[2012] EWPCC 49
Case No: CC11P03258
IN THE PATENTS COUNTY COURT

Rolls Building
7 Rolls Buildings
London EC4A 1NL

Date: 30/10/2012

Before :

HIS HONOUR JUDGE BIRSS QC
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Between :

	VERNACARE LIMITED	Claimant	
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	ENVIRONMENTAL PULP PRODUCTS LIMITED	Defendant	

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Peter Colley (instructed by WP Thompson & Co) for the Claimant
Richard Davis (instructed by Walker Morris) for the Defendant

Hearing dates: 27th July 2012
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Judgment

His Honour Judge Birss QC : 

1.	This is a patent action.  In the main judgment dated 19th July 2012 [2012] EWPCC 41 I decided that the claimant’s patent was valid.  As regards infringement, the defendant admitted that, subject to validity, version 1 of its product would infringe.  I found that version 2 also infringed but that version 3 did not.   On 27th July 2012 I heard the parties’ submissions on the form of order.  The hearing was conducted by telephone.  The only major dispute was about costs.  I dealt with the costs at the hearing, including the summary assessment, with reasons to be given later.  These are those reasons.
2.	Peter Colley instructed by WP Thompson appeared for the claimant.  Richard Davis instructed by Walker Morris appeared for the defendant.
3.	The general approach was common ground.  The defendant referred to paragraph 4 of the judgment of Jacon LJ in MMI Research v Cellxion [2012] EWCA Civ 139.  In this paragraph the learned judge refers to Floyd J’s summary of the position: 
"The correct approach is to ask oneself three questions. First of all, who has won; secondly has the party that has won lost on an issue which is suitably circumscribed to deprive that party of the costs of that issue and, thirdly, is the case a suitably exceptional one to justify making a costs order on that issue against the party who has won overall."
4.	Each side submitted that they were the winner.  The defendant submitted it was the commercial winner because what really mattered was that version 3 did not infringe.  On that basis the defendant does not care whether the patent is valid and versions 1 and 2 are of historical interest only.  On the other hand the claimant submitted it had won. The patent had been found valid and two of the defendants’ three versions infringed.  
5.	Mr Davis referred to the judgment of Floyd J in Omnipharm v Merial [2012] EWHC 172 (Pat) in which he had to grapple with a situation in which each side said they had won.  In that case Merial had two patents and the judge had held that one was invalid.  While the other was valid, the judge held that three of the four Omnipharm formulations were not infringing.  At paragraph 6 the judge referred to the judgment of Lord Bingham in Roache v News Group Newspapers [1998] EMLR 161 as follows: 
6. A significant issue which has divided the parties in relation to the costs of this particular case is, who has won. The approach of the court to determining that question has been set out most authoritatively by Lord Bingham, the Master of the Rolls, in Roache v News Group Newspapers [1998] EMLR 161 at 168 where he said this:
"The judge must look closely at the facts of the particular case before him and ask: who, as a matter of substance and reality, has won? Has the plaintiff won anything of value which he could not have won without fighting the action through to a finish? Has the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?"
6.	Floyd J went on to consider the case before him and said this: 
19. When so much can be said on both sides for the fact that they have achieved a commercial victory, I think there is a danger, at least in some cases, in the court starting from the standpoint that one party and not the other was the winner. Mr. Carr very properly reminded me that there are some cases, of which AEI v PPL is one example, where the court has come to the conclusion somewhere on the spectrum of possible results between the two extremes contended for by the parties where the court has recognised that there is no overall winner.
20. I think the present case may present a different example of that principle where giving too much weight to a decision about the overall winner might cause an unjust result. I have borne that very strongly in mind in the approach which I have decided to adopt. It is of course tempting in such a situation to make no order as to costs at all, but I do not think it proper or fair to do that in this case.
21. Standing back, it seems to me to be fair to view the matter in this way. Omnipharm has achieved success in relation to three formulations, but not in relation to formulation B and the validity of '881, which had great importance to Merial going far beyond this case. Moreover, invalidity of '881 would have given Omnipharm a significant further degree of freedom than that which they actually achieved. Nevertheless, if I apply Lord Bingham's approach and ask myself, has Omnipharm won anything of value which it could not have won without fighting the action and has Merial substantially denied the plaintiff the prize which they fought to win, I think I have to come to the conclusion that Omnipharm were the overall winners. I bear in mind also that the extent to which they have won is a factor which I can bear in mind in arriving at an appropriate proportion."
