[00:00:00] Speaker 00:
The next argument is 161794 Natquist versus Lee.

[00:00:21] Speaker 00:
Technically you should be switching over, but that's okay.

[00:00:26] Speaker 00:
We like that place better.

[00:00:58] Speaker 02:
Good morning.

[00:00:59] Speaker 02:
May it please the court, Janie Lilly for the Patent and Trademark Office.

[00:01:03] Speaker 04:
Your Honor, Section 145 provides... This case doesn't depend at all on the outcome of the first case, right?

[00:01:09] Speaker 02:
No, Your Honor.

[00:01:10] Speaker 02:
Plaintiff's obligation to pay for the expenses of the proceeding does not depend on its success, on the merits of its action.

[00:01:19] Speaker 02:
In fact, Congress provided in Section 145 that a plaintiff must pay all the expenses of the proceeding, regardless of whether it prevails on the merits.

[00:01:29] Speaker 00:
What's the difference?

[00:01:31] Speaker 00:
There's a disagreement as to whether or not the American rule applies in this circumstance, and you all take the position that it doesn't, but even if it did, it doesn't make any difference.

[00:01:41] Speaker 00:
In your view, is there a different standard that's applied if we conclude the American rule does apply in this circumstance?

[00:01:49] Speaker 00:
Is there a different standard that applies in terms of the requirement of specificity or clarity?

[00:01:54] Speaker 02:
Your Honor, the American rule

[00:01:56] Speaker 02:
requires a heightened statement of clarity where it applies.

[00:02:00] Speaker 02:
As you've pointed out, we argue that it doesn't apply to a unilateral compensatory fee like Congress imposed in section 145.

[00:02:08] Speaker 02:
But as Your Honor pointed out, we think that the language here is clear.

[00:02:12] Speaker 02:
Plaintiff has provided no explanation for why the language, all expenses of the proceeding, should mean only

[00:02:19] Speaker 02:
some of the expenses of the proceeding or part of the expenses.

[00:02:21] Speaker 01:
That presumes that expenses includes attorney fees, right?

[00:02:24] Speaker 01:
I mean, if it said all costs of the proceedings, I presume you wouldn't be sitting here arguing that that includes attorney fees, or maybe it would.

[00:02:34] Speaker 01:
I don't, all doesn't seem to be the emphasis that you need here.

[00:02:38] Speaker 01:
You seem to need to show that expenses include attorney fees.

[00:02:42] Speaker 02:
Yes, Your Honor, and plaintiff doesn't meaningfully dispute that the ordinary

[00:02:47] Speaker 02:
meaning of the term expenses includes personnel expenses that are expended.

[00:02:52] Speaker 02:
We cited dictionary definitions in our brief that shows that expenses is normally used to encompass... They're saying your adversary agrees that expenses includes attorney fees?

[00:03:02] Speaker 02:
It cannot point to any sort of textual or dictionary definition that shows that expenses excludes personnel expenses.

[00:03:09] Speaker 02:
And the Supreme Court has made precisely this point in making the distinction, Your Honor.

[00:03:14] Speaker 01:
What about the statutes that are cited

[00:03:16] Speaker 01:
by the dissent in Seamus.

[00:03:18] Speaker 01:
There's a number of different statutes that are cited there that say, attorney fees, comma, excuse me, expenses, comma, including attorney fees, or expenses and attorney fees, or expenses, comma, attorney fees.

[00:03:33] Speaker 01:
What do we derive from that?

[00:03:34] Speaker 01:
Do we derive that Congress doesn't think that expenses always includes attorney fees?

[00:03:40] Speaker 01:
It seems to, in other statutes, always specify that there's attorney fees.

[00:03:45] Speaker 01:
It doesn't

[00:03:46] Speaker 01:
The fact that it has to say expenses, comma, including attorney's fees, doesn't that suggest that the language attorney's fees would be superfluous?

[00:03:56] Speaker 02:
Well, Your Honor, I have two responses.

[00:03:58] Speaker 02:
First, those make precisely the point that the term expenses includes attorney's fees.

[00:04:02] Speaker 02:
Plaintiff has not pointed to any examples where the term expenses excludes personnel expenses.

[00:04:08] Speaker 02:
And of course, we argue that these are not attorney's fees.

[00:04:10] Speaker 02:
But here, Congress specified that of the expenses,

[00:04:14] Speaker 02:
Even if there were any ambiguity, it's clarified by the term all expenses.

