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Peter v. Nantkwest Inc.

Oral argument transcript · No. 18-801 · October Term 2019 · argued October 7, 2019 · the respondent won

Decision: votes, opinion and citations · Official transcript (PDF) · Argument audio at the Supreme Court

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From the Court's official transcript; speaker labels as in the transcript, with advocates' full names from its list of appearances.

Chief Justice Roberts: We'll hear argument next in Case 18-801, Peter versus NantKwest. Mr. Stewart. ORAL ARGUMENT OF MALCOLM L. STEWART ON BEHALF OF THE PETITIONER

Malcolm L. Stewart: Thank you, Mr. Chief Justice, and may it please the Court: An unsuccessful patent applicant may seek judicial review through either a direct appeal to the Federal Circuit under 35 U.S.C. 141 or a district court suit under Section 145. Section 145 states that an applicant who files suit under that provision must pay all the expenses of the proceeding. The question presented here is whether those expenses include money that the PTO spends to employ lawyers and paralegals who assist with the agency's defense of the suit. For three principal reasons, the answer to that question is yes. First, the term "expenses" unambiguously encompasses costs -- encompasses money paid to employees or other Official 1 personnel to accomplish an -- a particular task. And unlike the term "costs," which has a similarly broad common meaning, this Court has not construed the term "expenses" as a legal term of art with a more limited scope. Second, requiring patent applicants who file suit under Section 145 to pay personnel expenses of the PTO is consistent with the overall statutory scheme. Congress has directed the PTO to charge fees that are sufficient to cover its aggregate operating costs, including personnel expenses. And the PTO has developed fee schedules that, in a rough and ready way, require applicants who cause the agency to incur greater expenses to -- to pay more in the way of fees. And Section 145 applicants put the PTO to a particular expenses, and it's therefore consistent with the logic of the statute to require them to pay more. And, third, it's especially appropriate to require Section 145 plaintiffs to pay the PTO's personnel expenses because Section 141 is available as an alternative means of obtaining judicial review. Section 141 is Official 1 not a cut-rate or a substandard mode of judicial review. It's ordinary, on the record, APA-style judicial review. And it contains no requirement that the -- the applicant who chooses that course must pay the PTO's personnel expenses. And so --

Justice Ginsburg: Mr. -- Mr. Stewart, is there any other federal statute that provides for attorneys' fees on the basis of the word "expenses" alone? As you know, there are expenses and attorneys' fees, expenses including attorneys' fees. But what other statute provides for attorneys' fees simply on the basis of the word "expenses"?

Malcolm L. Stewart: We're not aware of any, unless you include the trademark analogue to this provision. And, presumably, the government's position on those two statutes will rise or fall together. We're -- we're frankly not aware of any other federal statute that uses the term "expenses" standing alone; that is, as -- as Your Honor's question suggests, when Congress has provided for shifting of expenses, it typically makes clear that it intends to provide Official 1 for payment of attorneys' fees in -- in the course of doing that. But sometimes it says expenses including attorneys' fees, sometimes expenses and attorneys' fees.

Justice Kavanaugh: How -- how about to the losing party? Are there other statutes that provide for fees, attorneys' fees, that are awarded against the prevailing party?

Malcolm L. Stewart: I mean, the -- the only one we're aware -- there are -- there are two categories of those. There are -- there are Sebelius versus Cloer, the vaccine act, and that was an unusual situation. There are also statutes that provide discretion to award attorneys' fees without specifying that the -- the person who receives the fees must obtain some degree of litigation success. And in that context, the -- the Court has construed those discretionary provisions as requiring a degree of litigation of success. But I'd say a couple of things about that --

Justice Kavanaugh: And it was called it a radical departure to do otherwise?

Malcolm L. Stewart: Well, it -- it would be, Official 1 in the context of ordinary fee-shifting provisions. And I think this is an important point, that if you ask is it unusual, is it a departure from the norm, either to require a -- an adverse litigant to pay the government's personnel expenses or to require the prevailing party to pay, the answer is if you compare it to other adversarial litigation involving the government, yes, it is unusual. If you compare it to other stages of the patent application process, it's not unusual at all. And so the PTO charges particular fees for application and examination. Those fees -- the PTO doesn't try to fine-tune the process. It's determined that it would be administratively overly cumbersome to say to each applicant, you must pay in precise proportion to the work that you make the PTO do. But in a sort of rough and ready way, it's tried to create a scenario in which applicants who cause the PTO to pay -- to incur greater expenses must pay more. So if your proposed patent has an unusually large number of claims, you may have to pay a larger fee. If you seek continued examination or if you file an Official 1 administrative appeal to the PTAB, you have to pay additional fees. And none of that is contingent on how the application is ultimately disposed of. And so if your application is turned down by the examiner and you file an appeal to the Patent Trial and Appeal Board, the PTAB, and the PTAB says yes, you're right, the examiner missed the boat completely, you are entitled to your patent, you get a favorable disposition, but you still have to pay the appeal --

Justice Gorsuch: Well, the --

Malcolm L. Stewart: -- appeal fee to the PTAB -- for the PTAB proceeding.

Justice Gorsuch: Counsel, your -- your interpretation of "expenses" includes attorneys' fees, you argue in this case. Is there anything that would inhibit the government from suggesting that other forms of overhead might also be allocated to litigants? The electric bill? The sewage bill? Other things that were required in order to be able to litigate these cases?

