Senior U.S. District Judge for the Eastern District of Va T.S. Ellis III
Senior U.S. District Judge for the Eastern District of Va T.S. Ellis III (Photo: Diego M. Radzinschi / NLJ)

An “odd” federal law requires plaintiffs who bring lawsuits challenging the U.S. Patent and Trademark Office’s trademark rulings to pay all of the agency’s expenses including attorney fees, no matter which side wins, a Virginia federal judge has ruled.

Eastern District of Virginia U.S. District Judge T.S. Ellis III issued the ruling on Friday in Shammas v. Focarino. He ordered plaintiff Milo Shammas to pay nearly $33,000 to cover salaries of agency attorneys who worked on the case and additional money for paralegal salaries and expenses.

Noting that the question was of first impression, Ellis held that the statute in question requires a plaintiff to pay all of the patent office’s expenses for a district court review of a trademark appeal board ruling, win, lose or draw. That includes the salaries of patent office attorneys and paralegals for their case work.

Ellis ordered Shammas to pay another $2,280 in agency attorney fees for work on a motion to strike new evidence that the plaintiff filed after a discovery deadline. Ellis cut that request down from more than $11,000. He noted that Shammus did not dispute the agency’s “entitlement to reasonable attorney’s fees” for work related to that discovery violation.

Shammas in December 2012 sought review of the PTO’s Trademark Trial and Appeal Board’s rejection of a proposed trademark registration for the term “probiotic” for fertilizers. Shammas invoked a statute that allows appeal of trademark board rulings either to the U.S. Court of Appeals for the Federal Circuit, based only on the record; or to a district court, where plaintiffs may add new evidence.

In a footnote, Ellis called the statute “odd for several reasons,” including that it could encourage forum-shopping. He also noted that the statute’s contradictory incentives for plaintiffs—to hold back evidence from the trademark board in order to seek district court review and, conversely, to avoid district court review because of the fee language. Still, he wrote, the statute’s meaning is clear.

“When the word ‘expenses’ is prefaced with the word ‘all,’ it is pellucidly clear Congress intended that the plaintiff in such an action pay for all the resources expended by the [patent office] during the litigation, including attorney’s fees,” Ellis wrote.

The ruling “dramatically impacts the rights provided to trademark applicants and patent applicants” under a companion statute covering patent cases, said Bill Steffin of Steffin Lelkes Azod in Beverly Hills, lead counsel for Shammus. “We feel there are very significant unintended consequences for small business community and startups,” he said. John Jennison of Jennison & Shultz in Arlington, Va., served as local counsel.

A patent office representative said the agency would have no comment. The Justice Department, which represented the agency in the litigation, did not respond to a request for comment.

“This long-forgotten statute needs a congressional rewrite,” said Andrew Berger, intellectual property counsel at Tannenbaum Helpern Syracuse & Hirschtritt in New York, who wasn’t involved in the case. The fee language “chills the incentive for trademark applicants with meritorious claims to attempt to vindicate them in district court,” he said.

Sheri Qualters can be contacted at squalters@alm.com.