[00:04:19] Speaker 02:
As the Supreme Court has said in Taniguchi and Arlington Central School Board, the term expenses is an open-ended, broad term that would encompass litigation expenses of attorneys, Your Honor.

[00:04:32] Speaker 02:
And Congress clarified not that it meant some of those, but all of those.

[00:04:37] Speaker 02:
Here it would have been odd when Congress is thinking about the litigation expenses associated with an agency like the Patent and Trademark Office.

[00:04:44] Speaker 02:
to use the phrase attorney's fees, which connotes market rate, private attorney's fees.

[00:04:51] Speaker 02:
Instead, it clarified that it meant the expenses of the proceeding that included all of those, including the personnel and labor expended by the agency to defend them.

[00:05:01] Speaker 00:
You're resting on the distinction between attorney's fees and personnel expenses, because wouldn't your position be that it's all the same thing, that all expenses does include attorney's fees?

[00:05:11] Speaker 00:
What if the Patent Office, for example,

[00:05:13] Speaker 00:
were to contract out services to a law firm.

[00:05:17] Speaker 00:
Are you arguing that the reason you prevail here is because the personnel expenses that were obligated were not attorney's fees?

[00:05:25] Speaker 02:
Your Honor, I think our point is that the term personnel expense or the term expenses includes personnel expenses.

[00:05:33] Speaker 02:
And here where you're talking about the agency's expenses that were used to defend the action that plaintiff elected.

[00:05:41] Speaker 00:
Does the term all expenses include attorney's fees?

[00:05:45] Speaker 02:
Your Honor, in this case where we're talking about the expenses, the patent agreement.

[00:05:51] Speaker 04:
If they hired somebody else, a private lawyer, to do it, would that be included in expenses also?

[00:05:58] Speaker 02:
Would all expenses include attorney's fees in that?

[00:06:01] Speaker 04:
Of course, the patent office hires an outside lawyer to litigate the case.

[00:06:05] Speaker 02:
In the theoretical case that they had the authority to do so.

[00:06:08] Speaker 02:
All expenses could include attorney's fees.

[00:06:10] Speaker 02:
We're saying that it would overcome the clear statement presumption of the American rule.

[00:06:15] Speaker 02:
Yes, Your Honor.

[00:06:19] Speaker 01:
Would it or could it?

[00:06:20] Speaker 01:
I'm sorry.

[00:06:21] Speaker 01:
I couldn't tell what your position was, because you changed to could, and I wasn't sure what that meant.

[00:06:25] Speaker 02:
Oh, I'm sorry if I were unclear, Your Honor.

[00:06:27] Speaker 02:
The phrase all expenses of the proceeding overcomes the clear statement rule of the American rule.

[00:06:33] Speaker 02:
And so it would overcome.

[00:06:36] Speaker 02:
in the case in which the PTO could have hired outside counsel, which didn't hear.

[00:06:44] Speaker 02:
And it's not clear whether PTO would have such authority.

[00:06:48] Speaker 02:
But our position is the phrase, all expenses, overcomes the clear statement rule of the American rule and would include attorney's fees in that hypothetical case.

[00:06:59] Speaker 01:
OK.

[00:07:00] Speaker 01:
Are you aware of any cases other than the Seamus case?

[00:07:04] Speaker 01:
where a court has found that the term expenses includes attorney fees.

[00:07:09] Speaker 01:
Specifically, like looking at a statute that had the word expenses in it.

[00:07:13] Speaker 01:
Not a situation where the court is just using the word expenses broadly.

[00:07:17] Speaker 02:
Well, I would point to the examples that Your Honor gave earlier where the statutes specify that expenses include attorney fees.

[00:07:23] Speaker 01:
How about a situation where a statute says expenses only.

[00:07:27] Speaker 01:
It doesn't say anything about attorney fees.

[00:07:30] Speaker 02:
Your Honor, I'm not aware that there are

[00:07:33] Speaker 02:
of cases where the term expenses has been construed in the abstract, or certainly not disconnected from the phrase attorney's fees.

[00:07:45] Speaker 02:
But here we have not only the phrase expenses, but all expenses.

[00:07:49] Speaker 02:
And we have no examples of a case in which expenses have been interpreted to exclude personnel expenses, like the PTO is claiming here.

[00:07:57] Speaker 00:
I don't understand why you place so much emphasis on the word all.