Malcolm L. Stewart: Well, the statute refers to expenses of the proceeding. And so we would Official 1 have to show the requisite connection --

Justice Gorsuch: Well --

Malcolm L. Stewart: -- to the --

Justice Gorsuch: -- you have a lawyer here, right, who works for the government anyway. It's not like you went out and hired a lawyer. So you're allocating some personnel expenses to this proceeding. What would prohibit the government from allocating other expenses to this proceeding?

Malcolm L. Stewart: Well, it certainly -- it's certainly true that, for some bookkeeping purposes, when we talk about personnel expenses, we will include what I think is referred to as a fully burdened rate --

Justice Gorsuch: Right.

Malcolm L. Stewart: -- where we're talking not just about the salary but to some additional increments of money that are -- that go along with hiring a --

Justice Gorsuch: So nothing, in other words, right? A fully burdened rate would include this other form of overhead that we're talking about, right?

Malcolm L. Stewart: I guess the point I Official 1 would make is we -- we do that in the application process already.

Justice Gorsuch: Oh, okay. So you're already doing this?

Malcolm L. Stewart: We're -- we're doing that in the application process in -- in the sense that we are under a congressional mandate to collect fees that, in the aggregate, are sufficient to cover --

Justice Gorsuch: Well, that's helpful to know that you're already doing this. And it has been 170 years; is that right?

Malcolm L. Stewart: That's right.

Justice Gorsuch: How did the government just figure this out?

Malcolm L. Stewart: Well, I think -- we don't have a good explanation for why we weren't doing it before. We do have explanation -- good explanations for why we focused on this matter at the time that we did.

Justice Ginsburg: But you would -- you would say that in all the years that you weren't doing it, you were violating the statute because the statute is mandatory and not discretionary? Official

Malcolm L. Stewart: I wouldn't -- I wouldn't say that we were violating the statute. That is, this is somewhat analogous to what the Court often refers to as a mandatory claim processing rule as opposed to a jurisdictional requirement. So, for instance, statutes of limitations are often phrased in terms of no suit shall be filed more than three years after the violation occurs. But everybody understands that even though the -- the statute is phrased in mandatory terms, the defendant can waive or forfeit the limitations defense by failing to raise it at the appropriate moment. And nobody would say that the defendant violates the statute by failing to assert a limitations defense that it could have asserted.

Justice Kavanaugh: You --

Malcolm L. Stewart: So you -- I think we would have to say that for that 170-year period, we were foregoing a source of income that we were entitled to get.

Chief Justice Roberts: Are you going to --

Justice Kavanaugh: You started by Official 1 saying that the statutory term expenses unambiguously covers attorneys' fees. So two questions on that. First, the cases seem to suggest that there is something of a clear statement rule in this area that has to explicitly, expressly cover fees and, two, all of the statutes that seem to satisfy that refer to attorneys, attorneys' fees, or fees, and not the term expenses. So which part of that do you disagree with?

Malcolm L. Stewart: Oh, well, the Court has made clear that, even though a relatively clear indication of congressional intent is necessary, there's no magic words requirement. And the point I was making about expenses being unambiguous is that there is no ordinary, plain language understanding of the word "expenses" that doesn't encompass the money that you use to hire a person to accomplish a particular task. And sometimes in situations like this, where Congress has used expansive general language, the Court has said the failure to specify particular items doesn't indicate Official 1 ambiguity, it indicates breadth, that Congress could have --

Justice Kavanaugh: I think that would be true if there weren't some kind of clear statement backdrop to this. But my question is, you agree there is something of a clear statement requirement; is that correct?

Malcolm L. Stewart: That's correct.

Justice Kavanaugh: Okay. And then --

Justice Kagan: Does -- does -- may I interrupt for a second?

Justice Kavanaugh: Go -- go ahead.

Justice Kagan: Does that mean you are dropping your argument in your initial brief that the American Rule doesn't apply to this kind of case, because in your reply brief you don't make any mention of that, and here in responding to Justice Kavanaugh's questions and in your first two minutes, you also don't make that argument again, have you effectively dropped that argument so we're now within the American Rule presumption?

Malcolm L. Stewart: We -- we would certainly acknowledge that if this sentence didn't appear in Section 145 at all, we would need -- we would Official 1 not be able to recoup personnel expenses. Now, the Fourth Circuit held that because the Section 145 mandate applies without regard to the ultimate outcome of the litigation, the American Rule doesn't apply. And we think the Federal Circuit -- the Fourth Circuit was right at least to the extent of saying the absence -- not only the absence of a prevailing party requirement, but the specific mandate that the expenses be paid regardless of the outcome of the proceedings is a good indication that this provision is trying to accomplish something very different from what an ordinary fee shifting provision is intended to accomplish. And so you can conclude on that basis the American Rule doesn't apply or you can conclude this is one of the contextual factors that leads you to the conclusion that personnel expenses are -- are encompassed. And --

Chief Justice Roberts: Are you -- are you going to send the Respondent a bill for your time today?

