Hyatt v. Matal

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

GILBERT P. HYATT,

Plaintiff,

Case No. 1:05-cev-2310-RCL

. Case No. 1:09-cv-1864-RCL

‘ Case No. 1:09-cv-1869-RCL

Case No. 1:09-cv-1872-RCL

ANDREI IANCU,

Defendant.

MEMORANDUM OPINION

Before the Court are two motions for litigation expenses — plaintiff Gilbert P. Hyatt’s

motion for attorneys’ fees under 28 U.S.C. § 2412(b) (ECF No. 262)! and defendant Patent and

Trademark Office’s* (PTO) motion for expenses under 35 U.S.C. § 145 (ECF No. 261) — as well

as Mr. Hyatt’s motions to de-designate certain evidence as protected under a protective order (ECF

Nos. 207 and 240).

Upon consideration of the motions and briefing thereon, the Court will grant in part and

deny in part Mr. Hyatt’s motion for fees, grant in part and deny in part the PTO’s motion for

expenses, and grant in part and deny in part Mr. Hyatt’s motion to de-designate protected

documents.

I BACKGROUND

The Court refers readers to its discussion of the factual background to this long-running

dispute between Mr. Hyatt and the PTO in two earlier opinions. See Hyatt v. lancu (“Hyatt

! All docket citations refer to the docket in Case No. 1:05-cv-2310-RCL.

2 The named defendant is Andrei Jancu, sued in his official capacity as Under Secretary of Commerce for Intellectual

Property and Director of the United States Patent and Trademark Office. For convenience, the Court refers to the

defendant as the PTO.

Merits”), 332 F. Supp. 3d 83 (D.D.C. 2018) and Hyatt v. Iancu (“Hyatt Latches”), 332 F. Supp. 3d

113 (D.D.C. 2018). In brief, this case arises from hundreds of extraordinarily lengthy and complex

patent applications Mr. Hyatt filed in 1995, shortly before regulations implementing the Uruguay

Round of the General Agreement on Tariff and Trade went into effect. Hyatt Latches, 332 F.

Supp. 3d at 123. From 2003-12, the PTO suspended examination of the majority of Mr. Hyatt’s

patent applications. Jd at 124. Ultimately, the PTO and the Patent Trial and Appeals Board?

denied some of Mr. Hyatt’s claims in the four patents at issue here. /d. at 125-27.

Mr. Hyatt sued the PTO under 35 U.S.C. § 1454 — which allows a patent applicant to

challenge an adverse PTO decision in district court — seeking patents on four of his inventions.

The parties conducted discovery under a stipulated protective order. See Stipulated Protective

Order (ECF No. 40). After the Court denied cross-motions for summary judgment, the PTO moved

to dismiss these actions for prosecution latches. See Def.’s Mot to Dismiss (ECF No. 91). The

Court denied that motion, concluding that Mr. Hyatt neither unreasonably nor inexplicably delayed

the patent proceedings. Hyatt Latches, 332 F. Supp. 3d at 138-39. After a bench trial, the Court

ordered the PTO to issue a patent covering some, but not all, of the claims in Mr. Hyatt’s patents.

Hyatt Merits} L aos at 112-13.

Mr. Hyatt and the PTO have both appealed from the Court’s decisions. See Hyatt v. Iancu,

No. 18-2390, et al. (Fed. Cir. argued Feb. 6, 2020).

3 At the time, the Board was known as the Board of Patent Appeals and Interferences. See Leahy-Smith America

Invents Act, Pub. L. No. 112-29, § 7(a), 125 Stat. 284, 313 (2011).

4 At the time Mr. Hyatt filed these actions, § 145 designated the District of Columbia as the exclusive venue for § 145

actions; since 2011, the Eastern District of Virginia is the exclusive venue. See America Invents Act § 9(a).

I.