[00:08:02] Speaker 00:
If the statute had just said they pay the expenses incurred in this, would there be a difference between all the expenses and less than all of the expenses?

[00:08:12] Speaker 02:
Your Honor, I think that the term and its ordinary meaning expenses, as you point out, includes the expenses of the proceeding.

[00:08:20] Speaker 02:
But Congress made it triply clear by using the phrase all expenses of the proceeding.

[00:08:27] Speaker 00:
Can I ask a question?

[00:08:28] Speaker 00:
This more goes to your friend on the other side, and I plan to ask him about this as well.

[00:08:32] Speaker 00:
But in two of the Supreme Court cases, as I understand it, Arlington and the West Virginia case, those dealt with expert fees.

[00:08:40] Speaker 00:
And it seemed to me that the same rules would apply to expert fees as they applied to attorney's fees, at least in terms of the American rule.

[00:08:50] Speaker 00:
So it's a little odd to me.

[00:08:52] Speaker 00:
Is it inconsistent for the district court judge to have parsed out and differentiated

[00:08:57] Speaker 00:
between allowing expert fees here and not attorney's fees?

[00:09:01] Speaker 02:
With respect to the American rule?

[00:09:03] Speaker 02:
Yeah.

[00:09:04] Speaker 02:
Your Honor, plaintiffs do not dispute that the term expenses includes expert witness expenses, and presumably that's why that was not in dispute.

[00:09:15] Speaker 04:
I think the question is, is it inconsistent to treat them differently if expenses includes expert witness fees

[00:09:26] Speaker 04:
Doesn't that suggest that it also includes attorney's fees?

[00:09:30] Speaker 02:
Well, the term expenses is capacious and includes both expenses.

[00:09:34] Speaker 02:
It would stand to reason that, and sort of textually, that the term expenses would include both expert witness fees and personnel and attorney expenses.

[00:09:43] Speaker 02:
Yes, Your Honor.

[00:09:49] Speaker 02:
I see the court has no more questions.

[00:09:51] Speaker 00:
I've reserved the balance of my time for rebuttal.

[00:10:05] Speaker 03:
May it please the court, Helen Heinrich?

[00:10:08] Speaker 03:
So the main thrust of the PTO's argument is that the American rule doesn't apply here, because according to the PTO, the American rule is only concerned with statutes that would shift fees to a prevailing party.

[00:10:24] Speaker 00:
Well, let's skip that.

[00:10:25] Speaker 00:
Let's skip over that.

[00:10:26] Speaker 00:
Let's assume for purposes of argument that the American rule does apply.

[00:10:30] Speaker 00:
Why is not the term expenses

[00:10:33] Speaker 00:
What do you point to other than perhaps a whole bunch of historical statutes, all of which use different terminology?

[00:10:41] Speaker 00:
Other than that, what can you point to to say that expenses is not intended to include attorney's fees?

[00:10:47] Speaker 03:
So the first thing is that under the PTO's construction, if expenses includes attorney's fees without regard to winners or losers here, then the PTO would be entitled to their attorney's fees in cases that the patent

[00:11:03] Speaker 03:
patentee prevailed in.

[00:11:04] Speaker 03:
And the Baker-Botts case, the Baker-Botts case of the Supreme Court states that interpreting a proposed fee-shifting statute that would award the loser fees would be, quote, a particularly unusual deviation of the American rule.

[00:11:23] Speaker 03:
So right out of the gate, they have a problem there.

[00:11:26] Speaker 04:
Because it suggests that the American rule

[00:11:29] Speaker 04:
applies in a situation in which it's not a prevailing party test.

[00:11:34] Speaker 04:
But are you arguing that the statute has to use the word attorney's fees to achieve fee shifting?

[00:11:42] Speaker 04:
No.

[00:11:43] Speaker 04:
What would be an example of the kind of language other than attorney's fees that would do the fee shifting?

[00:11:50] Speaker 03:
Sure.

[00:11:50] Speaker 03:
Well, in Bakery Bot, the statute there talked of reasonable compensation for a number of professionals.

[00:11:58] Speaker 03:
An attorney was included.

[00:11:59] Speaker 03:
among them.

[00:12:01] Speaker 04:
There are certainly... And Baker-Bot suggested that the term litigation costs would include attorney's fees too, right?

[00:12:10] Speaker 03:
The term litigation costs?

