May 11, 2015

Let the Record Show...

If the U.S Patent and Trademark Office (the "PTO") refuses registration of your mark, you may appeal to the Federal Circuit for review or begin a proceeding in district court. One of these routes is likely to be more expensive than the other. The recent case of Shammas v Focarino, Case No. 14-1191, decided by the U.S. Court of Appeals for the Fourth Circuit, illustrates why.

Mr. Shammas sought to register the mark PROBIOTIC for fertilizer products, but the PTO refused registration on the grounds that the term is generic and descriptive. The Trademark Trial and Appeal Board (the "TTAB") affirmed. Mr. Shammas began a proceeding in district court instead of appealing the decision to the Federal Circuit. Because no adverse party opposed his application, he had to name the PTO director as the defendant. This was a "de novo" proceeding, which means the district court rules on the evidence and the law without deferring to the TTAB decision. The district court granted the PTO's motion for summary judgment.

Under the Lanham Act, if an applicant files a de novo action in district court like the one Mr. Shammas filed, the applicant must pay "all the expenses" of the proceeding, regardless of whether the applicant prevails. Here, the PTO moved for reimbursement of its expenses, which included prorated salaries of two attorneys and a paralegal in addition to copying expenses. Mr. Shammas opposed, arguing that the term "expenses" in the statute does not include attorneys' fees. But the district court found for the PTO again, so Mr. Shammas appealed to the U.S Court of Appeals for the Fourth Circuit.

You may be aware of the "American Rule," which requires each party in litigation to bear its own attorneys' fees. By contrast, under the "English Rule," the losing party bears the prevailing party's attorneys' fees. In order for a statute to deviate from the American Rule, Congress must state its desire to do so clearly and directly. Usually this means expressly referring to attorneys' fees. Because this section of the Lanham Act does not mention attorneys' fees, Mr. Shammas argued that "expenses" should not be read to include them.

The Fourth Circuit disagreed. Because the Lanham Act requires the applicant to pay all expenses regardless of whether it prevails, this statutory provision is not a deviation from the American Rule, but something totally separate, so Congress need not mention attorneys' fees expressly. Instead, the modifier "all" makes clear they are included in the term "expenses." Furthermore, the court reasoned that since the applicant chose the de novo proceeding, which takes a great deal of PTO resources, it is reasonable and appropriate for Congress to impose the financial burden on the applicant.

The Shammas case underscores the importance of establishing a complete record at the PTO. Then, if you must seek review, you may feel more comfortable choosing the less expensive option of appealing to the Federal Circuit.