Malcolm L. Stewart: We -- we are not. And I think that's -- there -- there are really three Official 1 different potential obstacles to our claiming an incremental share of my salary. The first is that the PTO has, even in the most recent years, has sought only expenses of PTO personnel, not of Department of Justice lawyers who's assisted -- who have assisted in the representation of Section 145 suits. And I think that's based on the idea this is a provision that is intended to help in making the PTO a self-financing agency. It complements the requirement that the PTO collect fees to cover its own operating expenses, not that of other agencies. There -- there's a separate question also about whether an appellate stage of the case would fall within the -- the term proceedings in Section 145, and it's noteworthy in this regard that Section 141, which provides for direct appeal to the Federal Circuit, doesn't include an expense recoupment mandate. And I think you could infer from that fact that Congress intended only that the trial stage of the Section 145 proceedings, the thing that was distinctive to a Section 145 suit, to be subject to -- to this mandate. Official 1 And the third thing is, even in the trial -- with respect to the trial court proceedings in this case, the PTO didn't seek recoupment of expenses for attorney time spent arguing about the fees. It -- it requested recoupment of expenses only for the attorney time that was devoted to the issue of patentability. And the only issue before this Court, obviously, is recoupment of fees, not the original dispute.

Justice Sotomayor: Mr. Stewart --

Justice Ginsburg: I can see the argument, Mr. -- Mr. Stewart, that the word "expenses" could include attorneys' fees, but I don't understand the argument that expenses alone must include attorneys' fees.

Malcolm L. Stewart: I think the argument -- the argument is simply, as a matter of plain language, no one would doubt that the money paid, excuse me, the money paid to PTO personnel in the course of the suit were part of the expenses that the PTO incurred. And the only question is whether the term expenses, like the term costs, has acquired a status as a legal term of art that has a legal Official 1 meaning narrower than its common meaning. And the Court has never used the term in that way. Indeed, in elucidating the term costs, the court has sometimes said, as in Taniguchi, cost has an ordinary meaning that's synonymous with expenses, but for purposes of federal cost shifting statute, it has a more narrow meaning. The -- the other thing I would say about costs is that when the Court says that the word "costs" is a term of art, it has a limited meaning, the Court has a source of law to look to to see whether particular items are or are not costs. It looks to 28 U.S.C. 1821 and 28 U.S.C. 1920. And so when the Court says we are going to depart from the ordinary meaning of costs, it doesn't have to make things up. It has a source of law to determine whether --

Justice Breyer: All right. Sorry. I don't want to cut you off.

Malcolm L. Stewart: Whereas here, I think NantKwest has really given no guidance as to what it thinks the term "expenses" means, other than it doesn't include attorneys' fees, but we can't fault NantKwest for that because there Official 1 really is no alternative source for determining what the term "expenses" means, if not its ordinary meaning.

Justice Breyer: How should I deal with this fact. As far as I can tell, if you go back to the 1830s when this was enacted, the patent litigants paid the costs, including the attorneys' fees of the Patent Office, didn't they? So you could say, well, this was just, where there are special costs here, this group should pay it, not everybody. That made sense. But then in the 1860s, the government decides to pay for all these expenses. Now it doesn't make much sense any more to have this group pay. Then in 1990 it goes back to the first system. All right. So if it were just the one system or the other, I could make a lot of sense out of it, either saying these have special costs, the patent litigants pay anyway, let them pay, or I could say you are putting a special burden on this and it has to be clearer before you break the American Rule. Official 1 But we have some of one and some of the other. So what -- should I put -- use that to put weight on the fact nobody has ever thought of this before?

Malcolm L. Stewart: Well, as -- as I say, I think this was an argument that could have been made for an extended period of time. And we don't have a good explanation --

Justice Breyer: I --

Malcolm L. Stewart: -- for --

Justice Breyer: Don't know if it could have been made between 1865 and 18 -- and 1990.

Malcolm L. Stewart: Well, the -- the --

Justice Breyer: Because during that time it was the Congress that paid these costs.

Malcolm L. Stewart: Well -- well, there was still the objective of making the PTO a self-funded agency, an agency whose receipts were equivalent to its --

Justice Sotomayor: It already is.

Malcolm L. Stewart: -- expenses.

Justice Sotomayor: It already is. You're -- you're paying from the fees, meaning the time you're attributing to the attorneys and Official 1 the paralegals is already being paid. Without these fees, the patent application fee itself is covering it. You haven't had a shortfall.

Malcolm L. Stewart: Well, the -- the PTO is under a congressional mandate to ensure that it's aggregate receipts match up with it's aggregate --

Justice Breyer: Now.

Malcolm L. Stewart: -- expenditures.

Justice Breyer: But was that true between 1865 and 1990?

Malcolm L. Stewart: No, no. It -- it --

Justice Breyer: No, it wasn't. And, therefore, I'm having a big -- oddly enough, that's sort of what is giving me a problem here because -- and the long delay -- because I couldn't have said what you want me to say for over, well over 100 years.

Malcolm L. Stewart: Well, the -- the mandate to pay the, I think it was the whole of the expenses of the proceeding under the original statute, the mandate was there all along and it was part of Congress's objective that the PTO be self-financing. Official 1 Now, for a prolonged period of time, the way that Congress went about that was that, for the most part, Congress was determining the amount of the fees for particular services. And it was trying to set fees at a level that would, as closely as possible, match up with PTO expenses. Often there was a shortfall and an appropriation would be needed to fill the gap. In 2011, Congress essentially made it the PTO's responsibility to balance the books. It put the PTO under a mandate to make sure that your aggregate receipts equal your aggregate expenditures. And once that responsibility was placed upon the agency, the agency felt a -- a greater duty to look for other sources --

Justice Breyer: I look to 1930, for example. I'll discover that even in 1930 Congress was trying to get the patent fees to match the patent expenses. They just didn't always do it right.

