Costs - Coloplast A/S v Salts Healthcare Limited


 




Jane Lambert


Patents Court (Nicholas Caddick QC) Coloplast A/S v Salts Healthcare [2021] EWHC 107 (Pat) (26 Jan 2021)

I discussed Nicholas Caddick QC's decision in Coloplast A/S v Salts Healthcare Limited [2021] EWHC 3 (Pat) (18 Jan 2021) in Patents - Coloplast A/S v Salts Healthcare Limited. on 16 Feb 2021. It will be recalled that the claimant won everything except on obviousness.  As that was enough to defeat the action the learned deputy judge found for the defendant.

On 21 Jan 2021, he had to deal with the form of order.   The following issues were in dispute:

"a. Whether to make an issue-based costs order;
b. The level of interim payment to award on account of costs;
c. Whether to award an interim payment in respect of interest on costs; and
d. Whether to grant Coloplast permission to appeal."

Whether to make an Issue-Based Order
Mr Caddick said at para [3] of his order:

"It is common ground that Salts was the overall winner of the proceedings. Accordingly, the starting point as regards costs is the general rule that Salts is entitled to its costs (see CPR r.44.2 (2) (a)). However, CPR r.44.2 (2) (b) recognises that the court may make a different order and an instance of this is where it is appropriate to make an issue-based costs order pursuant to CPR r.44.2 (4) (b) and CPR r.44.2 (6) (f). Such orders can be appropriate where, despite being the overall winner, a party has lost on certain issues."

In Pigot v Environment Agency [2020] EWHC 930 (Ch), Mr Stephen Jourdan QC provided the following guidance at para [6] of his judgment:

"(1) The mere fact that the successful party was not successful on every issue does not, of itself, justify an issue-based cost order. In any litigation, there are likely to be issues which involve reviewing the same, or overlapping, sets of facts, and where it is therefore difficult to disentangle the costs of one issue from another. The mere fact that the successful party has lost on one or more issues does not by itself normally make it appropriate to deprive them of their costs.
(2) Such an order may be appropriate if there is a discrete or distinct issue, the raising of which caused additional costs to be incurred. Such an order may also be appropriate if the overall costs were materially increased by the unreasonable raising of one or more issues on which the successful party failed.
(3) Where there is a discrete issue which caused additional costs to be incurred, if the issue was raised reasonably, the successful party is likely to be deprived of its costs of the issue. If the issue was raised unreasonably, the successful party is likely also to be ordered to pay the costs of the issue incurred by the unsuccessful party. An issue may be treated as having been raised unreasonably if it is hopeless and ought never to have been pursued.
(4) Where an issue-based costs order is appropriate, the court should attempt to reflect it by ordering payment of a proportion of the receiving party's costs if that is practicable.
(5) An issue-based costs order should reflect the extent to which the costs were increased by the raising of the issue; costs which would have been incurred even if the issue had not been raised should be paid by the unsuccessful party.
(6) Before making an issue-based costs order, it is important to stand back and ask whether, applying the principles set out in CPR rule 44.2, it is in all the circumstances of the case the right result. The aim must always be to make an order that reflects the overall justice of the case."

While finding that guidance helpful, Mr Caddick made the additional points at para [5] of his judgment:

a. The approach to issue-based costs orders in patent litigation does not differ from the approach in other types of litigation (see Hospira UK Ltd v Cubist Pharmaceuticals, LLC [2016] 5 Costs LR 1011, per Henry Carr J. at [9]). However, patent cases lend themselves to issue-based costs orders because they often involve a large number of issues and a party can (as in the present case) lose on a number of issues but still be the overall winner. See SmithKline Beecham Plc v Apotex Europe Limited [2004] EWCA Civ 1703, per Jacob LJ at [25]-[26]. Further, as Henry Carr J said in Cubist at [9]:

'Patent litigation is very expensive, and it is important that parties should be encouraged only to pursue their best points, and to be aware of the cost implications of failing to do so.'