7.	In my judgment the case before me is not as difficult to deal with as the case before Floyd J.  I do not doubt that from the defendant’s point of view, being free to sell version 3 is of significant commercial importance but I do not accept that this means that, from the point of view of assessing the costs of this action, the defendant can be regarded as the winner.  In terms of the issues before the court the defendant firmly pressed its claim that the patent was wholly invalid and that version 2 did not infringe even if the patent was valid.  In relation to validity, up to trial the defendant had relied on 3 cited items of prior art, an attack of obviousness over common general knowledge alone and added matter.  At trial the defendant dropped reliance on one of the citations and I dealt with and rejected the other challenges to validity.  If the patent had been invalid, none of the defendant’s products would have infringed, and in particular that meant that the defendant would not be liable for its prior sales of version 1, albeit it contends these were modest.  
8.	In my judgment the winner of the legal proceedings was the claimant.  I can and should take the defendant’s victory in relation version 3 into account on an issue based approach to costs.  
9.	CPR Part 44.3(4) provides that in deciding what order (if any) to make about costs, the court must have regard to all the circumstances including: (a) the conduct of all the parties, (b) success in part if not in whole and (c) admissible offers to settle. 
Issues
10.	I think the fair thing to do in this case is deduct 25% from the claimant’s costs to reflect the defendant’s success on the issue of infringement of version 3.  A further 5% should also be deducted in relation to the issue of obviousness over common general knowledge alone.  That latter argument was to some extent a squeeze, tied to the issue of infringement by version 3 (see main judgment paragraph 50).  It is fair to make a modest deduction here to reflect the fact that it is not correct to say simply that the claimant won the point and the defendant lost.  Accordingly from a consideration of the issues, I will deduct 30% from the claimant’s costs.  In this case I do not think it would be fair to go further and require the claimant to pay the defendant’s costs in relation to these points.  
Offers
11.	The defendant relied on various offers to settle which it had made.  In a letter from Walker Morris on 29th December 2011 the defendant offered not to sell version 1.  However that offer was without admission of liability and the sales would not take place only while the patent subsisted.  This offer was made after the defendant made it clear it was challenging the validity of the patent.  If that challenge had succeeded the defendant would have been free to start selling version 1 again.  I do not see how this offer could be said to justify any different costs order in this case.
12.	On 12 January 2012 Walker Morris stated in correspondence that sales of versions 1 and 2 had ceased and sales of version 3 had now started. Thus, they said, the commercial reality was that version 3 was the only product “which remains actively in play”.  However, as WP Thompson stated in reply on 18th January, it was incorrect to say that version 3 was the only product in play given that, at that stage the defendant had neither admitted infringement by versions 1 or 2 nor undertaken to withdraw either version after trial.  
13.	On 23rd February 2012 the defendant made a further offer to settle.  This was an offer purporting to settle the whole claim in relation to versions 1 and 2.  The offer included an undertaking not to sell either version but again it was qualified in that it was only an undertaking not to sell while the patent subsisted.  The offer made it clear that the defendant’s challenge to validity (as well as its case that version 3 did not infringe) would go to trial.  It was clear therefore that the defendant’s position was tied into the validity of the patent.  If the defendant’s challenge to validity had succeeded, it would have been free to sell version 1 or 2.  In my judgment the claimant’s success on validity means that it has achieved more than was on offer.  Subject to a point on conduct (below) these offers do not justify an adjustment in relation to costs. 
Conduct
14.	The defendant submitted that the claimant had simply failed to engage with the offers of settlement (and with offers to conduct a mediation).  I was taken through the various parts of the correspondence and I have referred to some of them above.  In my judgment there is a degree of force in the defendant’s criticism albeit not as much as the defendant submits.  I bear in mind the nature of the offers actually being made and the fact that the claimant has achieved more in these proceedings than was on offer.  Nevertheless it does seem to me that the claimant could and should have engaged more constructively with the defendant’s attempts to negotiate and I will deduct a further 5% from the claimant’s costs for that reasons. 
15.	Thus, overall, if this were a case proceeding in the High Court, I would award the claimant 65% of its costs.
