[00:00:00] Speaker 03:
1794, Nanquest versus Yanku.

[00:00:05] Speaker 03:
Miss Lilly, whenever you're ready.

[00:00:18] Speaker 00:
Good morning.

[00:00:19] Speaker 00:
Jamie Lilly for the United States Patent and Trademark Office.

[00:00:22] Speaker 00:
Your Honors, the panel correctly concluded that Nanquest must pay all expenses of the 145 proceedings that elected

[00:00:29] Speaker 00:
that it elected, including the PTO's personnel expenses.

[00:00:34] Speaker 00:
Congress, in adopting the language in the statute, embraced the broad term expenses that there is no meaningful dispute includes attorney's fees or personnel expenses, and clarified which of those expenses it meant to include, all of the expenses.

[00:00:51] Speaker 03:
You say there's no meaningful dispute with respect to whether expenses covers attorney's fees or not.

[00:00:58] Speaker 03:
enough in the record to establish there is some ambiguity in terms of the coverage of expenses?

[00:01:04] Speaker 00:
No, Your Honor.

[00:01:04] Speaker 00:
The term expenses, as the Supreme Court has said in Taniguchi and Congress has stated in various statutes, the ordinary meaning includes the word attorney's fees.

[00:01:17] Speaker 00:
Now in this case, where the statute applies to the USPTO, it doesn't have attorney's fees or

[00:01:24] Speaker 00:
doesn't engage in fee arrangements with its counsel.

[00:01:27] Speaker 00:
It has personnel expenses.

[00:01:30] Speaker 00:
It employs attorneys in the Solicitor's Office who perform the work of the PTO.

[00:01:38] Speaker 06:
That's the point, isn't it?

[00:01:40] Speaker 06:
They don't have attorney fees.

[00:01:41] Speaker 00:
Exactly, Your Honor.

[00:01:42] Speaker 00:
And so Congress, when it specified which expenses, specified all expenses, it would be passing strange as the panel

[00:01:51] Speaker 00:
explained for Congress to have used the word attorney's fees to describe expenses that can only be claimed by the PTO that doesn't have private fee arrangements with outside counsel.

[00:02:01] Speaker 11:
It did in 1839, didn't it?

[00:02:05] Speaker 00:
Your Honor?

[00:02:06] Speaker 11:
It did in 1839, apparently, hire outside counsel.

[00:02:11] Speaker 00:
Your Honor, we noted in our brief that there's some indication that the PTO paid for counsel

[00:02:20] Speaker 00:
in a couple of cases, or may have paid for counsel in a couple of cases.

[00:02:24] Speaker 00:
But PTO has not had an outside fee arrangement that would be typically described as attorney's fees.

[00:02:33] Speaker 11:
But at the time of the 1839 statute, there wasn't within the office a lawyer position, was there?

[00:02:43] Speaker 11:
The solicitor position was established much later, in the 20s, I think.

[00:02:48] Speaker 00:
You may be right, Your Honor.

[00:02:51] Speaker 00:
the expenses provision as in 1836, Congress made clear, was the language of expenses included the salaries of the PTO staff members.

[00:03:05] Speaker 00:
And so Congress sensibly three years later, when it added the expenses provision, used the language expenses, which it had used three years earlier to describe PTO salaries, to include the

[00:03:18] Speaker 00:
the expenses of PTO that would include salaried expenses related to 145 acts.

[00:03:23] Speaker 00:
Including patent examiners?

[00:03:27] Speaker 00:
Your Honor, in the 145 actions, there would be no reason to claim patent examiner expenses when we're talking about proceedings in the district court.

[00:03:41] Speaker 12:
If it's so clear.

[00:03:42] Speaker 12:
Why did it take the PTO until the last couple of years to tumble on this supposedly unambiguous reading?

[00:03:51] Speaker 00:
Well, Your Honor, as we explained in our brief, that following Congress's mandate that the PTO become a fully user-funded agency, PTO, and this court's decision in Hyatt, and this Supreme Court's decision, it meant that these proceedings were going to be more complicated and more expensive

[00:04:10] Speaker 00:
PTO took a look at its funding sources and decided that it made it a priority to claim PTO's personal assets.

[00:04:18] Speaker 10:
Are you saying when the taxpayers were paying your fees you had no obligation to seek them?

[00:04:24] Speaker 10:
But when the applicants would be paying your fees, now you suddenly need to go seek them?

[00:04:29] Speaker 10:
You just said when we turned into a self-funding agency, before that, who was paying the expenses of the agency?

[00:04:34] Speaker 00:
You're correct that before PTO claimed the expenses of the proceeding, that it would be paid by either other users or

[00:04:44] Speaker 00:
taxpayers before him.

[00:04:46] Speaker 10:
So the statute has said for 170 years all the expenses of the proceeding shall be paid by the applicant.

[00:04:52] Speaker 00:
Yes, Your Honor.

[00:04:53] Speaker 10:
That is not discretionary, correct?

[00:04:55] Speaker 10:
No, Your Honor, but the PTO... So the PTO didn't have the discretion if the statute included attorney's fees.

[00:05:01] Speaker 10:
The PTO did not have the discretion to not seek attorney's fees because the statute is mandatory, not discretionary.

[00:05:08] Speaker 10:
Your Honor, the statute... You're telling me that when we suddenly switch

[00:05:13] Speaker 10:
to user fee-based, fully no longer funded by taxpayer dollars, but when we needed to finally support ourselves, we decided to comply with the mandate in the statute that we seek attorney's fees?

[00:05:26] Speaker 10:
No, Your Honor, for that we decided not to.

[00:05:28] Speaker 00:
No, Your Honor, there was no decision based on

[00:05:34] Speaker 00:
the user-funded nature of the agency encouraged the agency to look more carefully at its user fees.

[00:05:42] Speaker 06:
And in doing so, and in light of Haydn... Didn't the agency become user-funded in the 80s?

[00:05:50] Speaker 00:
Partially so, Your Honor, but in the AIA, Congress made clear that the aggregate estimated cost of operating the agency should be borne by user fees, and so the agency

[00:06:02] Speaker 00:
sensibly examined all of its user fees and its costs.

[00:06:06] Speaker 00:
And in doing so, and in light of this court's decision in Hyatt, anticipated more complexity, more expense.

[00:06:14] Speaker 10:
Do you agree, since it wasn't mandatory, and your reading of the statute now is all expenses of the preceding shall be paid by the applicant, do you now agree that the agency was in error for the last 170 years when it failed to seek attorney's fees?

[00:06:30] Speaker 00:
Your Honor.

[00:06:32] Speaker 00:
The language of the statute is clear that it should be paid.

[00:06:39] Speaker 00:
The language of the statute, Your Honor, says the applicant shall pay them.

[00:06:44] Speaker 00:
So now the agency did not seek those fees from the applicant so that there hasn't been a violation.

[00:06:51] Speaker 00:
There's been no request that an applicant pay them that the applicant has not.

[00:06:55] Speaker 00:
But you're right, Your Honor.

[00:06:56] Speaker 00:
We didn't request them before.

[00:06:58] Speaker 11:
What difference does it make when you made a mistake earlier?

[00:07:01] Speaker 11:
We're not going to defer to your interpretation of this particular statute.

[00:07:05] Speaker 11:
We don't owe you any chevron deference.

[00:07:07] Speaker 00:
We are not arguing for deference over this interpretation of the statute.

[00:07:12] Speaker 00:
And we've been very clear, Your Honor, that after the AIA and HIAT, we have taken a closer look at the statute.

[00:07:19] Speaker 00:
And the agency is now clearly seeking

[00:07:22] Speaker 00:
the expenses that it's entitled to under the statute.

[00:07:26] Speaker 10:
And plaintiff's argument.

[00:07:27] Speaker 10:
I think my problem isn't a matter of giving you deference for your interpretation.

[00:07:30] Speaker 10:
It's more a matter of whether or not the fact that you failed to seek fees for 170 years reflects the fact that you didn't appreciate the language of the statute including attorney's fees.

[00:07:42] Speaker 10:
And as such, maybe that actually

[00:07:45] Speaker 10:
really does suggest that the statute is ambiguous and not so clear since the agency itself didn't interpret it as including attorney's fees for 170 years.