Malcolm L. Stewart: It was certainly trying as much as possible --

Justice Breyer: Okay.

Malcolm L. Stewart: -- to --

Justice Breyer: How do I -- where do Official 1 I look for that.

Malcolm L. Stewart: I -- I'm -- I'm not sure whether you would look for -- to -- to that. But the -- even in the 1830 act, '36 act, the statute said that fees that are paid into the Treasury, fees for patent application services, will be placed in a fund to be known as a patent -- as the patent fund to be used for the -- the salaries of the officers and clerks and other expenses of the agency. And --

Justice Ginsburg: Mr. Stewart, do you dispute the Federal Circuit's estimate that if this cost of the PTO attorneys is spread among all patent applicants, even the ones who don't use 145, that the added cost per applicant would be $1.60?

Malcolm L. Stewart: We don't. And I think that the -- we don't dispute that. And I think the PTO's motivation here is really more one of equity than of financial necessity. That is, it is certainly true that the number of Section 145 suits is small enough that if the -- the applicant was not required to pay PTO personnel expenses, those could be allocated among all the hundreds of thousands of patent applicants and Official 1 none of them would -- all of them would pay a very small amount. I think the PTO's motivation really is -- in -- in this case, for example, we sought about $111,000 in combined personnel expenses and expert witness fees. It was a little under 80,000 for the -- the lawyers and paralegals, a little over 30,000 for the expert witnesses. And the PTO tells me that that -- that the fee application and examination fee for the typical patent application is about $3300. So here we're dealing with a situation in which the Section 145 suit caused us to incur about 30 times the expenses that would ordinarily attend -- that would ordinarily be the fees for a patent application and examination. And it's one thing for the PTO to say: We're not going to fine tune this absolutely. We're going to accept the idea that some applicants will pay a little bit more; some applicants will pay a little bit less than their fair share of our operating expenses. But when we have this congressional mandate and when we have a situation whereby filing suit under Section 145, you've caused the Official 1 PTO to incur 30 times the expenses that -- that go with a typical patent examination, it -- it seems fair and appropriate to make the applicant pay. And, again, part of our fairness argument is that Section 141 is available. It provides exactly the type -- same type of judicial review that is ordinarily the only mode of judicial review that's available to somebody who's aggrieved by federal agency action. And so the applicant who -- who doesn't believe -- either doesn't want to pay the expenses or doesn't believe that its chances of success will be enhanced by filing suit in district court is -- the -- the 145 -- 141 mechanism is available --

Justice Kavanaugh: I think you covered this, but just to confirm, however we rule in this case, will cover -- will affect only two statutory provisions?

Malcolm L. Stewart: That's correct. We're -- it -- it will certainly affect the -- the trademark statute and -- you know, basically our pitch in the certiorari petition was even though they are technically different statutes, our Official 1 position would stand or fall together. We're not aware of any other statute that uses the term "expenses" standing alone in this context.

Justice Kavanaugh: And then in terms of your overall purpose argument, Congress wanted it to be a self-sustaining agency, but what sense does it make to think that Congress wanted the winning party to turn around and pay the government's legal fees, given how unusual that is? Why would Congress have thought to do it that way is, I -- I guess, what I'm asking.

Malcolm L. Stewart: I guess the two reasons are Congress -- since the very beginning -- and the first iteration of the statute enacted in 1839 specifically said whether the decision is in its favor or not. And the trademark statute continues to include that language. And even if you interpreted the term "expenses" very restrictively, as limited to costs under 1821 and 1920, it is no more usual to require the winning party to pay the other party's costs than for the winning party to have to pay the losing party's attorneys' fees. And so interpreting the -- Official

Justice Kavanaugh: You're saying the costs are obviously a far -- far smaller amount than --

Malcolm L. Stewart: They -- they --

Justice Kavanaugh: -- attorneys' fees?

Malcolm L. Stewart: -- yeah -- that's correct, but the --

Justice Kavanaugh: It's unusual but not to the degree?

Malcolm L. Stewart: It doesn't have the same practical effects. But, again, the -- the point I would make, and I think this is in a sense our primary point, is you should -- the Court has described a Section 145 suit as a continuation of the examination process. And there is language in the statute to that effect. It refers -- it says that the applicant shall pay all the expenses of the proceeding, rather than the plaintiff. And so the applicant continues to retain that status throughout the lawsuit. It says that the Court can adjudge that the applicant is entitled to a patent. And so when -- when you look to see is Official 1 this unusual or not, you should compare it not just to other adversarial litigation involving the government; you should compare it to other stages of the patent application process. And as I've said, at every other stage, your obligation to pay fees depends in part on how much work you're making the PTO do, but it doesn't depend at all on the ultimate outcome of the process. And so if you file a successful PTAB appeal and persuade the PTAB that the examiner got it wrong, you still have to pay the fees for the PTAB appeal even though in a sense you could say that's requiring the winning party to pay. If I may, I'll reserve the balance of my time.

