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3 Things to Watch with USPTO Fee Rule Before SCOTUS

October 4, 2019

A recent Law 360 article by Bill Donahue, “3 Things to Watch as USPTO’s Fee Rules Hits the High Court, reports on the USPTO attorney fee rule that's before the U.S. Supreme Court.  The article reads:

With the U.S. Supreme Court set to hear arguments over the U.S. Patent and Trademark Office's controversial policy on attorney fees, Law360 asked legal experts what they’re expecting to hear from the justices.  The case, Peter v. NantKwest, will determine the legality of an unusual USPTO policy that demands reimbursement of the agency’s attorney fees in certain types of appellate proceedings — regardless of whether or not it wins the case.

The USPTO has argued that the tactic, first rolled out in 2013, is necessary to pay for a more expensive appellate option, but critics say it will harm small businesses and individual inventors who can’t afford to automatically pay the agency’s legal bills.  Lower appeals courts have split on whether the policy violates the so-called American Rule — a deep-rooted doctrine that says litigants must pay their own expenses unless Congress expressly says otherwise.

After the Federal Circuit struck down the policy last year in a case filed by the drugmaker NantKwest, the USPTO appealed to the high court, which agreed to hear the case in March.  With oral arguments set for Monday morning, here are three big issues that experts who have been tracking the case say they’ll be watching.

American Rule

One major factor to watch is the extent to which the justices focus on big questions about the American Rule and public policy or on narrow questions about exact statutory language.  The USPTO's fee policy is rooted in a novel interpretation of so-called de novo appeals — a longer and more fact-intensive route that allows a dissatisfied patent or trademark applicant to appeal to a district court rather than simply asking the Federal Circuit to review a refusal on the existing record.

At issue at the high court?  Language included in both the Patent Act and the Lanham Act that says applicants who choose the de novo route must reimburse "all expenses of the proceeding."  Crucially, that requirement applies regardless of whether an applicant wins or loses its appeal.

For decades, the USPTO interpreted that language to mean relatively minor expenses, like travel costs and expert fees.  But that changed in 2013, when the USPTO started demanding that applicants reimburse the substantially larger cost of the salaries paid to agency attorneys.  Whether that reinterpretation is legal has split the circuits courts.

In the current case against NantKwest, the Federal Circuit ruled that the policy violates the American Rule, saying that Congress did give the agency clear authority to win such fees.  But in a separate trademark case, the Fourth Circuit refused to apply the American Rule, and instead simply held that the definition of “all expenses” could reasonably include salaries paid to agency lawyers.

Experts will be watching whether the justices seem to be focusing, like the Federal Circuit did, on the bigger question of the American Rule or whether they merely want to analyze what “all expenses” means.  “If questions from the bench refer to the American Rule, it may mean the court views the government’s case skeptically,” said Theodore H. Davis, an attorney Kilpatrick Townsend & Stockton LLP who penned an amicus brief against the USPTO for the American Bar Association.  “But if the court zeros in on the definition of the word ‘expenses,’ that may suggest it’s leaning toward a reversal or a vacatur,” Davis said.

Across the Aisle

The challenge to the USPTO’s fee policy presents arguments that experts say could resonate on with both ideological wings of the high court.  Much of the criticism of the agency’s policy has been centered on the idea that it would limit access to justice for applicants with fewer resources.  The ABA said the rule means that applicants' “wealth would determine their access to the pathway to justice provided by Congress.”  The International Trademark Association warned that it would make de novo appeal unavailable “for all but the wealthiest applicants.”

Those policy arguments could strike a chord with the court’s liberal members, experts say.  “The more liberal justices may focus on the fact that fee-shifting creates an access to justice problem,” said Dyan Finguerra-DuCharme, an attorney at Pryor Cashman LLP.  “Those with less money will hesitate to pursue legitimate claims by civil action.”

For the conservatives, an abrupt about-face by a federal administrative agency that results in foisting large legal bills onto private companies might not sit well.  “I am particularly looking forward to the questions that Justices Neil Gorsuch and Brett Kavanaugh present to the parties,” said William Atkins, an attorney at Pillsbury Winthrop Shaw Pittman LLP who wrote an amicus brief against the USPTO for the Federal Circuit Bar Association.  “The views of administrative law may be on full display.”