[00:07:54] Speaker 10:
Maybe that goes to the ambiguity.

[00:07:56] Speaker 00:
Your Honor, we have not claimed the fees in the past and that's not in dispute and there may be various reasons for that.

[00:08:05] Speaker 00:
I can't speak to why the agency may or may not have in the past, but what is clear is that the

[00:08:10] Speaker 00:
the language authorizes the agency to seek these personnel expenses and that the agency has done so.

[00:08:16] Speaker 04:
What I don't understand is what I asked you before.

[00:08:20] Speaker 04:
If the AIA mandates that you be completely user funded, why isn't the cost of a patent examiner or the cost of Xeroxing or the cost of parking part of

[00:08:35] Speaker 04:
the fees that your program is seeking in this case?

[00:08:40] Speaker 00:
Well, Your Honor, the language of 145 indicates that the agency can only recoup the expenses of the proceeding, by which we mean the 145 proceeding.

[00:08:51] Speaker 04:
Well, doesn't that all rise in the proceeding?

[00:08:54] Speaker 00:
Well, Your Honor, the agency does recoup the fees of patent examiners and of PTAB judges in the form of fees that users pay to use those proceedings.

[00:09:03] Speaker 00:
And this provision is no different.

[00:09:04] Speaker 00:
As the Supreme Court said in Gandy versus Marble, these 145 proceedings are an extension of the patent application.

[00:09:10] Speaker 00:
So like the application fee that a user pays in the initial instance for patent examination or for a proceeding before the PTAB, the user pays for a patent.

[00:09:22] Speaker 04:
It's expensive.

[00:09:23] Speaker 04:
It's not cost as cost or no.

[00:09:25] Speaker 00:
It's expensive.

[00:09:26] Speaker 00:
Yes, Your Honor.

[00:09:26] Speaker 04:
So how about the price for driving to the courthouse or taking a taxi?

[00:09:31] Speaker 04:
Do you seek that?

[00:09:32] Speaker 00:
the price for PTO attorneys driving to the courthouse?

[00:09:38] Speaker 00:
Well, Your Honor, there may be circumstances in which those sorts of expenses are expenses of the proceeding.

[00:09:45] Speaker 00:
You may be aware that recently in 145 actions, PTO attorneys had to travel to Texas to participate in a 145 trial.

[00:09:54] Speaker 00:
And we think that those expenses.

[00:09:56] Speaker 04:
Sometimes costs include a travel expense.

[00:10:00] Speaker 04:
But you should be saying always

[00:10:02] Speaker 00:
we should be saying always.

[00:10:03] Speaker 00:
Certainly, at a minimum, we think that those- They're going to turn into a profit-making enterprise?

[00:10:08] Speaker 00:
Well, we are certainly not going to turn into a profit-making enterprise, Your Honor.

[00:10:12] Speaker 00:
And we have only sought the actual expenses that PTO incurred in defending the proceeding that NANDQUEST elected here, just as Congress- Can you cite to any other provision, any other circumstance in which a loser can recoup their attorney's fees?

[00:10:32] Speaker 00:
Um, your honor, it's highly unusual.

[00:10:35] Speaker 00:
And as the fourth circuit found, that was one of the features that the fourth circuit relied on in determining that this isn't, when you say highly unusual, is your answer?

[00:10:42] Speaker 00:
No, you can't think of any other, you haven't found any other circumstance other than the user fees that Nantquest paid, um, to PTO in order to apply for the patent that was rejected.

[00:10:54] Speaker 00:
Those are fees that apply, win or lose.

[00:10:56] Speaker 00:
Um, when it applies, uh, when it seeks a review in the PTAB,

[00:11:00] Speaker 00:
It pays those fees.

[00:11:02] Speaker 12:
Well, when you apply for a patent and it gets rejected, that's not a winner-loos proposition.

[00:11:06] Speaker 12:
I mean, I didn't think that the PTO viewed itself as adversary to applicants when it's reviewing the application.

[00:11:13] Speaker 12:
That's kind of an absurd statement.

[00:11:15] Speaker 00:
Well, Your Honor, these, like the Supreme Court said in Gandhi versus Marble, these proceedings are very analogous to the patent examination process, and indeed an extension of that process.

[00:11:27] Speaker 00:
And like the fee you pay,

[00:11:29] Speaker 00:
win or lose for a patent application at the outset.

[00:11:32] Speaker 00:
You pay these expenses, win or lose, before the district court.

[00:11:37] Speaker 00:
And that's what 145 requires.

[00:11:43] Speaker 00:
NANDQUEST's position is that other PTO users should pay those expenses.

[00:11:47] Speaker 00:
And that is directly contrary to what Congress provided in section 145.

[00:11:53] Speaker 08:
How are the salaries that are paid to the staff attorneys

[00:11:56] Speaker 08:
How are they treated within the budget, the PTO budget, in terms of GSNA?

[00:12:04] Speaker 08:
Are they an operating cost?

[00:12:06] Speaker 08:
Are they expensed out?

[00:12:09] Speaker 00:
Your Honor, I take it that you're asking the question about the budgeting and the allocation of costs for other user fees.

[00:12:15] Speaker 08:
No, for the staff attorney.

[00:12:18] Speaker 08:
The salaries paid to your staff attorneys.

[00:12:20] Speaker 08:
How are they treated?

[00:12:21] Speaker 00:
In the Solicitor's Office, those are salary expenses.

[00:12:26] Speaker 00:
So it's a cost?

[00:12:29] Speaker 00:
It is an expense of the PTO.

[00:12:32] Speaker 08:
Is there any profit margin factored into any of those costs?

[00:12:40] Speaker 00:
No, Your Honor, the PTO does not recoup profits in the private sector sense of that term.

[00:12:47] Speaker 03:
Is it part of the record in this case how much money was paid on an hourly basis?

[00:12:53] Speaker 03:
We all are familiar with hourly charges of attorneys, how that was calculated in this case and what the result was.

[00:12:59] Speaker 00:
Yes, Your Honor.

[00:13:00] Speaker 00:
In this case, the PTO has requested the pro rata portion of the salary expenses.

[00:13:05] Speaker 00:
So PTO submitted the annual salaries of the two attorneys and one paralegal who worked on this 145 proceeding and recorded the number of hours that they

[00:13:17] Speaker 00:
expended time working on this proceeding.

[00:13:20] Speaker 04:
Did Council ever receive bonuses during a fiscal year?

[00:13:26] Speaker 00:
If they did, Your Honor, I don't believe that they were counted in the pro rata share of the salary expenses here.

[00:13:34] Speaker 00:
Why not?

[00:13:34] Speaker 04:
The answer is Council do, can get a bonus.

[00:13:39] Speaker 04:
Isn't that correct?

[00:13:40] Speaker 00:
Possibly so, Your Honor.

[00:13:42] Speaker 00:
some government attorneys do.

[00:13:43] Speaker 00:
I don't know whether these particular attorneys received bonuses.

[00:13:48] Speaker 04:
No, in general, there's a policy that allows for bonuses to be awarded.

[00:13:52] Speaker 00:
That sounds right, Your Honor.

[00:13:53] Speaker 04:
Why aren't they expensed in?

[00:13:55] Speaker 00:
You're saying that if PTO attorneys received bonuses in the general course, whether a share of those could be expensed as expenses of the proceeding.

[00:14:05] Speaker 04:
Sure, or in this particular instance?

[00:14:07] Speaker 04:
Your Honor, if those were determined... You thought they did a really good job?

[00:14:10] Speaker 00:
that we could award those expenses?

[00:14:12] Speaker 00:
Well, I think that PTO could sensibly acclaim any expenses that were attributable to the proceeding, and then the district court could review in the usual course whether those expenses were expenses of the proceeding and whether they were reasonable in this case.

[00:14:28] Speaker 05:
Do you all keep time sheets, detailed time sheets, as in the private sector case by case?

[00:14:34] Speaker 05:
that you work on in a solicitor's office?

[00:14:36] Speaker 00:
There is time accounting.

[00:14:37] Speaker 00:
And those records.

[00:14:40] Speaker 05:
Day by day, by every eight minute break, or whatever it is?