Chief Justice Roberts: Certainly. Mr. Chu. ORAL ARGUMENT OF MORGAN CHU ON BEHALF OF THE RESPONDENT

Morgan Chu: Mr. Chief Justice, and may it please the Court: There are three important considerations. First, the American Rule is a bedrock principle, and this Court has recognized Official 1 and applied that rule for two centuries. Second, the government is arguing for a radical departure from the American Rule. It is arguing that when a private party sues the government for its improper action, then that private party must pay for the government's attorneys, even if the government and its attorneys are flatly wrong. Third, and this responds to some of the questions from the justices that were put to the government, today there are 3,274 federal statutory provisions that use the word "expenses" without any reference to attorneys' fees or counsel fees. Some of those provisions are open-ended, as is the case here. The government can point to not a one of those other provisions to say that the word "expenses" includes attorneys' fees, save for the two exceptions, radical exceptions, it is arguing here. And I would invite questions from the Court.

Chief Justice Roberts: Why -- why isn't this just like a filing fee? In other words, the applicant can take the normal appeal Official 1 to the court of appeals, but if he or she wants to go through the much more elaborate proceeding of trying the case, bringing in new evidence, they have to pay a filing fee? I mean, in some agencies, I don't remember from long ago, the filing fee for a particular proceeding before the ICC was $100,000 because they figured most of the people who are going to be doing this, it's going to be corporations that can afford it, and we're -- you know, they're putting us out to a significant extent. Why -- I -- I gather -- I mean, would it be -- would it be problematic in your case if they said, okay, you can go to district court, but if you're going to do this unusual proceeding, you know, if you have three claims, that's going to be 15,000; if you have six, it is going to be 30,000; or what -- in other words, a significant filing fee for the very purpose of doing what the statute seems to contemplate?

Morgan Chu: First, this is not a filing fee. It's a claim for attorneys' fees against the strong backdrop of the American Rule. Official 1 Second, this is not inside the Patent Office. This is adversarial litigation. This is where a private party says the government made a mistake, and I, private party, I am going to sue the government in the United States district court. And once it's adversarial litigation, there can be no doubt that the American Rule applies with its full force and effect over the last two centuries.

Justice Ginsburg: Is there any language short of saying explicitly "attorneys' fees" that would overcome the American Rule? We're told there are no magic words, but what short of saying "including attorneys' fees" or "and attorneys' fees" would do?

Morgan Chu: The answer to the question is no, that either the words attorneys' fees, counsel fees, reasonable compensation for services of a lawyer for a bankrupt estate, which was true in the Baker Botts case, there would be words that would be specific and explicit, to refer to Justice Kavanaugh's point, where Baker Botts, this Court made clear, that to have an exception because of a statute under Official 1 the American Rule, it must be specific and explicit. And well before that, in the Alyeska case, a decision by this Court was to the same effect as well as other decisions.

Justice Sotomayor: Well, I presume that if the Congress wrote a provision that said the pro rata share of all the services of its personnel, that would be enough, because you wouldn't exclude lawyers from that?

Morgan Chu: If Congress had a specific provision that showed it was intending to include lawyers, Congress has the authority to enact such legislation. But as in your exact example, I would say there would still be an ambiguity because of the American Rule. And let me give you an example from history. Three years before the enactment of what we now call Section 145, there was a statute enacted by Congress with respect to the expenses of the Patent Office. It was an appropriations statute. And Congress said we have five new positions. We have the Commissioner of Patents, we have a chief examining clerk, we have another Official 1 examining clerk, and we have two other clerks. And Congress said we need to pay for their salaries and said these are expenses of the office. Note: Three years later, when Section 145 was first enacted, the language was different in several respects. The language is all the expenses of the proceeding as distinct from expenses of the Patent Office, which it was addressing three years --

Justice Kagan: But --

Morgan Chu: -- earlier.

Justice Kagan: -- Mr. Chu, are you saying that expenses of the office is not enough to get you lawyers' fees? Suppose it was just expenses of the Patent Office, which would presumably give you the expenses, you know, the -- the -- the costs of personnel.

Morgan Chu: Yes. I --

Justice Kagan: Does that not -- does that not include lawyers?

Morgan Chu: Yes, I am saying under this backdrop of the American Rule, this Court has made clear Congress needs to enact a statute that is specific and explicit. Official

Justice Kagan: It basically has to say lawyers?

Morgan Chu: Or words to that effect, yes.

Justice Kagan: Well, what does words to that effect mean?

Morgan Chu: Counsel, compensation for legal counsel, for advice, whatever. In other words --

Justice Kavanaugh: Fees? The word "fees" alone?

Morgan Chu: I do not believe the word fees alone would cover it, because fees can refer to many, many other things, docket fees, marshal fees, filing fees, fees of other personnel, perhaps, but not attorneys' fees. If there is an ambiguity under the American Rule, this Court has repeatedly made clear it must be "specific and explicit."

Justice Ginsburg: What -- what expenses in your view does Section 145 impose on the person who invokes that proceeding?

Morgan Chu: Travel expenses, lodging expenses, parking expenses, expenses with respect to court reporters, printing expenses, Official 1 marshal fees, docket fees, court interpreters. That's not an exhaustive list but it does not include attorneys' fees.

Justice Sotomayor: Is it --

Justice Breyer: Are experts?