A similar point was made by Birss J in Unwired Planet International Limited v Huawei Technologies Co. Limited [2016] EWHC 410 (Pat) at [13] although Birss J went on, (at [18]), to note that courts must be careful because:

'If the court unduly penalises a party for dropping issues before trial, that may encourage parties to continue to run up issues all the way to trial, which will in turn increase the costs even further.'

b. What constitutes a discrete or distinct issue (or, as it is often called in patent cases, a "suitably circumscribed" issue) will vary from case to case. In the patent context, it may involve the consideration of an individual piece of prior art but may equally be an issue arising within a broader issue, such as an issue as regards experiments arising in relation to the broader issue of infringement. See Unwired Planet at [6].
c. Where the overall winner has lost on a discrete issue, it is likely to be deprived of its costs of that issue even if it acted reasonably. However, that is not inevitable. It must still be appropriate to make such an order.
d. Where the overall winner has lost on a discrete issue, it may also be ordered to pay the losing party's costs of that issue. As appears from Pigot, such an order is likely to be made where the overall winner had acted unreasonably in relation to that issue. However, such an order can be made even where the overall winner had not acted unreasonably. It has been said that to make such an order requires "suitably exceptional" circumstances. However, in reality, the test is simply whether it would be appropriate and just in all the circumstances to make such an order. It is not intended that such orders should be extremely rare. See Unwired Planet at [6]-[8] and Cubist at [6]-[10].
e. Where an issue-based costs order is appropriate, the proportion of the winning party's costs to be paid is often expressed in terms of a percentage of its total costs. This percentage reflects the deduction necessary to reflect the winning party's costs in relation to an issue on which it lost and also, where appropriate, the losing party's costs in relation to that issue. Such percentages orders "can usually be made in patent cases and should be made if they can be". See Unwired Planet at [10].
f. In determining the level of reduction, the court is not expected to undertake a detailed assessment. Indeed, it is unlikely to have the benefit of a detailed bill of costs. See Cubist at [3]-[4]. In this regard, Pumfrey J in Monsanto Technology LLC v Cargill International SA [2008] FSR 417 at [5] commented that:

'This brings me to the next problem confronting the judge who has to make an order for costs of the kind the parties want in this case. That problem is the doubts which their respective solicitors entertain as to the accuracy of the other side's estimate of the costs expended on the client's behalf upon the various issues …. I wish it to be clearly understood that parties cannot have it both ways. Either the case goes to detailed assessment, in which case issues of this description will fall by the wayside, or it is dealt with by the trial judge, who cannot resolve them. If the parties wish to take advantage of the benefits flowing from a comparatively rough-and-ready assessment by the judge, they cannot expect a detailed assessment of the correctness of each of the sums which they specify. This is a matter for the parties and not for the court. If neither seeks a detailed assessment, then the court will do its best with the material which is made available, and can only adjust figures deposed to by the solicitors concerned if there is a really good reason for doing so.'

Birss J, having quoted that passage in Unwired Planet (at [11]), went on (at [12]) to conclude that:

'In my judgment what the learned judge there said about the comparatively rough and ready assessment which these percentage orders represent remains true. It cannot be overemphasised that this exercise is very approximate.'"

Coloplast claimed an issues-based order in respect of the following issues:

a. Infringement;
b. Fischer – a piece of prior art that was pleaded but later dropped by Salts;
c. Novelty;
d. Insufficiency;
e. AgrEvo obviousness; and
f. Added matter.

Salts Healthcare Limited contended that it should receive its costs in full as it was the overall winner.  Mr Caddick disagreed.  With regard to infringement, he said at para [7]:

".... in addition to arguing that it did not infringe because the Patent was invalid, Salts also argued that it did not infringe because its products did not fall within the claims of the Patent. This further argument involved factual issues as to whether Salts' products fell within the integers of claims 1, 2 and 6 of the Patent and issues (largely but not entirely of construction) as to whether those products fell within claims 3 and 4. Given that these issues were either abandoned, not pursued or failed at trial, I cannot see any reason why there should not be a deduction in respect of Salts' costs in relation to them. The factual issues involved were clearly discrete issues and, to the extent that the construction issues overlapped with any other issue, it was the issue of sufficiency on which Salts also lost."