[00:14:44] Speaker 00:
I don't believe that it's an accounting system exactly along those lines.

[00:14:50] Speaker 00:
But the PTO submitted time accounting sheets that reported the time that its attorneys expended on it.

[00:14:57] Speaker 05:
At the time that it spent, or at the time in retrospect after the case is over?

[00:15:04] Speaker 00:
The records would reflect the time expended on the matter.

[00:15:12] Speaker 05:
Are you saying that contemporaneous, yes or no, are contemporaneous time sheets kept for every item that every lawyer works on?

[00:15:22] Speaker 00:
I know that in this matter, Your Honor, the PTO, in this matter, yes, the PTO submitted time.

[00:15:29] Speaker 05:
Contemporaneous time sheets were kept by every lawyer

[00:15:32] Speaker 05:
who worked on this matter that is assessing the charge.

[00:15:36] Speaker 00:
But the two attorneys and one paralegal here submitted time sheets indicating the time.

[00:15:41] Speaker 08:
I think the question is not whether they submitted time sheets.

[00:15:43] Speaker 08:
Do they keep time in the course of a day?

[00:15:46] Speaker 08:
If they get a phone call related to that, do they put the phone down and then mark, you know, spoke with Joe, point two?

[00:15:57] Speaker 00:
But for 145 actions, yes, that they do keep those actions in real time.

[00:16:03] Speaker 00:
For other matters, I can't speak to whether those.

[00:16:06] Speaker 05:
So for this case, contemporaneous time sheets have been produced?

[00:16:10] Speaker 00:
Yes, Your Honor.

[00:16:11] Speaker 05:
For exactly who worked on what at the time?

[00:16:14] Speaker 00:
Yes, Your Honor.

[00:16:15] Speaker 00:
And those were submitted to the district court in this case.

[00:16:20] Speaker 00:
So that the PTO has claimed the personnel expenses for the time

[00:16:26] Speaker 00:
that PTO devoted to this matter, and that those attorneys were diverted from pursuing the other work of the PTO.

[00:16:34] Speaker 05:
Are those sheets in the record before us?

[00:16:36] Speaker 00:
Yes, Your Honor.

[00:16:37] Speaker 03:
And what was the hourly rate?

[00:16:38] Speaker 03:
Do you recall if that's in the record?

[00:16:40] Speaker 00:
It is in the record.

[00:16:41] Speaker 00:
And Your Honor, I think it's roughly around $100 an hour.

[00:16:47] Speaker 00:
I could come up with the more specific rates, because it depends on the particular attorney's and paralegal's salaries.

[00:16:55] Speaker 01:
Can you clarify something that I may have misunderstood?

[00:16:58] Speaker 01:
You started the argument by talking about how the particular attorneys that are at issue here are salaried employees of the PTO.

[00:17:11] Speaker 01:
Is your view that 145 applies differently to the allocated share of their salaries

[00:17:19] Speaker 01:
on the one hand, and a out-of-pocket PTO expenditure on private attorneys hired for the purpose of litigating if there were such?

[00:17:30] Speaker 00:
Well, as the panel pointed out and we pointed out in our brief, the same logic would apply.

[00:17:36] Speaker 00:
PTO does not have authority or retain

[00:17:39] Speaker 01:
private counsel, but the notion that PTO salaried attorneys should be able to recoup the costs and the expenses of performing... I guess I thought I was hearing, and maybe I won't say this clearly enough, a suggestion that even if you could not get 145 reimbursement of out of pocket payments to private attorneys hired to conduct

[00:18:09] Speaker 01:
your litigation on the defense side of a 145 action, that even if you couldn't do that, you can get what you're seeking here, maybe because we wouldn't consider those attorney's fees at all, but just salary, internal salary expenses.

[00:18:30] Speaker 01:
Was I hearing that distinction correctly or not?

[00:18:34] Speaker 00:
Take it your question goes to our argument that the word expenses includes personnel expenses for salaried government attorneys and that attorney's fees would have been an odd use, would have been an odd phrase to use in the context of an expense recruitment provision that applies only to salaried government attorneys.

[00:18:53] Speaker 00:
And that was our only point, Your Honor, is that PTO doesn't retain outside counsel and so

[00:19:00] Speaker 00:
The phrase expenses applies most naturally in this particular context.

[00:19:07] Speaker 11:
But at the time the statute was passed, it appeared that you did retain outside counsel for some of these cases.

[00:19:14] Speaker 11:
That would be included within the term expenses too, wouldn't it?

[00:19:18] Speaker 00:
Yes, Your Honor, as we've said, that attorneys seize

[00:19:23] Speaker 00:
would be included as that term is understood under the the language of 145.

[00:19:28] Speaker 11:
I think you have a hard time saying that in 1839 it was common plain that this work was going to be done by salary employees of the office.

[00:19:37] Speaker 11:
I mean there's no indication that the office had the capability to do that.

[00:19:41] Speaker 11:
Well your honor but in 18... It seems perhaps more likely that at that time that the expense involved was the retention of outside counsel.

[00:19:51] Speaker 00:
Perhaps your honor but

[00:19:53] Speaker 00:
by borrowing the language expenses that Congress had used three years earlier in describing the salaries of PTO staff.

[00:20:01] Speaker 00:
that those expenses would have been included.

[00:20:04] Speaker 11:
It would include salaries.

[00:20:05] Speaker 00:
Salaries as well.

[00:20:07] Speaker 00:
Yes, Your Honor.

[00:20:07] Speaker 03:
And there's no dispute in this case at least that expert fees are included in this statutory provision.

[00:20:14] Speaker 00:
Yes, Your Honor.

[00:20:15] Speaker 03:
And does the PTO have a contract?

[00:20:17] Speaker 03:
Should they contract with outsiders?

[00:20:19] Speaker 03:
How is that financially different?

[00:20:21] Speaker 00:
Yes, Your Honor.

[00:20:21] Speaker 00:
The PTO would retain outside counsel as Nan Quest did here and then

[00:20:26] Speaker 00:
And the outside experts.

[00:20:31] Speaker 00:
Yes, your honor.

[00:20:31] Speaker 00:
Thank you for that clarification.

[00:20:32] Speaker 09:
Is there a prevailing party status required for the expert payment?

[00:20:39] Speaker 09:
The payment fees by expert witnesses?

[00:20:41] Speaker 00:
No, your honor.

[00:20:41] Speaker 09:
And as we- So this statute, at least in this context, is loser pays even for expert witness fees.

[00:20:48] Speaker 00:
Expert witness fees.

[00:20:49] Speaker 00:
And as-

[00:20:50] Speaker 00:
Yes, Your Honor, as we pointed out in our brief, expert witness fees are traditionally ones to which the American rule would apply.

[00:20:57] Speaker 00:
And there's no dispute that expert witness fees are attorney.

[00:20:59] Speaker 12:
But it's not loser pays.

[00:21:01] Speaker 12:
It's loser or winner pays.

[00:21:02] Speaker 00:
Or winner pays, yes, Your Honor.

[00:21:04] Speaker 00:
So in this sense, it's not even the American rule or the English rule applies.

[00:21:08] Speaker 00:
It's something different, that Congress made clear that when loser draw, the plaintiff who has availed itself of the opportunity to come into court with all of the advantages

[00:21:19] Speaker 00:
that the 145 proceeding conveys, pays all of the expenses.

[00:21:25] Speaker 12:
What about the open way of the constitutional right to petition the courts and the access to courts issue?

[00:21:33] Speaker 00:
The access to courts issue, there is nothing about the expenses provision that prohibits access to the courts.

[00:21:40] Speaker 00:
And every plaintiff has in the usual course the right to proceed

[00:21:45] Speaker 00:
before this court in a 141 action.

[00:21:48] Speaker 00:
So that overlay is of no moment within perspective.

[00:21:56] Speaker 08:
But whether or the other, a 145 action is a civil court action, correct?

[00:22:00] Speaker 00:
Yes, Your Honor.

[00:22:01] Speaker 08:
I wanted to make sure you weren't arguing something different to that.