LEGAL STANDARDS

A. Attorneys’ Fees

On a motion for attorneys’ fees, the movant bears the burden of showing its entitlement to

fees. Hensley v. Eckerhart, 461 U.S. 424, 437 (1983). Once the movant shows he is entitled to

fees, the court must confirm that the fees are reasonable and disallow “excessive, redundant, or

otherwise unnecessary charges.” Jd. at 433-34. The Court has broad discretion in determining

what qualifies as a reasonable fee and how much to discount an unreasonable fee. Washington

All. of Tech. Workers v. Dep’t of Homeland Sec., 857 F.3d 907, 910-11 (D.C. Cir. 2017). Fee

matrices — most commonly the Laffey matrix — “provide[] a useful starting point” in determining

whether a fee is reasonable. Eley v. District of Columbia, 793 F.3d 97, 100 (D.C. Cir. 2015).

B. Confidential Documents

Under Federal Rule of Civil Procedure 26(c), the Court may issue an order limiting

discovery in order to “protect a party or person from annoyance, embarrassment, oppression, or

undue burden or expense.” A party that designates evidence as confidential under a protective

order must show good cause why the evidence should be protected. See Fed. R. Civ. P. 26(c)(1);

Alexander v. FBI, 186 F.R.D. 71, 75 (D.D.C. 1998). Under the protective order governing

confidential materials in this action, the designating party bears the burden of establishing good

cause to protect documents if the opposing party challenges its designation. See Stipulated

Protective Order § 16.

The court has broad discretion in issuing and shaping protective orders. Aluminum Co. of

Am. v. Dep’t of Justice, 444 F. Supp. 1342, 1347 (D.D.C. 1978).

Il.

ANALYSIS

A. Mr. Hyatt’s Motion for Attorneys’ Fees

Under the American Rule, prevailing litigants generally may not collect attorneys’ fees

from their opponents. Alyeska Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 247 (1975).

A prevailing party, however, may recover fees “when his opponent has acted in bad faith,

vexatiously, wantonly, or for oppressive reasons.” F. D. Rich Co. v. United States ex rel. Indus.

Lumber Co., 417 U.S. 116, 129 (1974). And a party that prevails against the United States may

collect fees to the same extent that he could against a private litigant. 28 U.S.C. § 2412(b).

“(T]he underlying rationale of fee-shifting upon a showing of bad faith is punishment of

the wrongdoer rather than compensation of the victim. For that reason, the standard for a finding

of bad faith is stringent....[A]ttorneys’ fees will be awarded only when extraordinary

circumstances or dominating reasons of fairness so demand.” Nepera Chem., Inc. v. Sea-Land

Serv., Inc., 794 F.2d 688, 702 (D.C. Cir. 1986). To invoke this exception to the American Rule,

the prevailing party must demonstrate bad faith by clear and convincing evidence. Parsi v.

Daioleslam, 778 F.3d 116, 131 (D.C. Cir. 2015).

Mr. Hyatt prevailed on the issue of prosecution laches and is thus a prevailing party. He

employs a shotgun approach in contending that the PTO acted in bad faith in litigating against him.

He seeks fees principally based on PTO’s delay in asserting its prosecution laches defense, PTO’s

delay in disclosing the identity of additional witnesses, PTO’s failure to disclose which portions

of the record it would rely upon at trial, and PTO’s failure to disclose an email and an image in

discovery.° Based on those allegations of bad faith, Mr. Hyatt asks the Court to award him fees

5 Mr. Hyatt also argues that the PTO made other inappropriate changes to its argument during and after trial. The

Court does not find that PTO changed its arguments on its theories of prosecution latches. Parties have room to

maneuver in how they frame and present their properly noticed and preserved legal theories at trial. And strategic

relating to (1) compelling the PTO to disclose which parts of the administrative record it would

rely upon at trial, (2) deposing witnesses, (3) preparing for trial, and (4) drafting Mr. Hyatt’s

proposed factual findings and conclusions of law. Hyatt’s Fees Br. 7-8 (ECF No. 262-1).

Mr. Hyatt has not produced clear and convincing evidence that the PTO litigated in bad

faith by asserting a prosecution latches defense, delaying disclosure of its witnesses, or failing to

disclose discoverable documents.