Justice Sotomayor: I'm sorry.

Justice Breyer: Experts?

Morgan Chu: I do not think it should include expert witness fees, whether they are internal experts or external experts, but I want to note for the Court in this particular instance, for practical reasons, NantKwest did not challenge the government's request for expert witness fees and they were paid.

Justice Breyer: Well, that's -- see, then you put your finger on, yes, the American Rule, yes, yes, yes, but you have a special kind of case. And Congress was saying, it seemed, and says again, look, present all your evidence to the Patent Office. And if you don't like the result, go to the Federal Circuit. You want a second bite, you forgot to bring in somebody or you didn't, and then they'll have to bring in people, and before you know it, you have some big expense here, experts. Official 1 And, sure enough, you're saying, no, don't cover those. Not very discouraging, if they wanted to discourage you from using 145. I mean, did it carve out a separate special thing here or do we just use the American Rule?

Morgan Chu: Yes.

Justice Breyer: I know what you're going to say. That's the trouble. (Laughter.)

Justice Breyer: And I'm the one who's puzzled by it.

Morgan Chu: If I -- if I look puzzled -- I would like --

Justice Breyer: You don't look puzzled.

Morgan Chu: -- to withdraw my puzzled look.

Justice Breyer: I'm the one who is puzzled by it.

Morgan Chu: But I will say that in every case where a party wanted attorneys' fees under a statute, this Court has always applied the American Rule.

Justice Breyer: Yeah, I know that's Official 1 true.

Morgan Chu: Either the general rule, each party bears their own attorneys' fees, or the part of the American Rule that says if there's a specific and explicit statutory exception, that can apply. And the government points to no exception. The government points to no case decided by this Court involving a claim for fees under a statute that says the American Rule did not apply.

Justice Alito: Well, as you --

Justice Sotomayor: And which leaves -- I'm sorry.

Justice Alito: As you just said, in the typical American Rule case, the rule is each party to the case bears its own expenses, but that's not the situation here, is it? It's a question of whether you pay or other people who are not involved in this litigation at all pay. And maybe it is only going to be $1.60, but still other people are paying this expenses. Doesn't that make that different from the American Rule?

Morgan Chu: I would state the rule Official 1 differently than Your Honor. The American Rule doesn't apply to expenses generally. The American Rule applies to a claim for attorneys' fees, period.

Justice Alito: Well, let me -- let me ask something that's related. Maybe it's the same thing. Just as a matter of fairness, why should these other people pay for the costs that you have caused the Patent Office to incur?

Morgan Chu: If we were Congress -- and we're not -- Congress could decide what it thinks is fair or wise or good public policy. But as this Court has said in Alyeska, and Baker and Botts, no matter how good that policy might be, this Court does not have the roving authority to make those decisions. It is up to Congress.

Justice Breyer: Well -

Justice Sotomayor: Could you --

Justice Breyer: Go ahead.

Justice Sotomayor: Could you tell me what the difference is between expenses and cost? We have a whole statutory system of costs.

Morgan Chu: Yes. Official

Justice Sotomayor: I believe some of the items that you mentioned earlier as being expenses are not covered under the traditional sense. Give me a definition of expenses. It doesn't --

Morgan Chu: Yes.

Justice Sotomayor: As you understand it.

Morgan Chu: Yes. Let me do this in two parts. First in 1839, what did expenses mean? The Bouvier Legal Dictionary define "expensae litis," which literally means expenses of litigation. And it actually defined those expenses to be the costs that could be awarded to the prevailing party. To the same effect are two other legal definitions from legal dictionaries, both before and after 1839. And, in fact, one of those was the first Black's Law Dictionary, which was in 1891. Now, the second part of the answer is today. The meaning of "costs" has taken on a term of art in federal litigation. And there are certain things that are considered to be costs and other things not to be costs, but, Official 1 overall, I think any litigator today in federal court would say the word "expenses" floating by itself alone is probably a broader term than "costs."

Justice Breyer: Is -- is -- this you might have looked up, and it -- it might help me actually and help you -- or not. But -- but did you find any -- in any area where an agency, say, has proceeded along path one for 150 years, and then suddenly changes its mind and says now we're going to go on path two, and the court either said oh, well, that makes no difference whatsoever or the court said: No, it's too late, now we take into account the way you have carried this out? Did you find anything else --

Morgan Chu: We found no case --

Justice Breyer: Nothing on that?

Morgan Chu: -- no case, no instance where an agency has done anything like that, even for considerably shorter periods of time.

Justice Breyer: Or did you find some in a shorter period of time and the court said we're going to follow your habit; we're not going to follow going into a deep -- deep, difficult statutory analysis with an old Official 1 statute? It's good enough for you; it's good enough for us. Anything like that?