[00:22:05] Speaker 00:
No, Your Honor, and I appreciate the opportunity to clarify that

[00:22:09] Speaker 00:
that it is an action in district court with all of the advantages and all of the expenses that that requires.

[00:22:20] Speaker 04:
How do you calculate the attorney's hourly fee rate?

[00:22:25] Speaker 00:
The hourly fee rate in this case, we submitted the annual salaries of the attorneys in this case.

[00:22:34] Speaker 00:
and divided that by the proportion of the hours they would expend in a year that were devoted to this one.

[00:22:44] Speaker 00:
How do you know how many hours they would expend in a year?

[00:22:46] Speaker 00:
It's calculated by the number of hours that a PTO attorney is paid for each day.

[00:22:52] Speaker 00:
I believe it's eight and a half hours a day and adjusted for vacation, I think.

[00:22:58] Speaker 04:
So if they happen to work more hours that year, then their billing rate is less?

[00:23:05] Speaker 00:
Yes, Your Honor.

[00:23:06] Speaker 04:
So if they work, say, 3,000 hours, then their billing rate would be $75 or something along those lines.

[00:23:12] Speaker 00:
Is that correct?

[00:23:15] Speaker 00:
Yes, Your Honor.

[00:23:15] Speaker 00:
I believe that that math is correct.

[00:23:17] Speaker 10:
Except you just explained that they only keep time for 145 actions, but not the other matters they work on.

[00:23:22] Speaker 10:
So how do we know how many hours?

[00:23:24] Speaker 00:
I appreciate the opportunity to clarify that, Your Honor.

[00:23:26] Speaker 00:
The contemporaneous detailed billing records are with respect to 145, but they do keep time sheets

[00:23:34] Speaker 00:
due time accounting with respect to other cases.

[00:23:37] Speaker 06:
Is it your view that the expenses of this appeal should be payable, including the salaries of PTO employees who might be sitting here?

[00:23:49] Speaker 00:
The DC Circuit has held that expenses of an appeal are reasonably included in expenses of the proceeding under 145, so we think that those

[00:24:02] Speaker 00:
that a court could reasonably construe those.

[00:24:04] Speaker 00:
We've not sought those here, Your Honor.

[00:24:07] Speaker 08:
So you're saying that in language and statute that says this proceeding, it's not limited just to the 145 action at the district court, but also includes this appeal and maybe a Supreme Court appeal?

[00:24:21] Speaker 00:
Your honor, the DC Circuit found that the language would permit expenses related to an appeal.

[00:24:29] Speaker 00:
But again, the PTO is not seeking those here.

[00:24:33] Speaker 10:
Why?

[00:24:33] Speaker 10:
You again don't have discretion under the statute.

[00:24:36] Speaker 10:
If you believe those are expenses included within the statute, you shall

[00:24:42] Speaker 10:
receive them.

[00:24:43] Speaker 10:
You don't have the discretion.

[00:24:45] Speaker 10:
So if they're within the statute, you have to get them.

[00:24:48] Speaker 10:
I mean, you are agents of the taxpayers.

[00:24:50] Speaker 00:
Yes, Your Honor.

[00:24:52] Speaker 00:
And that's why we're here today, Your Honor, is to establish the principle that PTO can recoup all of the expenses of the proceeding

[00:25:01] Speaker 00:
And we've sensibly started.

[00:25:03] Speaker 10:
But you just suggested to two members of this Court you don't intend to seek all the expenses of the proceeding, because it is the PTO's view that the appellate attorney's fees here and possibly before the Supreme Court would be included.

[00:25:14] Speaker 10:
But you've decided not to seek them.

[00:25:17] Speaker 00:
Yes, Your Honor.

[00:25:18] Speaker 00:
In this case, I wanted to clarify the record that in this case, we have not.

[00:25:22] Speaker 00:
The PTO sensibly sought to establish the principle that it could claim all the expenses of its proceeding, all the expenses of the proceeding,

[00:25:31] Speaker 00:
by pursuing the expenses that are the easiest to establish, the BTS personnel expenses.

[00:25:39] Speaker 03:
Well, you mentioned that you're relying on the DC Circuit.

[00:25:41] Speaker 03:
That would not be binding on us.

[00:25:43] Speaker 03:
That's right.

[00:25:43] Speaker 03:
It would be the circuit to decide whether or not it's easy to see the proceeding included or excluded.

[00:25:48] Speaker 02:
Doesn't your argument also require an interpretation of the proceeding?

[00:25:52] Speaker 02:
I mean, earlier you said the proceeding doesn't include examination that occurs before the district court action.

[00:25:58] Speaker 02:
But now you're saying it would include any appeal that occurred after, including at the Federal Circuit and any potential action in the Supreme Court.

[00:26:07] Speaker 02:
How do you define proceedings to include that?

[00:26:10] Speaker 02:
I mean, I don't think that the district court, the DC district court, has defined the proceeding.

[00:26:15] Speaker 02:
What language is it that you're relying on that the DC district court defined?

[00:26:21] Speaker 00:
Your Honor, in the Robertson case, the DC Circuit considered whether

[00:26:29] Speaker 00:
certain printing expenses related to the appeal were expenses of the proceeding under 145.

[00:26:36] Speaker 00:
But that is no moment here, Your Honor, because the proceeding that PTO is claiming and that is indisputably the proceeding described in section 145 is the proceeding in district court

[00:26:51] Speaker 00:
all of the advantages that come with that, and the contraband expenses.

[00:26:54] Speaker 02:
Can I ask you about a question, which is, are you aware of any other statute that shifts the salaries of an agency's attorneys onto the party who brought proceedings challenging the agency's decision?

[00:27:07] Speaker 00:
I'm not aware, Your Honor.

[00:27:09] Speaker 00:
That's one of the very unique features of this statute, that the Fourth Circuit relied on in concluding that Congress, when it provided expenses,

[00:27:18] Speaker 00:
when loser draw to be recouped by the agency, that Congress was clear that it meant all of the proceedings.

[00:27:26] Speaker 00:
To take the unusual step of requiring a plaintiff to pay all of the expenses, regardless of its success, was an indication that Congress meant what it said, all expenses.

[00:27:37] Speaker 12:
That includes expert witness fees.

[00:27:40] Speaker 12:
The American rule doesn't even apply, because these are just personnel expenses.

[00:27:43] Speaker 12:
And you're not talking about attorney's fees.

[00:27:45] Speaker 12:
And why don't you then take a pro rata proportion of all of the overhead?

[00:27:50] Speaker 12:
So every time the PTO provides cars for people, it's employees to go places.

[00:27:55] Speaker 12:
Or every time the PTO contributes to health benefits or any other overhead that is used, why isn't that effective?

[00:28:06] Speaker 00:
Well, Your Honor, that might sensibly be part of the expenses of the proceeding, and that is not unusual, Your Honor.

[00:28:15] Speaker 00:
In an attorney's case, private attorneys would claim benefits and even a profit margin in those cases.

[00:28:23] Speaker 00:
When a PTO applicant proceeds before the PTO, those expenses include a pro rata share of the things that you're talking about.

[00:28:32] Speaker 12:
corporate overhead or law firm overhead factored into attorney's fees in attorney's fee applications.

[00:28:39] Speaker 00:
Well, Your Honor, is this court discussed the issue in Rainey when it was talking about the rates that salaried union attorneys could charge under attorney's fees provision and noted that proper cost accounting might include those types of overhead that are normally baked into a private

[00:29:00] Speaker 00:
attorney's attorney's fee.

[00:29:03] Speaker 00:
And it's not unusual that that would make sense, that that's how private law firms recoup their fees.

[00:29:08] Speaker 04:
So speaking sensibly, taking you back to the person who works extra hard is worth less than by your rationale, the person who only works half time is worth twice as much, right?

[00:29:21] Speaker 04:
So the person who only works 500 hours a year is worth four times as much, and you couldn't possibly fire them because they're worth four times as much.

[00:29:29] Speaker 00:
Well, Your Honor, you're pointing out that plaintiffs get a good deal with the PTO attorneys at their hourly rates.

[00:29:38] Speaker 00:
But to the extent that there are concerns with particular claims in a particular case, the district court would sensibly review those for reasonableness.