First, the PTO asserted its prosecution latches defense appropriately. The Court granted

the PTO leave to amend its answer to assert the prosecution latches defense, see Order, Apr. 10,

2017 (ECF No. 122), in order to efficiently resolve this dispute. And the PTO supported that

defense with a colorable argument. That the Court rejected the PTO’s argument does not render

it frivolous. Mr. Hyatt also argues that the PTO waited too long to assert its defense. To be sure,

“t]he Court is sympathetic to [Mr. Hyatt’s] argument that [the PTO] could and should have raised

the issue of prosecution laches earlier.” Order 2, Nov. 22, 2016 (ECF No. 90). But the Court

permitted the PTO to raise the defense in the interest of judicial economy. See id.; Order, Apr. 10,

2017. The PTO did not act in bad faith by raising a defense that the Court wanted to hear. Finally,

Mr. Hyatt claims that the PTO gave the Court an ultimatum — allow the amendment or permit the

PTO to deny the application for prosecution latches after trial. Hyatt’s Fees Br. 3. The PTO,

however, simply informed the Court and Mr. Hyatt about the practical consequences of denying

leave to amend its answer. The Court will not punish the PTO for taking an appropriate step to

streamline the case’s resolution.

behavior is not evidence of bad faith. The Court rejects these allegations of bad faith because the PTO acted within

the bounds of acceptable litigation behavior in how it framed its theory of the case.

Second, Mr. Hyatt has not produced clear and convincing evidence that the PTO failed to

timely disclose rebuttal witnesses. The Court did not exclude those rebuttal witnesses from

testifying before trial, implicitly acknowledging that they were properly noticed. Because the

Court is not firmly convinced that the PTO improperly gave notice of its rebuttal witnesses, it will

not find that the PTO acted in bad faith.

Third, Mr. Hyatt has not produced clear and convincing evidence linking the PTO’s failure

to disclose discoverable documents to the claims on which he prevailed. The withheld email

concerned the agency’s conduct not Mr. Hyatt’s. Moreover, Mr. Hyatt has not given reason to

believe that the agency acted in bad faith when it offered a weak but plausible argument as to why

the email could not be disclosed. See Hyatt v. PTO, 346 F. Supp. 3d 141, 150-51 (D.D.C. 2018).

To the extent that the PTO acted unreasonably, in forcing Mr. Hyatt to file a FOIA action before

turning over an email, it has already paid for Mr. Hyatt’s FOIA-related attorneys fees.

As to the PTO’s failure to disclose which documents it would rely on at trial, Mr. Hyatt

has shown by clear and convincing evidence that the PTO acted in bad faith. Mr. Hyatt served an

interrogatory on the PTO asking it which documents in a nearly two-million-page administrative

record it intended to rely on at trial. The PTO told him that the entire record would be relevant

and maintained that position in opposing Mr. Hyatt’s motion to compel. See PTO’s Opp’n to Mot.

to Compel 10-12 (ECF No. 143). No reasonable attorney expects to rely upon a record that — if

printed — would dwarf the Washington Monument at a five-day bench trial. That PTO complied

quickly with the Motion to Compel is irrelevant because Mr. Hyatt should never have been forced

to file his motion. Indeed, the fact that the PTO could inform Mr. Hyatt which documents it

intended to rely on within seven days of this Court’s order suggests that its refusal stemmed from

mere recalcitrance.

The Court will exercise its discretion to award attorneys’ fees based on that incidence of

bad faith litigation. But the Court will also tailor its fee award narrowly to punish the PTO only

for its failure to adequately respond to Mr. Hyatt’s interrogatory. The records Mr. Hyatt’s

attorneys submitted show that an attorney with 8-10 years of experience spent 7.9 hours on the

motion to compel and related discovery issues; they also show that that attorneys with 11-15 years

of experience spent 14.95 hours on those issues. See Grossman Decl. 3, 5, 7, Ex. 1 (ECF No.

263). The following table details the work for which the Court will award fees:

Date

Timekeeper

Hours

Rate

Fee

Narrative

6/23/2017

DeLaquil

0.50

$483.00

$241.50

Edit and revise draft 30(b)(6)

deposition notice; edit and revise

draft motion to compel.