Morgan Chu: Not for any period of time. I can give you an example, but it's a relatively short period of time. This case -- this Court decided the Adams Fruit case. The Labor Department was dealing with a statute passed by Congress that gave workers, under certain circumstances, a private right of suit. And the Labor Department said: Aha, we have the ability to interpret that statute and we should get deference. And it interpreted the statute to mean that the workers couldn't sue in federal court; they had to go through state law procedures. And the question that came up to this Court -- it was a Chevron question -- should this Court defer to the agency's interpretation of the statute? And this Court said no, this is a judicial matter. This isn't a matter of an agency having its own discretion. So too here. This is district court litigation where the parties are adversaries. The proceeding in the Patent Office is quite Official 1 different from that. The American Rule has always applied in federal court litigation. I'd like to point out --

Justice Alito: Picking up on -- on Justice Breyer's question, if you have a situation where there's a statute and it's pretty evident -- and certain parties, here it would be the PTO, for some period of time do not advance an interpretation of the statute that would benefit them, and a period of time passes, should we adopt a rule that that's strong evidence of what the statute means, that it doesn't mean the thing that -- the interpretation that would have benefited these parties that failed to take advantage of it?

Morgan Chu: I would say yes, in the following sense: The beginning part of statutory interpretation is always plain and ordinary meaning of the language on the date of enactment. There can be other factors. But the over 170 years involve scores, maybe hundreds, of senior Patent Office officials. Not a one of them thought that the plain and ordinary meaning of "expenses" in Section 145 or its predecessors included Official 1 attorneys' fees. So that should be considered by this Court. Now, I wanted to point out --

Justice Kavanaugh: Just in ordinary English, though, "expenses" would encompass attorneys' fees, wouldn't it? That's Mr. Stewart's point to the contrary.

Morgan Chu: It might or might not, but it would ignore the American Rule for 200 years, ignore the consistent case law of this Court always applying the American Rule, including applying the American Rule when in the National Childhood Vaccine Injury Act, the unsuccessful petitioner, under that Act of Congress, could be awarded attorneys' fees. Although this Court didn't use the words "American Rule," the government's reply brief, I believe at page 18, I would say takes the position in the reply brief different from earlier positions and says, in effect, this Court was applying the American Rule.

Justice Breyer: Is -- is -- you -- you probably, I'm just looking at your resume here, have experience in this patent area. Is that true? Official

Morgan Chu: Yes.

Justice Breyer: Okay. And in your experience, where you're settling out of court or where you're -- you're trying to work out a system without going into court for resolving a claimant who says this is infringing my patent, or there are all kinds of people claiming it, you set up private systems, and the private systems, whether it's arbitration, mediation, thousands of different systems, involve costs, is it fairly common, not fairly common, unheard of, or what, to say in the contract that, it's doing this for future controversies, that you bring up the controversy, you pay the whole thing? Or maybe the opposite. What's it like?

Morgan Chu: I can think of no instance by my personal experience or through reading or otherwise where a contract would say you bring this up and you pay for the whole thing, no matter what, including attorneys' fees. But there certainly are agreements that are silent on attorneys' fees in recognition of the American Rule, or that expressly say attorneys' fees may be shifted under certain circumstances, or expressly say Official 1 not at all. I would say what's interesting here is that Congress in 1952 first enacted what we now know as Section 285 of the Patent Act. And that provides for an award of "attorneys' fees" -- using those words -- that may be awarded in exceptional cases. And at that same time, in the 1952 Act, Congress amended Section 145. It used to be called R.S. 4915. It got codified as 145. The prior 145 has the exact same language that the current 145 has, but it added a clause where the entire statute at the time was "all the expenses of the proceeding shall be paid by the applicant, whether he shall prevail or not, prevail or otherwise," or words to that effect. So Congress, in adding this attorneys' fees provision for Section 285, where they use the word "attorneys' fees," took out that last clause. So it wasn't just carelessness, we're not worrying about the rest of the Patent Act. They were focused and focused in particular on 145. I want to point out also that the Official 1 government argued that there is no other statute that would be affected. We respectfully disagree. The word "expenses" standing alone without a reference to attorneys' fees in an open-ended fashion appears elsewhere. Let me give you an example: 19 U.S.C. 1608. 19 U.S.C. 1608. It relates to customs forfeitures. So a party saying, Customs Department, you shouldn't have caused my property to be forfeited, I want it back, must pay "all" -- the word "all" appears -- "all the costs and expenses." It's pretty closely analogous to this statute here. No party, no one, not the government or anyone else, not an academician has ever raised the question about "all the expenses" in that statute includes attorneys' fees. Here's another example: This is 19 U.S.C. 6337. The IRS can levy on a taxpayer's property, if the taxes weren't paid. So the private taxpayer says: I want my property back. And the statute provides: Taxpayer, you get your property back if you pay the expenses and the unpaid tax. Official

Chief Justice Roberts: I suppose a difference there is -- and maybe there is -- but I gather in those situations there weren't alternative proceedings that you could go through.

Morgan Chu: I do not know before the statutes whether there were or were not alternative proceedings. My main point is in those two examples, one that refers to all expenses and the other that refers to expenses, they are open-ended.

Chief Justice Roberts: Yeah, I -- I -- I don't want to preempt him, but I suspect Mr. Stewart will say don't worry about those, because those are different. Here, you know, the -- the applicant has two different routes, and if he wants to take the route that imposes more -- excuse me -- more costs on the government, then he should be expected to pay for it.

Morgan Chu: Well, that is their argument. But that is rewriting the statute that Congress actually enacted in 1839. Because it may sound sensible to the government today.

Justice Breyer: In 1839 -- you've Official 1 gone to a lot of work here, but in 1839, say 1840 to 1865, they did have a fund where the patentees paid all the expenses, et cetera. And then they had this too for the 145 equivalent to 145. During that period of time, that period of time, did the government ever try to collect attorneys' fees as part of the expenses?