Dissenting Voice

Ahead of arguments, the amicus briefs filed in the case have largely been one-sided, with almost all of them asking the court to strike down USPTO’s policy.  But one outside group, a conservative think tank called the R Street Institute, is pressing the court to uphold the agency’s interpretation.  According to R Street, administrative procedures at the USPTO for rejected patent applications largely replicate the advantages of a de novo appeal for a fraction of the cost, eliminating much of the “access to justice” policy arguments against the fee rule.

The real advantage of de novo appeals, according to R Street, is that they can be exploited to give “well-financed applicants” in the pharmaceutical industry extra time on the back end of a patent term.  Under separate provisions of the Patent Act, time spent litigating a de novo case is tacked onto the term.  For Charles Duan, the attorney at R Street who penned the group’s brief, the extent to which that argument gains traction with the justices will be another element to watch.

Article: Making Attorney Invoices Generic, but Detailed

August 27, 2019

A recent New Jersey Law Journal article by Ursula H. Leo and Jonathan N. Frodella, “Making Attorney Invoices Generic, but Detailed” reports on law firm billing format in OPRA matters.  This article was posted with permission.

Attorney invoices to municipalities and other government agencies are subject to disclosure under the New Jersey Open Public Records Act, N.J.S.A. 47:1A-1 et seq. (OPRA).  The standard OPRA exceptions apply to these “government records,” so custodians must redact all confidential information from them before providing them to OPRA requestors.  Unfortunately, redacting invoices requires attorney review, so taxpayers often incur additional legal fees when attorney invoices are requested under OPRA.  In the private sector, attorneys are encouraged to write billing narratives that capture their work as completely as they practically can, and the use of personal identifiers and descriptions of litigation strategies is standard practice.  However, when it comes to municipal work, more detail is not always the best course, and municipal attorneys should strive to draft their bills as generically as possible while still justifying their time to their governing bodies.

A good exercise to help achieve this goal is to draft every bill as though it absolutely will be subject to an OPRA request (and this presumption is not so far-fetched).  For example, when referring to employee investigations or labor disputes, matters should be described generally and the identities of specific employees and witnesses should not be revealed.  Although it is common for labor and employment attorneys to use initials to describe individuals, this practice should also be avoided since initials often must be redacted, and even the length of redactions or simple redaction errors can jeopardize the privacy interests that custodians are charged with protecting.  Similarly, when describing legal research or other legal work, descriptions should be general and should never reveal litigation strategy.  In addition to reducing legal fees, generic billing helps reduce municipal clients’ overall liability exposure by eliminating the need to make sensitive and timely redactions.

Attorneys must discuss any proposed generic billing styles with their clients to determine acceptable practices and agree to any useful billing conventions.  Even better, municipalities can create their own standards and incorporate them into attorney engagements.  For example, the State Division of Law publishes specific guidelines for outside counsel, including a detailed section on invoice format in which the Division explicitly prohibits “[i]ncomplete or vague charge descriptions” and provides some examples of the kinds of charge descriptions it will not accept.  The Division’s standards might seem at odds with the “generic billing” we are describing, so it is important to emphasize that generic billing is not vague or incomplete billing.  Attorneys can adequately account for their time using robust, detailed billing narratives without revealing confidential information, so long as they maintain awareness of OPRA confidentiality concerns and exercise their creativity.

Ursula H. Leo and Jonathan N. Frodella are attorneys at Laddey Clark & Ryan in Sparta, where they focus their practice on government services.

Law Firm Bills Soar Quickly in Big Bankruptcy

August 22, 2019

A recent Law.com story by Samantha Stokes, “Law Firm Bills in Big Bankruptcy Cases Growing Rapidly,” reports that there was no summer slowdown for law firms advising on large corporate bankruptcies: the season has brought a bonanza of law firm fee applications and approvals.  Several Am Law 200 firms stand to gain up to tens of millions of dollars from some of the most active Chapter 11 bankruptcies this summer, including Sears Holding Corp. and PG&E Corp.