[00:29:49] Speaker 08:
To what extent does your

[00:29:50] Speaker 08:
You're budgeting and limited or applicable to GAAP, generally accepted accounting principles.

[00:30:02] Speaker 00:
To what extent?

[00:30:03] Speaker 00:
Your Honor, my understanding of the GAAP is that that applies to private corporations.

[00:30:08] Speaker 00:
And so the PTO adheres to similar accounting principles that apply to government agencies.

[00:30:16] Speaker 00:
I'm not familiar with the intricacies of the difference between the two.

[00:30:20] Speaker 00:
But they apply normal accounting principles that apply to them.

[00:30:24] Speaker 03:
Okay.

[00:30:24] Speaker 03:
You've eaten all your rebuttal.

[00:30:25] Speaker 03:
We'll restart two minutes for rebuttal.

[00:30:27] Speaker 03:
Thank you, Your Honor.

[00:30:28] Speaker 03:
Thank you.

[00:30:32] Speaker 07:
Good morning.

[00:30:33] Speaker 07:
Thank you.

[00:30:34] Speaker 07:
May it please the Court, on behalf of Nanquest, Morgan Chu of Virela Monello.

[00:30:40] Speaker 07:
Good morning.

[00:30:40] Speaker 07:
The key question before the Court.

[00:30:43] Speaker 11:
So, Mr. Chu, what is the purpose of the expense provision in section 145?

[00:30:50] Speaker 07:
I'm sorry.

[00:30:50] Speaker 07:
I didn't hear the question.

[00:30:54] Speaker 11:
What is the purpose of the expense provision in section 145?

[00:31:01] Speaker 11:
What do you understand that Congress was concerned about?

[00:31:05] Speaker 11:
What was the purpose of the statute?

[00:31:08] Speaker 07:
Right.

[00:31:08] Speaker 07:
So let me address my understanding of the 1839 statute, what's included in expenses and what's not included in expenses.

[00:31:17] Speaker 07:
So at that time,

[00:31:19] Speaker 07:
I think I'm asking a little bit different question.

[00:31:23] Speaker 11:
Why did Congress adopt this unusual provision, which even under your view would include payment of expert fees and other fees which don't usually fall within the definition of costs.

[00:31:39] Speaker 11:
What was the purpose of this?

[00:31:41] Speaker 11:
Why was Congress providing that the applicant who sued for a bill in equity

[00:31:48] Speaker 11:
had to pay the expenses of the patent.

[00:31:50] Speaker 11:
What was the objective?

[00:31:51] Speaker 11:
What was the purpose of that?

[00:31:54] Speaker 07:
We don't know.

[00:31:55] Speaker 07:
We didn't see anything in the legislative history that explained it.

[00:31:59] Speaker 07:
We do know that at that time, at approximately that time, there were legal dictionary definitions that dealt with expenses or costs.

[00:32:13] Speaker 07:
And let me give you an example.

[00:32:14] Speaker 07:
This wasn't briefed by the government.

[00:32:16] Speaker 07:
And it wasn't briefed by Nanquest.

[00:32:18] Speaker 11:
So you have no view as to what the purpose of the statute was?

[00:32:22] Speaker 07:
Well, it was to shift expenses to the patent applicant who pursued 145 actions.

[00:32:30] Speaker 07:
That's clear on its face.

[00:32:32] Speaker 07:
On the underlying question of why did Congress intend to do that, I don't know the answer to that question.

[00:32:39] Speaker 07:
If I can return to the dictionary definition, I want to give credit to the amicus brief by the Intellectual Property Owners Association, because they refer to a dictionary definition not cited by the parties.

[00:32:53] Speaker 07:
There was a James Whishaw, W-I-S-H-A-W, who in 1829 published a new law dictionary, and it was defining

[00:33:09] Speaker 07:
a Latin term.

[00:33:12] Speaker 07:
I will butcher a Latin pronunciation, but it reads something like expenses litis, L-I-T-I-S.

[00:33:21] Speaker 07:
The literal translation in Latin to English is litigation expenses, so highly relevant.

[00:33:30] Speaker 07:
And the definition, in essence, is costs that are allowed in a suit

[00:33:39] Speaker 07:
to a plaintiff or a defendant who is recovering in that litigation.

[00:33:46] Speaker 11:
So your view is that the statute of expenses is limited to traditional costs?

[00:33:51] Speaker 07:
Well, we're focused on whether attorney's fees are.

[00:33:56] Speaker 07:
But yes, that is the starting place in terms of costs at that time.

[00:34:01] Speaker 07:
So the award of expert fees would be outside the scope of costs, right?

[00:34:07] Speaker 07:
We didn't address that exactly in this case, because the key question was a matter of attorney's fees.

[00:34:14] Speaker 07:
But there is another dictionary definition that is slightly different.

[00:34:17] Speaker 11:
But expert fees are not part of costs.

[00:34:20] Speaker 11:
So if your view is it's just costs, then expert fees wouldn't be included, right?

[00:34:25] Speaker 07:
So most courts today, in the ordinary.

[00:34:28] Speaker 11:
No, no, try to answer my question.

[00:34:29] Speaker 07:
Yes.

[00:34:30] Speaker 11:
Isn't that right?

[00:34:31] Speaker 11:
That if it's limited to costs, it wouldn't include expert fees either.

[00:34:35] Speaker 07:
If I accept a modern definition of costs as applied today, that's correct.

[00:34:41] Speaker 08:
What about attorney's fees?

[00:34:42] Speaker 08:
How would you define that today?

[00:34:44] Speaker 08:
I spent over 30 years in the private sector, and attorney's fees always had a profit built into it, correct?

[00:34:53] Speaker 08:
Is that your experience?

[00:34:55] Speaker 07:
Private law firms would like to think there is a profit built into it, but I can tell you that many private law firms don't have a profit built into it.

[00:35:02] Speaker 08:
And the ones that don't, they fail because they're not covering all their expenses.

[00:35:07] Speaker 07:
Well, the concept really is reasonable attorney's fees normally.

[00:35:10] Speaker 07:
So it's reasonable whether there is or isn't a profit.

[00:35:13] Speaker 07:
So we're not looking to whether there is a profit.

[00:35:16] Speaker 08:
So how are attorney's fees accounted for in the law firm?

[00:35:19] Speaker 08:
Are they the fees themselves?

[00:35:21] Speaker 08:
Are they a profit?

[00:35:24] Speaker 08:
Is it treated as income?

[00:35:26] Speaker 08:
Or is it treated as an expense?

[00:35:28] Speaker 08:
Just the fee facts.

[00:35:30] Speaker 07:
Income.

[00:35:30] Speaker 07:
It's revenue.

[00:35:32] Speaker 07:
And some matters by themselves are not profitable, and other matters are profitable.

[00:35:39] Speaker 07:
So I want to go to this other dictionary.

[00:35:42] Speaker 08:
So the charges or the expenses for staff lawyers that don't have income, that don't have a profit attached to it, there's something different than what constitutes attorney's fees, right?

[00:36:00] Speaker 07:
I can't address the government.

[00:36:01] Speaker 07:
I can address it from the private sector.

[00:36:04] Speaker 07:
There are sometimes we employ people who are law school graduates and members of the bar.

[00:36:10] Speaker 07:
And depending on the arrangement with the client, they are sometimes simply a pass-through cost.

[00:36:15] Speaker 07:
There is zero profit.

[00:36:17] Speaker 07:
Whatever we pay them is what we're reimbursed by the client.

[00:36:22] Speaker 08:
And they're treated as a operating cost.

[00:36:27] Speaker 07:
We bill the client

[00:36:29] Speaker 07:
for their time and they are usually paid for their time, but it's just a pass through.

[00:36:37] Speaker 07:
So going back to the key question, which is what did Congress intend in 1839?

[00:36:43] Speaker 07:
There is another dictionary definition.

[00:36:46] Speaker 07:
Again, a shout out to the IPO brief.

[00:36:48] Speaker 07:
The two cases I've mentioned, the first one and this one, are I think of page 12 and 13 of their brief.

[00:36:55] Speaker 07:
There is the first edition of Black's Law Dictionary.

[00:36:58] Speaker 07:
It's 1891.