Morgan Chu: No.

Justice Breyer: No. Okay.

Morgan Chu: I thank the Court very much.

Chief Justice Roberts: Thank you, counsel. Mr. Stewart, you have six minutes remaining. REBUTTAL ARGUMENT OF MALCOLM L. STEWART ON BEHALF OF THE PETITIONER

Malcolm L. Stewart: Thank you, Mr. Chief Justice. I mean, there were -- there were various questions concerning the -- the legal significance of the PTO's, and formerly the Patent Office's, failure to take this position over an extended period of time. And there is no question this is an Official 1 atmospherically unhelpful point for us, but I -- I -- (Laughter.)

Malcolm L. Stewart: I -- I don't -- I don't think that it fits in any established doctrinal category, that -- that is, there are cases in which the Court has said when you have a body of court of appeals precedent that adopts a particular interpretation of a particular term, and then Congress reenacts the provision without changing that term, then Congress can be supposed to have acquiesced in or ratified the -- the prior judicial interpretation. We don't have anything like that here. We don't have a body of lower court case law saying that the term expenses doesn't include personnel expenses.

Justice Breyer: You do have that interpretation through action by the agency itself over the period of 190 years or something.

Malcolm L. Stewart: I mean, you could -- you could say at the most that a -- a view that these expenses were not recoverable is implicit in what the PTO has done or not done. Even with Official 1 respect to the PTO, it's not as though the agency ever promulgated a regulation or issued some similarly formal statement to the effect that we think expenses means the following things and it doesn't include --

Justice Sotomayor: But we do have a doctrine, the American Rule, that says that unless a clear statement of attorneys' fees is encompassed, we won't impose them. So for 170 years the PTO didn't think of expenses, including attorneys' fees. Very consistent with the American Rule.

Malcolm L. Stewart: Okay. The -- the two things I would say are it -- it might be that part of the PTO's motivation, we don't know, but it's a reasonable speculation, is that the PTO didn't seek these expenses in part because it wondered whether the term was sufficiently clear to overcome the American Rule. But on close examination, we think that it is. That is, NantKwest has offered various examples of things that it would be covered -- thinks that it would be covered, things that it thinks wouldn't be covered, but it hasn't propounded a test. It hasn't pointed the Court Official 1 to a dictionary that would include some things and not the others. The other --

Justice Breyer: What about your -- I know this is slightly frivolous, but, I mean, we say we finally figured out what Justinian meant by this particular thing, a thousand years ago. Do you see the --

Malcolm L. Stewart: I -- I -- I see the point, but, you know, the Court -- the Court --

Chief Justice Roberts: Can you share it with the rest of us? (Laughter.)

Malcolm L. Stewart: The -- the -- the Court has said in cases like United States versus Fausto that the implications of existing statutory provisions may be clarified by newly-enacted provisions, and the PTO has examined this matter afresh in light of the totality of the statutory scheme. And the last thing I would want to say, and it's in -- in part a continuation of the point I was making earlier about the Section 145 suit being, in a very meaningful sense, in a legal sense, a continuation of the examination Official 1 process. Up to this point, Congress has directed the PTO to ensure that its aggregate intake equals its aggregate expenses. It hasn't directed the PTO to fine-tune the process to ensure that each patent applicant pays his or her fair share. But suppose it did. Suppose Congress said each applicant shall pay all the expenses of the application and examination process. If -- if the argument was made, that shouldn't include a pro rata share of the salary of the PTO examiner who worked on the case. The Court would say that's crazy. How could -- how could the PTO possibly effectuate its congressional mandate to collect aggregate expenses in a way that equals costs if it didn't -- if it didn't collect the single greatest expense that it incurs when a PTO examiner does his or her work? And, similarly, an appeal to the Board. If each patent applicant was required to pay all the expenses of the Board proceeding, of course that would include an increment of money that was attributable to the time spent on the case by the Board judges, even though those Official 1 judges are lawyers. No one would think that the American Rule required some clearer statement than that, that Congress intended the person who invoked that process to pay the extra expenses that the PTO incurs by virtue of that process. Similarly, the examiners on the patent side are typically not lawyers. Trademark examiners are lawyers. And the work that they do in examination is, therefore, lawyers' work. But nobody imagines that the American Rule has anything to do with the PTO's ability to make sure that people who invoke the examination services pay their fair share of the PTO's overall expenses.

Justice Kagan: I think this goes back to a question that you got at the very beginning. But setting attorneys' fees aside, could you tell us, Mr. Stewart, exactly what expenses you charge for and exactly what expenses you don't?

Malcolm L. Stewart: I mean, sometimes we have charged for travel expenses. We didn't in this case. I don't believe we charged for printing costs, although I think we could have. Official 1 With respect to personnel expenses specifically, we would charge for the lawyers. We would charge for the legal -- for the paralegals. In this case we had an outside expert who was -- was kind of paid money out of the agency's funds, and we did charge for that. There are other circumstances in which, rather than retain an outside expert, we get expertise from within the agency. So it could be the patent examiner who worked on the case or it could be somebody else, and we would charge a pro rata share of that person's time.

Chief Justice Roberts: Thank you, counsel. The case is submitted. (Whereupon, at 12:05 p.m., the case was submitted.)