Coloplast argued that there should be a further reduction in its own costs in relation to those issues.  As far as claims 1, 2 and 6 were concerned, the deputy judge thought it was wholly appropriate to make a deduction to reflect Coloplast's costs in that regard because Coloplast could have made admissions which would have saved experiments and other expenses.  As for claims 3 and 4, Mr Caddick did not consider it unreasonable to raise and pursue construction issues especially as the claims had been amended.  He allowed a deduction of 7.4% to reflect Salts' costs on infringement and a further deduction of 8% to reflect Coloplasts's.

Though infringement was the main issue, Mr Caddick carried out a similar analysis of the other issues and produced the following table:

ISSUE

 

Deduction from Salts

 

Account for Coloplast

Total Deduction

Infringement

 

7.4%

8%

15.4%

Fischer

 

1.5%

2%

3.5%

Novelty

2%

 

0

2%

Insufficiency

 

0

0

0

AgrEvo/

Added Matter

 

1%

0

1%

TOTAL:

 

 

21.9%


He concluded at [31]:

"Ultimately, Salts chose to raise and, in many cases, to maintain these issues and, in doing so, added considerably and unnecessarily to the time, expense and complexity of the litigation. In the circumstances (and bearing in mind the comments of Henry Carr J quoted at paragraph 5(a) of this judgment), it seems to me that the making of issue-based costs orders as set out above is fair and appropriate and in accordance with the principles set out in CPR r.44.2."

Interim Payment

It was agreed that Salts should receive an interim payment but the parties differed as to the amount and the method of computation.  In this case, there had been a costs management order and Salts requested 90% of its budgeted costs which would have amounted to £910,545.30. Coloplast argued that that might result in Salts receiving more than its actual costs and suggested a figure of 70% instead.   Mr Caddick referred to CPR 3.18 which requires a court to:

"(a) have regard to the receiving party's last approved or agreed budgeted costs for each phase of the proceedings;
(b) not depart from such approved or agreed budgeted costs unless satisfied that there is good reason to do so; and
(c) take into account any comments made pursuant to rule 3.15(4) or paragraph 7.4 of Practice Direction 3E and recorded on the face of the order."

He directed himself as follows at para [39]:

"By reason of CPR r.3.18 (a) and (b), when determining what is a "reasonable sum" to award by way of interim payment, the court has regard to the agreed or approved budgeted costs for each phase of the proceedings. Accordingly, where a party has overspent on a particular phase, the starting point as regards that phase (for the purposes of the interim payment) remains the budgeted figure even if that party has underspent on other phases."

He ordered an interim payment of £671,628, that is to say, 85% of 78.1% of the approved budgeted costs of £1,011,717.00.   The percentage of 78.1% was the balance after the deduction of 21.9% mentioned in the above table.

Interim Payment on Interest on Costs

Salts requested an interim payment to reflect interest on its costs.   The deputy judge rejected that request out of hand because there was no evidence as to when bills were rendered in respect of those costs or as to the date(s) of any payment(s) that had been made.

Permission to Appeal

Mr Caddick gave Coloplast permission to appeal as it had produced grounds of appeal that raised points of law that amounted to more than attempts to re-argue issues of fact and had, in the deputy judge's view, a real prospect of success,

Comment

It should be noted that the Court of Appeal reversed Mr Jourdan's judgment on which Mr Caddick relied in Pigot v The Environment Agency [2021] EWCA Civ 213 on Friday, 19 Feb 2021 though the appeal was on issues other than the order for costs.   Anyone wishing to discuss this article or the topic generally may call me on 020 8404 5252 or send me a message through my contact form.

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