[00:36:59] Speaker 07:
It's the first edition, however.

[00:37:02] Speaker 07:
And it also defines that same term, the Latin term, expenses litus.

[00:37:10] Speaker 07:
And it says, in essence, costs or expenses of suit usually awarded to the successful party.

[00:37:24] Speaker 07:
So between 1829 and the 1891 Black's Law Dictionary, there's great consistency.

[00:37:30] Speaker 07:
The second definition said expenses are costs or expenses.

[00:37:34] Speaker 07:
So your theory is that expenses means traditional costs.

[00:37:38] Speaker 07:
Yes.

[00:37:39] Speaker 07:
And I think Judge Stoll's dissenting opinion cited three contemporaneous dictionary definitions that stand for the proposition, expenses are included in costs,

[00:37:52] Speaker 07:
and costs are included in expenses.

[00:37:55] Speaker 07:
Two of the definitions were from 1830, and one was from 1856, in sharp contrast to the government's argument based on Wright and Miller from the last decade or two, or the last edition of Black's Law Dictionary.

[00:38:13] Speaker 07:
Again, what we're asking is, what did Congress intend?

[00:38:18] Speaker 07:
And what the Supreme Court has taught us

[00:38:20] Speaker 07:
in Baker-Botts, in Aliesca, and in other opinions, if there is a departure from the American rule, it must be, this is in quotes, specific and explicit.

[00:38:35] Speaker 11:
But it doesn't have to use the word attorneys' fees, right?

[00:38:37] Speaker 07:
It does not have to use the word attorneys' fees.

[00:38:40] Speaker 07:
It could say compensation for members of the solicitor's office.

[00:38:45] Speaker 07:
Compensation for the... Well, let me ask you.

[00:38:47] Speaker 03:
If you're sitting there in Congress and you're trying to craft an unambiguous provision that would allow for the personnel expenses, would it be sufficient in this provision to say all of the expenses of the proceeding, including the personnel expenses, would that be sufficient?

[00:39:05] Speaker 07:
No.

[00:39:07] Speaker 07:
No.

[00:39:07] Speaker 07:
Not at all.

[00:39:08] Speaker 07:
And Congress had that opportunity.

[00:39:10] Speaker 07:
Congress was engaged in an overhaul

[00:39:13] Speaker 07:
of the entire Patent Act leading up to the 2011 enactment of the America's InvenSent.

[00:39:22] Speaker 07:
So they were shifting more than they had in the past the responsibility for being completely user-funded.

[00:39:31] Speaker 07:
At that point in time, either interested groups, including the Patent Office or anyone else or members of Congress, could have said, we've got to help them out.

[00:39:41] Speaker 07:
Let's make sure.

[00:39:41] Speaker 03:
Well, then why wouldn't it be sufficient if it's said explicitly, including personnel expenses?

[00:39:47] Speaker 07:
Because the general rule from the Supreme Court is against the background of the American rule, which has been in place since 1796.

[00:39:59] Speaker 07:
And Congress, I think, would have the wisdom to say that it shifts attorney's fees, including inside attorneys.

[00:40:09] Speaker 03:
of the patent office and then maybe... Well, I thought we agreed that you don't have to use the magic words, attorney's fees.

[00:40:15] Speaker 03:
So tell me how you would say it to be clear without using the word attorney's fees, because we agreed that that was not necessary.

[00:40:23] Speaker 07:
Lawyers working on the case from the solicitor's office.

[00:40:26] Speaker 03:
It's not personnel.

[00:40:26] Speaker 03:
So it would be all of the expenses of the proceeding, including the... What's the language you're giving me?

[00:40:32] Speaker 07:
Well, I would start with attorney's fees because that's the

[00:40:36] Speaker 07:
major change.

[00:40:37] Speaker 07:
I would say they would be awarded the patent.

[00:40:40] Speaker 03:
But follow me for a while.

[00:40:41] Speaker 03:
Okay.

[00:40:42] Speaker 03:
Let's assume that, and I thought we agreed that attorney's fees, the word attorney's fees doesn't have to be in it.

[00:40:47] Speaker 03:
Right.

[00:40:47] Speaker 03:
So if you're sitting there in Congress, start with all of the expenses of the proceeding, comma, what would we have to say, including what?

[00:40:56] Speaker 07:
Okay.

[00:40:57] Speaker 07:
I would say it in the following way.

[00:40:59] Speaker 07:
Quote, including without limitation the time spent by lawyers

[00:41:06] Speaker 07:
working on the particular matter from the solicitor's office, since I'm getting to draft this statute, I would also say, and outside counsel, allowing for situations in the future.

[00:41:18] Speaker 07:
That would be specific and explicit under Supreme Court presidents.

[00:41:24] Speaker 11:
Now, I- What they have to do is kind of an awkward statute.

[00:41:27] Speaker 11:
They have to draft it with that level of detail?

[00:41:29] Speaker 07:
Yes.

[00:41:30] Speaker 09:
Yes, because they are- Isn't that just a way of saying attorney's fees in other words?

[00:41:35] Speaker 09:
I mean, you're saying expensive- Yes.

[00:41:37] Speaker 09:
Well, but you're not accepting the chief judge hypothetical that you don't have to use magic words.

[00:41:42] Speaker 09:
Changing the words attorney fees into expenses of lawyers is not fully accepting her hypothetical.

[00:41:49] Speaker 09:
So assume that you don't have to use any magic words that designate and call out attorneys, lawyers, counselors, or anything like that specifically.

[00:41:59] Speaker 09:
What else would be sufficient?

[00:42:01] Speaker 07:
Well, there are two points.

[00:42:03] Speaker 07:
There are lots of other ways to describe the compensation of someone doing legal work other than the ones we've already mentioned.

[00:42:09] Speaker 07:
That was my answer to the chief judge's question.

[00:42:14] Speaker 03:
So would it be including expenses associated with the compensation of attorneys, salaried attorneys, in the solicitor's office?

[00:42:22] Speaker 07:
Yes.

[00:42:23] Speaker 03:
But wouldn't that make the word all superfluous?

[00:42:27] Speaker 07:
No, not at all.

[00:42:29] Speaker 07:
In fact, there's a Supreme Court decision that looks at a similar word.

[00:42:34] Speaker 07:
See, all is a catch-all word, but if you think about it, it really doesn't change.

[00:42:38] Speaker 07:
If someone says, I'm going to pay you all the expenses, that's not different from saying, I'm going to pay you all the expenses.

[00:42:45] Speaker 07:
In Flora v.

[00:42:47] Speaker 07:
U.S., Supreme Court 1960, I believe, there is a catch-all phrase

[00:42:57] Speaker 07:
that was any, and then a string of words.

[00:43:01] Speaker 07:
And the Supreme Court says, well, that's a catch-all phrase, but it doesn't tell us what it catches.

[00:43:06] Speaker 07:
So too in the difference between expenses and all expenses.

[00:43:10] Speaker 11:
But let's go back to the, I'm having a problem here, because in 1839, there was no solicitor of the patent office.

[00:43:17] Speaker 07:
I'm sorry, sir.

[00:43:18] Speaker 11:
In 1839, there was no solicitor in the patent office.

[00:43:22] Speaker 11:
There weren't any lawyers in the patent office that handled litigation.

[00:43:26] Speaker 11:
So how, sitting there in 1839, would you draft this statute to include outside counsel fees without mentioning attorney's fees?

[00:43:38] Speaker 07:
So two points.

[00:43:40] Speaker 07:
First of all, scouring all of the attorney's fees statutes in the United States, they all mention attorney's fees in some way.

[00:43:51] Speaker 11:
Tell me how you would draft it in 1839 without mentioning attorney's fees.

[00:43:56] Speaker 07:
persons providing lawyer services who are hired internally or externally by the Patent Office.

[00:44:05] Speaker 07:
And there was something very close three years earlier in the 1836 statute.

[00:44:11] Speaker 07:
It referred to the compensation for the personnel of the Patent Office.

[00:44:16] Speaker 07:
Now, three years later, that was, I think, Section 9 of the 1936 Act.

[00:44:21] Speaker 07:
There is this new section, which is Section 16 of the 1939 Act.