6/23/2017

Grossman

0.50

$410.00

$205.00

Attention to discovery disputes

with Mr. Levine

6/23/2017

Levine

4.70

$483.00

$2,270.10

Draft correspondence to

Government regarding motion to

compel interrogatory responses

and other discovery production;

draft motion to compel; review

changes from Mr. M. DeLaquil;

review and revise motion to °

compel based upon same; discuss

research issues concerning same

with Mr. J. Nawrocki;

[REDACTED]; review potential

documents for use in motion to

compel.

6/24/2017.

Grossman

1.00

$410.00

$410.00

Attention to client

communications regarding

discovery; review and revise

motion to compel.

6/24/2017

Levine

0.25

$483.00

$120.75

Correspond with client regarding

discovery motion.

6/25/2017

Levine

0.40

$483.00

$193.20

Review and revise motion to

compel based upon comments

from client and Mr. Grossman.

6/26/2017

Grossman

1.20

$410.00

$492.00

notice.

Attention to discovery issues;

discuss same with Mr. Levine;

final review of motion to compel;

attention to Rule 30(b) deposition

6/30/2017

Grossman

6/30/2017

Levine

4.00

$410.00

$1,640.00 —

Attention to discovery issues and

communications with PTO

regarding same; participate in call

with client; discuss timing and

strategy issues with Messrs.

DeLaquil and Levine;

[REDACTED]; review materials

provided by client; review

response to motion to compel

filed by PTO and discuss same

with Mr. Levine.

3.50

$483.00

$1,690.50

Review PTO Opposition to Hyatt

Motion to Compel; research

issues related to the same; discuss

same with Mr. Grossman; draft

email regarding the same;

correspond with PTO regarding

discovery issues; [REDACTED];

discuss same with Mr. DeLaquil;

discuss deposition planning with

Mr. DeLaquil and Mr. Grossman;

draft correspondence relating

thereto.

7/1/2017

Levine

4.80

$483.00

$2,318.40

Draft reply in support of motion

to compel; review PTO

opposition brief.

| 7/2/2017

Grossman

1.20

$410.00

$492.00

Review and revise reply in

support of motion to compel.

7/2/2017

Levine

0.80

$483.00

$386.40

Review changes from Mr.

Grossman to Reply brief in

support of motion to compel

Id. at Ex. 1. The Court notes that some of the entries are block billed; as all of the entries relate to

discovery disputes that occurred at the same time as the motion to compel, however, the Court will

not reduce its fee award. See Tridico v. District of Columbia, 235 F. Supp. 3d 100, 110 (D.D.C.

2017) (declining to discount fees due to limited block billing).

Accepting as reasonable the Laffey Matrix fees for attorneys with the same experience as

Mr. Hyatt’s counsel, the Court will award Mr. Hyatt $10,459.85 in attorneys’ fees. °

B. The PTO’s Motion for Expenses

When a patent applicant bypasses Federal Circuit review of a decision of the Patent Trial

and Appeal Board and sues directly in district court, he obtains the ability to introduce new

evidence and the right to a de novo determination of the merits of his application. Kappos v. [Hyatt,

566 U.S. 431, 434-36 (2012). But those benefits come with a cost: a plaintiff suing under § 145

must pay “[a]ll the expenses of the proceedings.” 35 U.S.C. § 145.

The question here is whether “expenses” include expert fees. The Supreme Court

construed § 145 to exclude attorneys’ fees in Peter v. NantKwest, Inc., 140 S. Ct. 365, 372 (2019),

holding that the provision’s language was not express enough to overcome the American Rule’s

presumption against fee shifting. And a similar presumption applies to witness fees. See W. Va.

Univ. Hosps., Inc. v. Casey, 499 U.S. 83, 86-87 (1991) (holding that a court may not award expert

fees “absent contract or explicit statutory authority to the contrary” and refusing to “lightly infer

that Congress has repealed [statutory caps on witness fees]... through... any... provision not

referring explicitly to witness fees.” (quoting Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S.

437, 439, 445 (1987)).

