district court action. In accordance with the Lanham Act, Shammas had named the Director of the USPTO as a defendant (15 U.S.C. § 1071(b)(3)). The district court granted the USPTO's motion for summary judgment, holding that Shammas had failed to cast doubt on the finding that PROBIOTIC was a generic term. At the end of the district court proceeding, the USPTO filed a motion under § 1071(b)(3) of the Lanham Act seeking reimbursement of its expenses totalling $36,320.49, which included:
- The prorated salaries of two attorneys.
- The prorated salary of one paralegal.
- Photocopying expenses.
Shammas argued that the motion should be denied because the USPTO was essentially seeking a shifting of attorneys' fees in violation of the "American Rule," which creates a presumption that each party should bear its own attorneys' fees. Since the Lanham Act stated only that "all the expenses of the proceeding" should be paid to the USPTO in these district court proceedings, Shammas argued that this type of attorneys' fees shifting was not explicitly authorized by the statute, and therefore the American Rule should apply. The district court rejected this argument and granted the USPTO's motion.
The Fourth Circuit affirmed the district court's decision, holding that:
- The plain meaning of "expenses" is broad enough to include attorney and paralegal fees, and further, Congress's use of "all" to modify it suggests clear intent not to limit the plain meaning of the term.
- A statute like § 1071(b)(3) of the Lanham Act, which mandates payment of attorneys' fees regardless of a party's success, is not a fee-shifting statute to which the American Rule applies.
- The legislative history of § 1071(b)(3) supports the district court's decision because:
- requiring trademark applicants to pay all USPTO expenses and construing expenses to include attorneys' fees is consistent with Congress's intention to reduce the financial burden imposed on the USPTO by dissatisfied applicants bringing district court actions; and
- § 1071(b)(3) was intended as a funding provision designed to relieve the USPTO of the financial burden resulting from an applicant's decision to pursue the more expensive district court litigation alternative.
Update: On March 7, 2016, the US Supreme Court denied certiorari (Shammas v. Hirschfeld, 136 S. Ct. 1376 (2016)).