[00:44:26] Speaker 07:
So just a different section, and it doesn't refer to reimbursement by a private party for expenses of personnel in the patent office.

[00:44:38] Speaker 07:
That juxtaposition is strong support that Congress was not intending to shift the attorney's fees or to shift the internal personnel expenses at all.

[00:44:50] Speaker 10:
Yes.

[00:44:52] Speaker 10:
that the all-expenses language is clear and doesn't include attorney's fees, or that it's ambiguous, and therefore under the Supreme Court precedent doesn't include attorney's fees?

[00:45:04] Speaker 10:
You could say both in the alternatives, by the way.

[00:45:07] Speaker 07:
Yes.

[00:45:07] Speaker 07:
I think it is at a minimum ambiguous, particularly in the context of an argument without regard to shifting attorney's fees.

[00:45:18] Speaker 07:
So if you just have a bunch of very smart people

[00:45:22] Speaker 07:
who grammaticians arguing about whether expenses does include it, I would say it's ambiguous.

[00:45:29] Speaker 07:
And therefore, we have to follow the Supreme Court precedent from Malieska.

[00:45:35] Speaker 08:
Why would it be ambiguous?

[00:45:36] Speaker 08:
If you believe that the magic words don't have to be said to be included, then why is it ambiguous?

[00:45:42] Speaker 07:
Let me be real clear on how I answered that earlier question.

[00:45:45] Speaker 08:
You don't have to use- You did concede, or you did say,

[00:45:49] Speaker 08:
that the words attorney fees do not have to be included in the word expenses in order for them to be included.

[00:45:55] Speaker 07:
Correct.

[00:45:56] Speaker 07:
That's how I answered that exact question.

[00:45:58] Speaker 07:
OK.

[00:45:58] Speaker 07:
But what I'm trying to explain is that other words could be used.

[00:46:03] Speaker 07:
I think I made that clear.

[00:46:04] Speaker 07:
But it's got to tell us congressional intent on a specific and explicit basis under Baker-Botts and Aliaska.

[00:46:17] Speaker 01:
So let me see if I understand this.

[00:46:20] Speaker 01:
My understanding, and tell me if I'm wrong, is that nobody has identified any statute that uses generic language like expenses or costs without a parenthetical saying, including attorney's fees, that has been interpreted to cover time for lawyers.

[00:46:39] Speaker 01:
The principle that there are no magic words doesn't go further than to say there are many different words you can use to refer specifically to time-for-lawyer services.

[00:46:49] Speaker 01:
It doesn't mean that generic concepts without something more specific, using some words referring to lawyers' time, are unnecessary.

[00:46:59] Speaker 07:
Yes.

[00:47:00] Speaker 07:
Okay.

[00:47:00] Speaker 07:
Exactly.

[00:47:01] Speaker 07:
And that every statute that shifts attorneys' fees, every statute that's been interpreted to shift attorneys' fees, saved the litigation recently.

[00:47:09] Speaker 07:
started by the patent office has interpreted a statute that specifically says attorney's fees or uses words very, very close to that.

[00:47:20] Speaker 07:
So there is no ambiguity.

[00:47:22] Speaker 01:
Is it right that nobody has identified statutory language that has been construed to cover payment for lawyer's time that uses terms only like expenses or costs without further

[00:47:37] Speaker 01:
language pointing to time for attorneys.

[00:47:40] Speaker 01:
I'm not remembering, as I'm sitting here, any example of that.

[00:47:45] Speaker 07:
Yes.

[00:47:45] Speaker 07:
We scoured the case law to the beginning of the United States to see if there was any such case.

[00:47:52] Speaker 07:
We could find none.

[00:47:53] Speaker 07:
The Patent Office and the Department of Justice, I assume they did the same thing.

[00:47:58] Speaker 07:
They could find no such case law.

[00:48:01] Speaker 08:
But are we really dealing with attorney's fees here?

[00:48:04] Speaker 08:
Yes.

[00:48:04] Speaker 08:
Are these attorney's fees?

[00:48:06] Speaker 08:
A while ago, you said that attorney's fees are budgeted or they fall under, let's say, gap as a general selling administrative expense.

[00:48:17] Speaker 08:
They have a profit margin.

[00:48:18] Speaker 08:
They're viewed as income.

[00:48:20] Speaker 07:
Well, that's attorney's fees.

[00:48:24] Speaker 07:
Actually, I was intending to communicate something slightly different.

[00:48:28] Speaker 08:
So in my example, if we hire- Well, in your experience as a practitioner,

[00:48:34] Speaker 08:
Attorney fees, that which you charge your client.

[00:48:37] Speaker 08:
Yes.

[00:48:38] Speaker 08:
Does that contain a profit section to it?

[00:48:42] Speaker 07:
Sometimes yes, sometimes no.

[00:48:44] Speaker 07:
The example I gave earlier, where we have an agreement with a client, we're employee attorneys, and let's say it's a bankruptcy matter, and we're entitled to petition.

[00:48:54] Speaker 08:
Let's say that it didn't, that none of your attorney fees included a profit margin.

[00:48:59] Speaker 08:
Would you be profitable?

[00:49:02] Speaker 08:
You'd either be a non-profit organization or a governmental agency at that point.

[00:49:07] Speaker 07:
Actually, not to spend too much time on the economics of a law firm, but a certain group in a law firm, a certain practice area, may not be profitable at all.

[00:49:17] Speaker 07:
Or work on a certain client may not be profitable at all.

[00:49:21] Speaker 08:
My experience in the private sector, and I did spend quite a bit of time in directing and managing a law firm, is that

[00:49:30] Speaker 08:
You build attorney's fees in order to capture all your costs plus a profit margin.

[00:49:37] Speaker 07:
Yes and no.

[00:49:38] Speaker 07:
It varies from client to client.

[00:49:40] Speaker 07:
Sometimes the lawyers really want to do some work because it's very interesting as a legal matter and we say okay as a firm because we're professionals.

[00:49:48] Speaker 07:
We do more than just try to make a profit.

[00:49:50] Speaker 07:
Often we do like to make a profit.

[00:49:52] Speaker 07:
Pro bono cases.

[00:49:54] Speaker 07:
We take on pro bono cases.

[00:49:55] Speaker 07:
We may get paid nothing.

[00:49:57] Speaker 07:
But if we have the ability to submit a petition for attorney's fees, we will say the customary rates that we are paid is X dollars an hour.

[00:50:07] Speaker 07:
So it really runs the gamut here.

[00:50:11] Speaker 01:
Can I ask you this?

[00:50:13] Speaker 01:
My understanding is that although the various remedial regimes changed over time, particularly in the 19th century, that from the beginning of this provision,

[00:50:25] Speaker 01:
the suit in equity was an alternative to some other kind of, I'm going to use the term loosely here, judicial review, at least starting in 1839.

[00:50:38] Speaker 01:
Initially not to court review, but rather individual judge review of the chief judge or chief justice of the District of Columbia.

[00:50:48] Speaker 01:
But does that make this a distinctive context, namely that the suit in equity here

[00:50:55] Speaker 01:
was always not the only remedy that a disappointed applicant could seek.

[00:51:03] Speaker 01:
There was always something else, including, at least I think since 1839, I may be wrong about this, from a judge.

[00:51:16] Speaker 07:
The answer to the exact question is I do not know.

[00:51:18] Speaker 07:
I do believe that in

[00:51:20] Speaker 07:
other federal statute, a disappointed litigant, might have different ways to seek review.

[00:51:27] Speaker 07:
But that doesn't address the exact question.

[00:51:30] Speaker 07:
The exact question is, what was the congressional intent in 1839 when it remained unchanged, including through 2011 with the AIA?

[00:51:40] Speaker 07:
And I want to remind, I'm sure the Court, everyone on this Court knows, there's not only

[00:51:45] Speaker 07:
the 285, which specifically refers to attorney's fees shifting for exceptional cases.

[00:51:51] Speaker 07:
There are three other sections of the AIA that specifically refer to attorney's fees.

[00:51:57] Speaker 07:
Two of them incorporate or refer back to 285.

[00:52:00] Speaker 07:
And there's another one when basically a less than honest person is trying to sell certain inventorship services.