When Congress intends to shift witness fees, it does so expressly. See id. at 90 n.4

(collecting statutes); cf NantKwest, 140 S. Ct. at 373-74 (describing expressly authorized

attorneys’ fess provisions). It did not mention expert fees in § 145, quite possibly because the PTO

6 The Court acknowledges that the PTO has appealed its prosecution latches decision. See Hyatt v. Iancu, No. 18-

2390, et al. (Fed. Cir. argued Feb. 6, 2020). Ifthe PTO prevails on appeal, Mr. Hyatt will not be entitled to the fees

the Court awards here. Nevertheless, the Court will exercise its discretion and decline to stay consideration of this

motion until the Federal Circuit decides the appeal. Mr. Hyatt filed his patent applications at issue here in 1995; he

filed the lead case here almost fifteen years ago and the parties have actively litigated for most of this decade. At this

point, resolving the parties’ remaining disputes as quickly as possible best serves the interests in judicial economy.

did not start using expert witnesses until 1985. See Gould v. Mossinghoff, Civil No. 80-3287, 1985

WL 6013 (D.D.C. Dec. 19, 1985). That statutory silence cannot trump express statutory text which

authorizes courts to shift witness fees only for court-appointed experts. See 28 U.S.C. § 1920.

The Court lacks the statutory authority required to shift expert fees onto a § 145 plaintiff.

The PTO points to an unbroken line of cases that have come out the other way. They cite

this Court’s order in Sandvik Aktiebolag v. Samuels, Civil No. 89-3127-LFO, 1991 WL 25774,

(D.D.C. Feb. 7, 1991), which awarded expert fees in a § 145 action, but never addressed West

Virginia University’s explicitness requirement. They cite several cases in the Eastern District of

Virginia that award expert fees without explaining how the statute authorized the award. See

Halozyme, Inc. v. Iancu, No. 1:16-CV-1580, 2018 WL 5270329, at *1 (E.D. Va. Oct. 23, 2018)

(“Expenses are commonly understood to encompass printing, travel, and expert witness costs.”

(quotation marks omitted)); Taylor v. Matal, No. 1:15-cv-1607-LMB, 2017 WL 5147147, at *5

(E.D. Va. Nov. 6, 2017) (“It is well settled that the term ‘expenses’ as used in § 145 encompasses

the costs associated with court reporters, transcription, printing, travel expenses, and expert

witnesses.”); Realvirt, LLC v. Lee, 220 F. Supp. 3d 704, 706 (E.D. Va. 2016) (looking to text alone

to conclude that plaintiff is likely to lose on merits of PTO’s expert fees claim). They also point

to dicta in the Federal Circuit’s decision in NantKwest discussing the uncontested expert fees

award in that case. See NantKwest, Inc. v. Iancu, 898 F.3d 1177, 1181 (Fed. Cir. 2018) (en banc)

(noting that PTO has relied on § 145 to collect expert fees). But the PTO has not pointed to a

single precedent that gives a reasoned explanation as to how § 145 can provide for expert fees

without expressly mentioning them. Accordingly, the cases PTO cites do not actually counter Mr.

Hyatt’s argument.

10

The Court has found only one case that comes close to explaining why § 145 overcomes

the presumption against shifting expert witness fees. In Booking.com B.V. v. Matal, the Eastern

District of Virginia held that a parallel provision in trademark law allowed the PTO to recover

expert fees. No. 16-cv-425-LMB, 2017 WL 4853755, at *10 (E.D. Va. Oct. 26, 2017), vacated

and remanded, No. 18-1309, 2020 WL 3578671 (U.S. July 2, 2020). In reaching that decision

Judge Brinkema, relied on (1) Congress’ choice of the word “expenses” instead of the narrower

word “costs,” (2) Congress’ inclusion of the word “all” to broaden the scope of expenses, and (3)

the ordinary meaning of the term “expenses.” Jd. But in NantKwest, the Supreme Court rejected

all three rationales in explaining why § 145 does not include attorneys’ fees. See NantKwest, 140

S. Ct. at 373-74 (explaining that word “expenses,” though broader than costs, is not explicit

enough to include attorneys’ fees); id. at 372 (“The reference to ‘expenses’ in § 145 does not

invoke attorney’s fees with the kind of ‘clarity we have required to deviate from the American

Rule.””); id. at 372-73 (“[T]he modifier ‘all’ does not expand § 145’s reach to include attorney’s

fees. Although the word conveys breadth, it cannot transform ‘expenses’ to reach an outlay it

would not otherwise include.”).