Summary assessment 
16.	The next task is to summarily assess the costs.  Costs in the Patents County Court are summarily assessed (CPR r45.41(3)) and I explained the general approach to this process in Westwood v Knight [2011] EWPCC 11.  
17.	The question arose as to the correct way to approach costs in the Patents County Court having regard to the costs scales in Table A of Section 25C of the Costs Practice Direction (CPR Pt 45) and an issue based approach which produces a figure for a fraction of a party’s costs which it should receive.  Mr Davis submitted I should apply the caps for the various stages first and then apply the percentages to those figures.  I rejected that submission.  I believe the correct approach is the one I have set out in BOS v Cobra [2012] EWPCC 44.  The reasons for taking that approach are set out in that judgment and I will not repeat them.  In fact that judgment arose from an assessment undertaken after the assessment in this case but the approach I took was the same.   At paragraph 23 of BOS v Cobra I said: 
23. In my judgment the right approach is the following.  I should start with the actual costs for a given stage.  Then they should be summarily assessed on the normal PCC basis.  That produces a figure for the party’s summarily assessed costs at that stage.  That figure is the one to which the issue based discount should be applied.  Once the discount has been applied the figure can be compared to the scale and the lower of the two taken.  
18.	In this case there is a further factor which needs to be considered which did not arise in BOS v Cobra.  CPR r45.42 (3) provides the basis in the rules for the costs scales in Table A of Section 25C of the Costs Practice Direction.  It provides that the maximum the court will award for each stage of the claim is that set out in the tables.  However CPR r45.42 (4) further provides that the amount of scale costs awarded by the court in accordance with paragraph (3) will depend on the nature and complexity of the claim.  The nature and complexity of the claim in BOS v Cobra was sufficient to mean that there was no reason to reduce the scale costs below the levels in Table A.  However this case is different.  This is the very simplest sort of patent case one could imagine.  In my judgment it is a case in which CPR r45.42 (4) is engaged.  I should emphasise that this is not any sort of criticism of the parties or the manner in which the case was fought or the costs incurred.  It is simply that I believe this is a case in which some of the scale figures in Table A may be more generous than necessary.
19.	There is no reason to reduce the scale costs for the statements of case or the case management conference however I do think that the scale costs for experts and the trial merit further thought.   The technology in this case was easy to understand and to explain.  The costs scale in Table A for “Preparing Experts’ Report” is £7,500.  In my judgment in this case it should be reduced to £6,000.   The trial in this case occupied the court for a morning.   It would have taken longer if the defendant had decided to call its expert witness for cross-examination but I doubt that would have added more than ½ hr to 1 hr.  The time the trial took was a reflection of the simplicity of the technology and issues to be addressed.  The costs scale in Table A for “Preparing for and attending trial and judgment” is £15,000.  In my judgment in this case it should be reduced to £10,000.
20.	Taking the foregoing into account, the table below summarises the claimant’s costs position in this case.  The column for summary assessment records my summary assessment of the claimant’s costs on the standard basis.  The issue based discount is then applied to show what 65% of those costs would be.  The PCC scales for the various stages are in the next two columns and the final result at the end. 
21.	A small point arises on row 6.  At the hearing the figure for the claimant’s actual costs for this stage was not recorded in the costs statement because it included a number of separate elements and was to some extent ongoing.  My notes from the hearing have a clear record of the figure I arrived at by way of summary assessment of those costs but do not contain a clear note of the actual costs.  Nothing significant turns on it and the actual costs figure for the trial shown is an approximation based on rough calculations using other information provided.
22.	The summary table is: 
	Stage	Actual costs	Summary Assessment	Issue based discount	PCC scale
in Table A	PCC scale for this case (r45.42(4))	Result	
				65%				
1	Particulars of Claim 	£9,458	£6,500	£4,225	£6,125	£6,125	£4,225	
2	Defence and counterclaim	£11,131	£7,500	£4,875	£6,125	£6,125	£4,875	
3	Reply and defence to counterclaim	£11,976	£7,500	£4,875	£6,125	£6,125	£4,875	
4	Attendance at a case management conference	£10,036	£7,000	£4,550	£2,500	£2,500	£2,500	
5	Preparing experts reports	£28,003	£20,000	£13,000	£7,500	£6,000	£6,000	
6	Preparing for and attending trial and judgment 	£40,000 (approx)	£28,000	£18,200	£15,000	£10,000	£10,000	
	Total	£110,604	£76,500	£49,725	£43,375	£36,875	£32,475	
23.	Thus I will award the claimant £32,475 in costs.  There will be no need for the parties to attend the handing down of these reasons.