[00:52:08] Speaker 07:
But in each of those four instances, in the AIA as of 2011,

[00:52:14] Speaker 07:
Attorney's fees are specifically called out.

[00:52:19] Speaker 07:
So we have this long history where Congress has never passed another statute before or after 1839 that uses broad words like expenses or costs to mean attorney's fees.

[00:52:32] Speaker 07:
No court has ever interpreted any federal statute that way, with the exception of some decisions the Patent Office has been seeking in the last

[00:52:41] Speaker 07:
few years, indeed the Patent Office has taken a contrary position in prior litigation.

[00:52:47] Speaker 07:
So one case is Robertson v. Cooper.

[00:52:51] Speaker 07:
The exact question was whether the Patent Office could get reimbursement for trial expenses because the lawyer had to attend an out-of-state deposition.

[00:53:02] Speaker 07:
The district court said no.

[00:53:04] Speaker 07:
It's up on appeal.

[00:53:06] Speaker 07:
And the patent applicant who's trying to support the

[00:53:10] Speaker 07:
The decision of the district court says, well, this can lead to mischief and folly and abuse.

[00:53:18] Speaker 07:
The word abuse is actually used.

[00:53:21] Speaker 07:
And then specifically argues that what the patent office might do is begin to charge patent applicants for the fees of their solicitors.

[00:53:32] Speaker 07:
And what does the government say in response?

[00:53:36] Speaker 07:
Oh, no.

[00:53:37] Speaker 07:
That is so remote.

[00:53:39] Speaker 07:
that it should not be taken seriously at all.

[00:53:43] Speaker 07:
So that's been the patent office not only policy by its inaction, despite the mandatory not precatory language, which uses shall in the statute, but this is also contrary to what they've argued in prior cases.

[00:54:03] Speaker 04:
Mr. Chu, not to get into your firm's practices, but just in general.

[00:54:08] Speaker 04:
your knowledge of the private bar.

[00:54:10] Speaker 04:
Do private law firms follow the government model in which people who bill less hours, let's call them senior partners, get charged more for each hour?

[00:54:19] Speaker 07:
It's exactly the opposite.

[00:54:22] Speaker 07:
And it doesn't matter what category of lawyer you are, the first junior lawyer, five years out of school, or a partner.

[00:54:31] Speaker 07:
We value a lot of other things, too.

[00:54:33] Speaker 07:
Creativity and talent and writing skills and mentoring people.

[00:54:37] Speaker 07:
But if everything else is equal, we like people to work harder than less hard.

[00:54:44] Speaker 07:
You could apply the same question to members not of this bench, but other benches.

[00:54:49] Speaker 07:
And no one would say that a judge on some other bench who doesn't work very hard is somehow much more valuable.

[00:54:59] Speaker 07:
Thank you very much, Your Honors.

[00:55:01] Speaker 03:
Thank you.

[00:55:07] Speaker 00:
Your Honor, just a few points on rebuttal.

[00:55:11] Speaker 00:
Judge Wallach, I've been informed that, in fact, PTO attorneys cannot record over time.

[00:55:18] Speaker 00:
So the notion that the numbers would be distorted in the way that you described it is unlikely.

[00:55:24] Speaker 00:
And in any event, courts routinely deal with claims by salaried counsel under attorney's fees provisions

[00:55:31] Speaker 00:
and can sort through any sort of distortive effects.

[00:55:34] Speaker 04:
Do you keep track of whether they work up to the standard?

[00:55:39] Speaker 00:
The quality of their work?

[00:55:42] Speaker 04:
No, just the amount of hours.

[00:55:43] Speaker 04:
In other words, if somebody only comes in and puts in 1,000 hours, you keep track of that, don't you?

[00:55:48] Speaker 00:
Yes, Your Honor, and they would take leave.

[00:55:50] Speaker 00:
And so that would be reflected in the timesheet submitted.

[00:55:55] Speaker 00:
Your Honor, the notion that- That would be reflected in the filling value reflected or submitted?

[00:56:01] Speaker 00:
would be reflected, yes, Your Honor, in the numbers as well as it would be adjusted for the hourly weight would reflect, I think, annual leave or any other sense in which an attorney was not performing work.

[00:56:18] Speaker 00:
But again, those are mechanical questions that shouldn't cause this court any pause in affirming the general principle.

[00:56:26] Speaker 10:
When did the government determine that this provision included attorney's fees?

[00:56:32] Speaker 10:
When did the government?

[00:56:33] Speaker 10:
You said that for 170 years, we didn't seek them.

[00:56:37] Speaker 10:
Yes, your honor.

[00:56:38] Speaker 10:
But what that doesn't tell me is, did you, during that 170 years, believe that you were entitled to seek them, but you chose not to?

[00:56:45] Speaker 10:
When did the government?

[00:56:46] Speaker 10:
There has to have been an epiphany, right?

[00:56:48] Speaker 10:
Because I set up the parade of horribles.

[00:56:50] Speaker 10:
Otherwise, you're not collecting money the taxpayers are owed.

[00:56:53] Speaker 10:
And I tend to think that you're more of a fiduciary and fiscally responsible than that.

[00:56:58] Speaker 10:
So when did the government conclude

[00:57:01] Speaker 00:
Well, Your Honor, as I explained, that after the passage of the AIA and the anticipated increase in the expense after the Supreme Court's decision in Hyatt, the PTO took a look at that.

[00:57:13] Speaker 00:
They took a look at it.

[00:57:14] Speaker 10:
That's not answering my question.

[00:57:16] Speaker 10:
Is that when you concluded that we can seek attorney's fees under this provision?

[00:57:21] Speaker 00:
That is when we came to the decision that we would do.

[00:57:23] Speaker 00:
So I really can't speak to what members of the

[00:57:26] Speaker 10:
of the PTO in... So you can't tell me, as you stand here, that for a hundred and seventy years the agency did in fact or did not in fact believe it was entitled to attorney's fees?

[00:57:39] Speaker 00:
I can tell you two things, Your Honor.

[00:57:40] Speaker 00:
One is that we never disclaimed the authority and two, that what we did seek are attorney travel expenses and expert witness fees that are expenses that the American rule would apply.

[00:57:53] Speaker 00:
So plaintiff can't explain

[00:57:55] Speaker 00:
why the American rule would preclude PTO from seeking its personnel expenses, and yet permit PTO to seek the expenses for its expert witnesses that it's claimed in this case, or the travel expenses for PTO attorneys to travel to defend depositions or take depositions.

[00:58:14] Speaker 02:
Do you have a response to Mr. Chu's reference to that Margritzen v. Cooper case?

[00:58:20] Speaker 00:
The Roberts v. Cooper case?

[00:58:22] Speaker 00:
Yes, Your Honor.

[00:58:22] Speaker 00:
That's the case that I'm talking about in which

[00:58:25] Speaker 00:
The principle was established that PTO can claim its travel expenses for attorneys.

[00:58:32] Speaker 02:
Well, what about where the government, Mr. Chu was saying that the government in that case said that that possibility that the PTO would try to seek fees was so remote that it can't be taken seriously?

[00:58:43] Speaker 00:
Your Honor, that statement was in the government's brief.

[00:58:48] Speaker 00:
There, the government was seeking travel expenses of its attorneys.

[00:58:52] Speaker 04:
But that's what Mr. Chu said.

[00:58:54] Speaker 04:
He said the question was raised of attorney's fees.

[00:58:58] Speaker 04:
And the government said, never happened.

[00:59:01] Speaker 00:
Your Honor, it said it was so remote, it didn't need to be considered.

[00:59:03] Speaker 00:
And here we are at that remote day.

[00:59:06] Speaker 00:
The government has evaluated its authority under Section 145 and has determined that it can seek its personnel expenses, and it's doing so here, Your Honor.

[00:59:19] Speaker 03:
Thank you.

[00:59:19] Speaker 03:
Time has expired.

[00:59:20] Speaker 03:
Thank you.

[00:59:20] Speaker 03:
We thank both sides.

[00:59:21] Speaker 03:
The case is submitted.

[00:59:23] Speaker 03:
We'll take a recess for about 20 minutes or so to hear the next case.

[00:59:29] Speaker 11:
All on.