In the Sears case, U.S. Bankruptcy Judge Robert Drain of the Southern District of New York on June 28 approved fee requests for 16 advisers—including six law firms—that totaled about $130 million in all for work mostly from mid-October through February.

Of the $130 million fee package, Weil, Gotshal & Manges alone billed and was awarded more than $40 million, as well as nearly $1.6 million in expenses.  According to the firm’s fee application, that amount included billing from 154 attorneys and 39 others.  The highest hourly rates—$1,600—belonged to Weil partners Kenneth Heitner, Greg Danilow, Ellen Odoner, W. Michael Bond, Stuart Goldring and Paul Wessel.  The lawyer that netted the most for the firm in the fee award, about $1.4 million, was partner Ray Schrock, co-chair of the firm’s business finance and restructuring department.

In addition, Drain awarded Akin Gump Strauss Hauer & Feld, counsel to the committee of unsecured creditors, $20.3 million in fees and $1.3 million in expenses, and Paul, Weiss, Rifkind, Wharton & Garrison, conflict counsel for debtors and counsel for the restructuring subcommittee, $14.38 million in fees and about $289,000 in expenses.  Delaware law firm Young Conaway Stargatt & Taylor, conflicts counsel, was awarded $239,471 in fees, while McAndrews, Held & Malloy, IP counsel for Sears, was awarded $628,967.  Wachtell, Lipton, Rosen & Katz, which previously served as special counsel for Sears but withdrew from the case in March, was awarded about $873,185.  Sears is to begin repaying what it owes, according to the order, although fee applications will still be reviewed by an independent, court-ordered fee examiner.

Across the country, PG&E has already paod more than $84 million to four firms in the months leading to its January 2019 bankruptcy, including Cravath, Swaine & Moore; Weil; Jenner & Block; and Keller & Benvenutti.  In the last two months, several law firms have filed fee applications for compensation after PG&E’s Chapter 11 filing in the Northern District of California.

Last month, Weil, representing the debtors, applied for fees to the tune of more than $9 million, in addition to more than $335,000 in expenses; Munger, Tolles & Olson, representing debtors on certain matters, applied for $6.65 million in fees and $99,000 in expenses; and Keller & Benvenutti billed for $1.1 million in fees and more than $32,000 in expenses.

Also in July, Baker & Hostetler, counsel to the committee of tort claimants, asked the court for $7.19 million in fees; Simpson Thacher & Bartlett, counsel to PG&E Corp.’s and Pacific Gas and Electric Co.’s boards, as well as certain current and former independent directors, applied for $1.9 million in fees; and Milbank, counsel to the committee of unsecured creditors, submitted a fee application for $7.28 million.

In August, Jenner, special corporate defense and energy counsel to the debtors and debtors in possession, applied for $3.48 million in legal fees.

Earlier in the summer, a judge approved more than $56 million in fees for Kirkland & Ellis from Toys R Us’ bankruptcy proceedings.  The firm is likely to reap further fees from the representation of luxury retailer Barneys in its own Chapter 11, filed in August.

NALFA Announces The Nation’s Top Attorney Fee Experts of 2019

August 20, 2019

NALFA, a non-profit group, has a network of attorney fee expertise. Our network includes members, faculty, and fellows with expertise on the reasonableness of attorney fees.  We help organize and recognize qualified attorney fee experts from across the U.S. and around the globe.  Our attorney fee experts include court adjuncts such as bankruptcy fee examiners, special fee masters, and fee dispute neutrals.