The lack of reasoned precedent to support the PTO’s position also answers their objections

to Mr. Hyatt’s reliance on NantKwest. The PTO is correct in arguing that NantKwest did not

abrogate decisions applying § 145 to expert fees — but only because no precedents actually stand

for the proposition that § 145 allows the PTO to recover expert fees. Moreover, the NantKwest

Court’s silence on the question of expert fees elucidates nothing because the parties did not present

that question to the Court. See Izumi Seimitsu Kogyo Kabushiki Kaisha v. U.S. Philips Corp., 510

U.S. 27, 32 n.5 (1993). But what NantKwest makes clear is that the language in § 145 is not

specific enough to overcome the common-law presumption against shifting attorneys’ fees

11

embodied in the American Rule; a fortiorari, § 145 cannot overcome the statutory presumption

against shifting expert fees described in West Virginia University.

The PTO is not entitled to collect expert fees from Mr. Hyatt.

Finally, Mr. Hyatt does not contest that the government is entitled to $60.797.44 in

reimbursement for its court reporting, travel, and photocopying expenses. Accordingly, the Court

will award the PTO $60,797.44 in expenses.

C. Mr. Hyatt’s Motion to De-designate Protected Documents

The PTO designated most of the documents it produced in discovery as protected. Mr.

Hyatt seeks to de-designate two classes of documents: (1) internal PTO case files, emails, and

documents and (2) documents introduced at trial.

The PTO argues that it had good cause to designate the documents ds protected because

they are internal documents that are (1) maintained in confidence, (2) not generally available to

the public, and (3) of a type that they would not ordinarily reveal to the public except in

confidence.’ That argument is enough to show good cause under the parties’ stipulated protective

order. See Stipulated Protective Order § 1. And except for the evidence put forward at trial, Mr.

Hyatt cannot show that any of the evidence does not meet those three criteria.

His citations to cases denying contested motions for protective orders are inapposite,

because here the stipulated protective order provides the standards for protecting the documents.

And his citations to FOIA cases provide no more support for this motion: Mr. Hyatt may well be

able to get this information through FOIA litigation, but the very fact that he would have to litigate

to see the files indicates that the PTO protects the documents from public disclosure.

7 The rest of the PTO’s arguments counter Mr. Hyatt’s arguments rather than offering grounds for why the documents

should remain protected.

12

The PTO, however, cannot protect materials that have been displayed in open court. Both

the common law, Nixon v. Warner Commce’ns, Inc., 435 U.S. 589, 597 (1978) and the First

Amendment, Richmond Newspapers, Inc. v. Virginia, 448 U.S. 555, 575—77 (1980), create strong

presumptions in favor of public access to judicial proceedings and records. To be sure, there are

rare occasions when evidence introduced in open court can be protected retroactively. See

Poliquin v. Garden Way, Inc., 989 F.2d 527, 533 (1st Cir. 1993) (hypothesizing that it might

protect “national security, the formula for Coca Cola, or embarrassing details of private life”). But

to invoke such protection, the PTO must satisfy far more than the good cause standard under Rule

23(c). Id. To seal the records of a judicial proceeding requires a compelling showing of need. Id.

In a case like this involving alleged government misconduct, that need must be extraordinarily

compelling. The PTO has not come close to making that showing.

Accordingly, the Court will order the documents made public at trial (PTX-615, PTX-272,

PTX-115, PTX-119, PTX-124, PTX-141, PTX-133, and PTX-140) de-designated as protected but

allow the other designations to remain intact.

IV. CONCLUSION

Based on the foregoing, by separate order the Court will grant in part and deny in part Mr.

Hyatt’s motion for fees, grant in part and deny in part the PTO’s motion for expenses, and grant

in part and deny in part Mr. Hyatt’s motion to de-designate confidential documents.

Sages Poodle.

Date: ue 24 Jae Royce C. Lamberth

United States District Judge

13