[00:12:11] Speaker 03:
Yes.

[00:12:12] Speaker 03:
I don't recall that particular aspect of Baker-Bot's, to be honest.

[00:12:19] Speaker 04:
Well, it talks about statutes.

[00:12:20] Speaker 04:
They tend to authorize the award of reasonable attorney's fees or litigation costs, thus suggesting that litigation costs would include attorney's

[00:12:28] Speaker 03:
I don't think that the term litigation costs standing alone would meet the explicit and specific requirement that the American rule mandates.

[00:12:42] Speaker 00:
So your view is that they have to use the term attorney's fees?

[00:12:46] Speaker 03:
No, they have to use an equivalent term, like reasonable compensation for attorneys in the Baker Botts case.

[00:12:54] Speaker 03:
Well, that's the same as attorney's fees, isn't it?

[00:12:57] Speaker 03:
My point is there's no magic language.

[00:13:04] Speaker 04:
What would be sufficient other than talking about attorney's fees specifically?

[00:13:10] Speaker 04:
I think it does have to be specific.

[00:13:12] Speaker 03:
It has to use the word attorney's.

[00:13:17] Speaker 03:
We see all these statutes, the dissent in Seamus cited them, where Congress is very specific.

[00:13:25] Speaker 03:
It wants to award attorney's fees.

[00:13:29] Speaker 03:
It does so very explicitly.

[00:13:31] Speaker 03:
It doesn't simply rely on the term expenses, but it says expenses including attorney's fees or expenses and attorney's fees in Title 35.

[00:13:40] Speaker 00:
So if they say, if a statute uses the term expenses including attorney's fees and another statute just says expenses, you're construing the congressional use of the phrase

[00:13:51] Speaker 00:
including attorney's fees to mean that if you don't specify attorney's fees, they are not included in expenses?

[00:13:56] Speaker 00:
That's what you derive from those statutes?

[00:13:58] Speaker 03:
Yes, Your Honor.

[00:14:02] Speaker 00:
So if you say expenses including attorney's fees, doesn't that suggest that attorney's fees are included under the rubric of expenses?

[00:14:13] Speaker 03:
I don't think so, Your Honor, because Congress has passed statutes that both use

[00:14:21] Speaker 03:
expenses, including attorney's fees, as well as expenses and attorney's fees.

[00:14:27] Speaker 03:
So what we can gather from that is that on its own, the term expenses is simply ambiguous.

[00:14:33] Speaker 03:
And we know that the American rule is not overcome by ambiguous language.

[00:14:38] Speaker 04:
But didn't the Supreme Court in Arlington and Yamaguchi suggest that expenses includes attorney's fees?

[00:14:46] Speaker 03:
No, Your Honor.

[00:14:47] Speaker 03:
In Arlington, for example,

[00:14:49] Speaker 03:
The issue was whether expert fees were part of costs.

[00:14:53] Speaker 03:
The statute there explicitly provided for attorney's fees.

[00:14:59] Speaker 04:
I understand that the holding wasn't that, but the language of Arlington and the language of Taniguchi suggests, does not, that attorney's fees comes within expenses.

[00:15:11] Speaker 03:
So we would disagree with that, Your Honor.

[00:15:13] Speaker 03:
We think that expenses standing alone is ambiguous.

[00:15:17] Speaker 03:
These cases were addressing a different issue.

[00:15:19] Speaker 03:
What is covered by costs?

[00:15:24] Speaker 03:
Taniguchi noted that costs have a very specific definition under the federal rules of civil procedure.

[00:15:32] Speaker 03:
So those cases really deal with a very different set of issues.

[00:15:38] Speaker 00:
Looking at Arlington and also at the West Virginia case, do you know what I mean?

[00:15:42] Speaker 00:
I forget what it's called.

[00:15:44] Speaker 00:
But it also dealt with, actually, expert witness fees.

[00:15:47] Speaker 00:
But my reading of those cases, repeatedly in those cases, the Supreme Court used the term expenses to include attorney's fees.

[00:15:56] Speaker 00:
They called out the example of what attorney's fees is, and they did it under expenses, including attorney's fees and expert witness fees.

[00:16:06] Speaker 00:
So why isn't that, I mean, that's not the holding in the case, but if we discern clearly from Supreme Court cases that that's the way the Supreme Court uses a term, Black's Law Dictionary uses the term that way, Wright and Miller uses the term that way, what do you have on the other side of that?

