PERCENTAGE COSTS ORDERS AFTER A TRIAL: ISSUE BY ISSUE DEDUCTIONS

The judgment of Mr Justice Arnold in Novartis AG -v- Focus Pharmaceuticals Limited [2015] EWHC 1553 (Pat) is another example of an approach to percentage costs orders and interim orders for costs after a trial.  The judge ordered that the successful defendants receive 75% of their  costs. What is interesting is the manner in which the judge goes through each issue on which the defendant was unsuccessful and allocates a specific percentage to those issues when appropriate.

THE CASE

The defendants were successful in defending an action for breach of a patent on the ground that the patent was invalid. In this separate judgment the judge considered the appropriate order for costs.

osts

  1. There is no dispute as to the applicable principles, which have been set out in many previous decisions. It is common ground that overall the Defendants were successful and thus the starting point is that the Defendants are entitled to their costs. It is also common ground that there should nevertheless be some deduction from those costs to reflect issues on which the Defendants were unsuccessful. Novartis contend that the Defendants should only recover 61% of their costs. The Defendants contend that they should recover at least 90% of their costs.
  2. Novartis contend that the Defendants were unsuccessful on the following issues: (i) construction, (ii) novelty over US031, (iii) validity over International Patent Application No. WO 2005/079784 (“WO784”), (iv) insufficiency, (v) priority and (vi) infringement.
  3. So far as construction is concerned, Novartis contend that the Defendants were unsuccessful in persuading the court to adopt their preferred construction and that Novartis should not have to pay the Defendants’ costs of this. The Defendants dispute this. They contend that there were two possible constructions of the claim, both of which have found favour in different European jurisdictions and thus were reasonable to advance. More importantly, they point out that, although their preferred construction would have led to non-infringement, the alternative construction led to the finding of added matter. Thus they contend that Novartis cannot really be said to have won on this issue. In any event, they say that considering the Application and Patent was a necessary preliminary to consideration of the added matter issue, and therefore any deduction should only reflect the increased costs.
  4. In my view the Defendants did raise an issue of construction on which they were unsuccessful, and therefore Novartis are right to say that the Defendants ought not to recover their costs of doing so. I agree with the Defendants, however, that it is only the Defendants’ additional costs of advancing their preferred construction which should be deducted. Since the Defendants estimate their entire costs of construction at under 4%, this is a small percentage. I assess it at 2%.
  5. As for novelty over US031, Novartis point out that the Defendants pleaded, but did not actually run, a case of lack of novelty. As the Defendants point out, however, the Defendants did not adduce any evidence or submissions on this issue. Furthermore, in so far as Novartis incurred costs in considering what features were missing from US031, those costs had to be incurred anyway for the obviousness case. Accordingly, I shall not make any deduction on this account.
  6. 7. Turning to validity over WO784, this was not pursued by the Defendants at trial. The Defendants accept that they should not recover their costs in relation to this, which they estimate at 5%. Novartis say that the Defendants should notionally pay Novartis’ costs as well, which they again estimate at just over 5%. The Defendants dispute this. I agree with Novartis on this point. Given that the Defendants’ combined costs are larger than those of Novartis, I consider that a fair deduction is 8%.
  1. As to insufficiency, Novartis contend that the Defendants were unsuccessful and should notionally pay Novartis’ costs. The Defendants accept that, in the case of two out of the three points run at trial, they should not recover their costs. In the case of the first point, the Defendants point out that this was run as a squeeze between obviousness and insufficiency, and hence contend that there should be no deduction. I agree with this. I consider that the Defendants should notionally pay Novartis’ costs in relation to the other points raised by the Defendants, however. Novartis estimate their overall costs of insufficiency at 10%, while the Defendants estimate theirs at less than 4%. Doing the best I can on the material available, I consider that an appropriate percentage deduction is 10%.
  2. So far as priority is concerned, Novartis complain that the Defendants raised an unnecessary issue which added nothing to the added matter objection. I agree with this, but as Novartis themselves say, it was raised late. Furthermore, it merely resulted in some additional legal argument. I do not think this justifies an additional deduction.
  3. As for infringement, Novartis contend that the Defendants were unsuccessful and should notionally pay Novartis’ costs. The Defendants dispute that there should be any deduction other than that for construction. As Novartis point out, however, the Defendants also lost on the factual question of whether their patches had the same starting dose as the reference patch. Given that Novartis estimate their costs at a little over 3% and that the Defendants’ costs in relation to that question will have been modest, I think a fair deduction is 5%.
  4. Overall, therefore, I shall order Novartis to pay 75% of the Defendants’ costs.

Payment on account

  1. It is common ground that Novartis should be ordered to make a payment on account of the Defendants’ costs. The Defendants ask for a payment on account of 60% of whatever percentage is awarded to reflect their success, while Novartis propose 40%. Novartis justify the latter figure on the basis that there is likely to have been duplication between the Defendants. The Defendants dispute this. It appears to me that there may have been some duplication, but I accept that the Defendants took at least some steps to minimise this. In the circumstances, I consider that a reasonable figure is 55% i.e. 55% of 75% of the Defendants’ total bill.

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