Patent and trademark applicants: Beware the hidden costs of an appeal from the PTAB/TTAB

A recent case involving an appeal of a rejected trademark application highlights a hidden cost that may occur if a patent or trademark applicant asks a District Court to overturn the USPTO’s action.

When the USPTO rejects a patent or trademark application, the applicant may appeal the rejection to the Patent Trial and Appeal Board (PTAB) or Trademark Trial and Appeal Board (TTAB), as the case may be.  If the applicant doesn’t like the PTAB/TTAB result, it may then appeal to a federal court.  As to which court, the applicant will have two options:  (1) appeal to the Eastern District of Virginia, or (2) appeal to the Federal Circuit.  The benefit of option (1) is that it allows the applicant to bring in new evidence in an attempt to improve its chances for a good result.  However, the downside of option (1) is that the applicant must pay the expenses of the proceeding under 35 U.S.C. 145 (if a patent appeal) or 15 U.S.C. 1071(b)(1) (if a trademark appeal).

In the recentdecision, Shammas v. Focarino, E.D. Va. No. 1:12-cv-1462 (Jan. 3 2014), the court held that “expenses” in the context of a trademark appeal includes attorneys’ fees, and that the appellant must pay those fees regardless of the outcome.  This included a pro rata portion of the actual salaries of the government attorneys who handled the case for the USPTO, based on the time that they devoted to the case.

Previous cases, such as the Supreme Court’s decision in Hyatt v Kappos, reached similar rulings in the patent context.  However, this is the first time that a court specifically held that the expenses included USPTO attorney salaries.

So, before appealing a PTAB or TTAB decision to District Court rather than the Federal Circuit, patent and trademark applicants should weigh the costs of the proceeding (including USPTO expenses) against the potential benefits of introducing additional evidence.

[NOTE:  Special thanks to my colleagues Jeff Schwartz and Lindette Hassan of Fox Rothschild LLP for co-authoring this post.]

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