[00:16:22] Speaker 03:
Well, first of all, the court wasn't saying that expenses is so explicit and specific enough to overcome the American rule.

[00:16:32] Speaker 03:
So at most from those cases, we can gather from dicta

[00:16:35] Speaker 03:
that in some context, the term expenses can include attorney's fees.

[00:16:40] Speaker 03:
But here we have this heightened standard.

[00:16:43] Speaker 00:
Don't you think it's a fair reading to say that the Supreme Court construes the word expenses to include attorney's fees and expert witness fees?

[00:16:51] Speaker 00:
Don't you think that's a fair reading of what they were saying?

[00:16:53] Speaker 03:
I would disagree with that specific characterization, Your Honor.

[00:16:56] Speaker 03:
I think it's fair to say that in some context, the Supreme Court has used expenses in a manner that encompasses attorney's fees.

[00:17:05] Speaker 03:
I don't think that these cases stand for the proposition that the Supreme Court has defined expenses to include attorney's fees, much less to have done so in a way that overcomes the American rule.

[00:17:19] Speaker 03:
In Baker-Botts, the Supreme Court said reasonable compensation standing alone wouldn't overcome the presumption of the American rule.

[00:17:31] Speaker 03:
And then on top of all of this,

[00:17:34] Speaker 03:
including the unusual deviation of the American rule that the PTO is advocating here.

[00:17:39] Speaker 03:
We have the PTO's 170 plus year practice of not seeking its attorney's fees.

[00:17:47] Speaker 04:
Well, why is that relevant?

[00:17:48] Speaker 04:
They don't have Chevron authority to construe the statute, right?

[00:17:53] Speaker 03:
That's correct.

[00:17:54] Speaker 03:
Yes, Your Honor.

[00:17:55] Speaker 03:
But it's relevant because we're asking the question here, is expenses

[00:18:02] Speaker 03:
specific and explicitly covering attorney's fees.

[00:18:06] Speaker 03:
So the fact that the PTO hasn't sought to get its.

[00:18:11] Speaker 00:
How many cases just at half a year that come under 145?

[00:18:16] Speaker 03:
Not many.

[00:18:18] Speaker 03:
But there's certainly examples throughout that 170-year period.

[00:18:25] Speaker 03:
There's the Robertson case from the Fourth Circuit where the PTO sought its

[00:18:30] Speaker 03:
travel expenses for a deposition, but specifically did not request attorney's fees.

[00:18:38] Speaker 03:
This practice, I'd submit, is also relevant to the question of whether this is specific and explicit enough.

[00:18:45] Speaker 03:
If it were, why hasn't PTO been doing this for all these years?

[00:18:50] Speaker 04:
Well, if it's only a handful of cases, maybe it's not as significant as if there had been hundreds of cases.

[00:19:01] Speaker 03:
There certainly are not many of these cases, but there's no indication that they've ever sought their fees prior to just a few years ago.

[00:19:12] Speaker 03:
Thank you very much.

[00:19:13] Speaker 01:
Could you address that question about 145 actions, how frequent they are, maybe how many there have been in the last 20, 40 years?

[00:19:27] Speaker 02:
In the last 20 or 40 years?

[00:19:28] Speaker 01:
I don't know.

[00:19:29] Speaker 01:
If you can give any view on the quantity of 145 actions, it was my impression there was more than four or five of them.

[00:19:37] Speaker 02:
More than four or five in the last 20 years?

[00:19:39] Speaker 02:
I would think so.

[00:19:40] Speaker 02:
That would stand to reason, Your Honor.

[00:19:42] Speaker 02:
Do you have that knowledge?

[00:19:44] Speaker 02:
I don't have that number in front of me, but it seems safe to assume that there have been more than four or five in the last 20 years, if that is Your Honor's question.

[00:19:52] Speaker 02:
Do you think there's more than four or five in the last three years?

[00:19:58] Speaker 02:
Yes, Your Honor.

[00:19:59] Speaker 02:
I think we cited three cases in our brief, 145 actions in the last three years in our reply brief.

[00:20:10] Speaker 02:
Yes, Your Honor.

[00:20:14] Speaker 02:
Seeing no further questions, we ask that the decision of the district court be reversed.

[00:20:20] Speaker 00:
Thank you.

[00:20:20] Speaker 00:
We thank both sides and the case is submitted.