Every year, we announce the nation's top attorney fee experts.  Attorney fee experts are retained by fee-seeking or fee-challenging parties in litigation to independently prove reasonable attorney fees and expenses.  The following NALFA profile quotes are based on bio, CV, case summaries and case materials submitted to and verified by us.  Here are the nation's top attorney fee experts of 2019:

"The Nation's Top Attorney Fee Expert"
John D. O'Connor
O'Connor & Associates
San Francisco, CA
"Over 30 Years of Legal Fee Audit Expertise"
Andre E. Jardini
KPC Legal Audit Services, Inc.
Glendale, CA
"Outstanding Skills Assessing Reasonable Attorney Fees in Class Actions"
Stephen J. Herman
Herman Herman & Katz LLC
New Orleans, LA

"The Nation's Top Bankruptcy Fee Examiner"
Robert M. Fishman
Fox Rothschild LLP
Chicago, IL

"Widely Respected as an Attorney Fee Expert"
Elise S. Frejka
Frejka PLLC
New York, NY
"Experienced on Analyzing Fees, Billing Entries for Fee Awards"
Robert L. Kaufman
Woodruff Spradlin & Smart
Costa Mesa, CA

"Highly Skilled on a Range of Fee and Billing Issues"
Daniel M. White
White Amundson APC
San Diego, CA
"Extensive Expertise on Attorney Fee Matters in Common Fund Litigation"
Craig W. Smith
Robbins Arroyo LLP
San Diego, CA
"Highly Experienced in Dealing with Fee Issues Arising in Complex Litigation"
Marc M. Seltzer
Susman Godfrey LLP
Los Angeles, CA

"Total Mastery in Resolving Complex Attorney Fee Disputes"
Peter K. Rosen
Los Angeles, CA
"Understands Fees, Funding, and Billing Issues in Cross Border Matters"
Glenn Newberry
Eversheds Sutherland
London, UK
"Solid Expertise with Fee and Billing Matters in Complex Litigation"
Bruce C. Fox
Obermayer Rebmann LLP
Pittsburgh, PA
"Excellent on Attorney Fee Issues in Florida"
Debra L. Feit
Stratford Law Group LLC
Fort Lauderdale, FL
"Nation's Top Scholar on Attorney Fees in Class Actions"
Brian T. Fitzpatrick
Vanderbilt Law School
Nashville, TN
"Great Leader in Analyzing Legal Bills for Insurers"
Richard Zujac
Liberty Mutual Insurance
Philadelphia, PA

Professional Fees in Puerto Rico Bankruptcy Pass $400M

June 5, 2019

A recent Bloomberg Law story by Daniel Gill, “Professional Fees in Puerto Rico Restructuring Pass $400 Million,” reports that attorneys and financial advisers employed in Puerto Rico’s epic bankruptcy-like restructuring have billed more than $400 million in less than two years since the proceedings began, according to a court-appointed fee examiner.  More than 50 firms have sought compensation in the case, Brady C. Williamson, the fee examiner appointed to review and make recommendations regarding professionals’ applications for compensation, said in his report June 5.

Proskauer Rose LLP, which represents the federal board created to oversee the restructuring, the Financial Oversight and Management Board, submitted a bill totaling about $20 million for services rendered from June 1, 2018 through Jan. 31.  For the same time period, O’Melveny & Myers LLP, counsel for the AAFAF, a Spanish acronym for Puerto Rico’s fiscal authority, is charging about $17 million.  Paul Hastings LLP, counsel for the unsecured creditors committee, seeks $3.6 million.  Other firms with a bill exceeding $1 million include Greenberg Traurig LLP, Brown Rudnick LLP, and Jenner & Block LLP.

The fee applications, which are public documents, don’t face any objections, Williamson said.  He recommended that some of the bills from Oct. 1, 2018 to Jan. 31 be approved.  He asked the court to defer ruling on other bills until a hearing on July 24.

Professional fees will likely continue to rise due to increased litigation and contested settlements, Williamson said.  The oversight board recently filed more than 200 lawsuits, and a proposed settlement of Puerto Rico’s electric utility PREPA’s debts is being contested.  Williamson said he “remains concerned about the potential for inefficiency and duplication of efforts in the management” of lawsuits, noting the many firms pursuing claims.

Article: Defense Costs Coverage 101

January 16, 2019

A recent New York Law Journal article by Howard B. Epstein and Theodore A. Keyes, “Defense Costs Coverage 101,” reports on defense fees and costs in the insurance coverage practice area.  This...

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