ON APPEAL FROM THE CHANCERY DIVISION
Mr Justice Norris & Mr Justice Arnold
Strand, London, WC2A 2LL
B e f o r e :
LORD JUSTICE AIKENS
LORD JUSTICE LEWISON
| FRESENIUS KABI DEUTSCHLAND GMBH
FRESENIUS KABI AG
FRESENIUS VIAL S.A.S.
FRESENIUS KABI LIMITED
|Appellants in 2011/2642
Respondents in 2011/2654 & 2011/2669
|- and -
|CAREFUSION 303, INC
||Respondent in 2011/2642
Appellant in 2011/2654 & 2011/2669
MR JOHN BALDWIN QC (instructed by DLA Piper UK LLP) for the Respondent
Hearing date : 1 November 2011
Crown Copyright ©
Lord Justice Lewison :
"a man had better have his patent infringed, or have anything happen to him in this world, short of losing all his family by influenza, than have a dispute about a patent. His patent is swallowed up, and he is ruined. Whose fault is it? It is really not the fault of the law; it is the fault of the mode of conducting the law in a patent case. That is what causes all this mischief."
"If, at the time when the defendant served his original particulars of objections, I had known that he was going to rely on the new point now sought to be raised, I might well have discontinued my action. If, however, after further investigation of the legal and factual position in the light of this new point, I now find that there is a valid objection to my patent and accordingly I, sensibly, decide to discontinue my action, it is only fair that the defendant should be ordered to pay the unnecessarily wasted costs which I have incurred since service of the original particulars of objection."
i) Such an order was a disincentive to a defendant to plead his best case, particularly since prior art from all over the world may be used to attack the validity of a patent (whereas only art published in the UK could be relied on when the Earth Closet order was invented);
ii) This disincentive might mean that the court was required to pronounce on the validity of a monopoly on the basis of a second best case. Put bluntly this would be against the public interest;
iii) Earth Closet orders are seen as a gift from heaven by patentees with a weak case which enables them to take the benefit of a costs order when the amendment was not really the cause of the discontinuance. In addition they will have had the commercial benefit of reliance on a monopoly which, with hindsight, can be seen to have been invalid;
iv) There is also a danger that the making of such orders will front load the costs onto defendants who will have to undertake exhaustive searches of prior art at a very early stage in the litigation.
"That being the existing state of the law prior to the Civil Procedure Rules it may be seen immediately that it is consistent with the overriding objective of the Civil Procedure Rules, particularly since it can be properly viewed as a means of imposing a sanction in relation to waste caused by lack of diligence by the defendant."
"(1) when a claimant discontinues the proceedings, there is a presumption by reason of CPR 38.6 that the defendant should recover his costs; the burden is on the claimant to show a good reason for departing from that position;
(2) the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason for doing so;
(3) however, if it is plain that the claim would have failed, that is an additional factor in favour of applying the presumption;
(4) the mere fact that the claimant's decision to discontinue may have been motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case will not suffice to displace the presumption;
(5) if the claimant is to succeed in displacing the presumption he will usually need to show a change of circumstances to which he has not himself contributed;
(6) however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule."
"It is clear, therefore, from the terms of the rule itself and from the authorities that a claimant who seeks to persuade the court to depart from the normal position must provide cogent reasons for doing so and is unlikely to satisfy that requirement save in unusual circumstances. The reason was well expressed by Proudman J. in Maini v Maini: a claimant who commences proceedings takes upon himself the risk of the litigation. If he succeeds he can expect to recover his costs, but if he fails or abandons the claim at whatever stage in the process, it is normally unjust to make the defendant bear the costs of proceedings which were forced upon him and which the claimant is unable or unwilling to carry through to judgment. That principle also underlies the decision of this court in Messih v MacMillan Williams. There may be cases in which it can be said that the defendant has brought the litigation on himself, but even that is unlikely to justify a departure from the rule if the claimant discontinues in circumstances which amount to a failure of the claim."
"1. The Claimants have permission to re-amend their Grounds of Invalidity and Particulars of Claim in the forms attached to this order.
2. The Claimants shall serve the aforesaid re-amended Statements of Case as soon as practicable.
3. The Defendant shall serve any consequential amendments to its Defence and Counterclaim within 5 days of service of the aforesaid re-amended Statements of Case.
5. The Defendant shall pay the Claimants 50% of their costs of this application to be assessed on the standard basis if not agreed.
6. The Defendant does elect by 4 p.m. on 10th October 2011 whether it withdraws its Defence and Counterclaim and consents to an Order for the revocation of EP 1 200 143 B2 (UK) as a result of the matter introduced by the aforesaid re-amended Statements of Case and if the Defendant does so elect and give notice thereof in the time aforesaid IT IS ORDERED THAT:
(a) EP 1 200 143 B2 is revoked;
(b) The Defendant do pay the First Claimant's costs of these proceedings to be assessed on a standard basis (if not agreed) incurred up to and including the service of the Grounds of Invalidity on the 7th January 2011;
(c) The Claimants do pay the Defendant's costs of these proceedings incurred thereafter to be assessed on the standard basis if not agreed.
8. The directions timetable to trial shall be as follows:
(a) The parties shall exchange expert evidence and fact evidence by 30th September 2011.
(d) The parties shall exchange expert and fact evidence in reply by 21st October 2011."
We write further to our first letter of today's date.
We hereby notify you that our client elects to withdraw its Defence and Counterclaim and to consent to an order in the UK for the revocation of EP 1 200 143 B2 (UK) pursuant to paragraph 6 of the Order of Norris J made on 26 September 2011.
i) CareFusion's appeal against Arnold J's construction of the order of Norris J. Arnold J gave permission for this appeal. CareFusion says that on the true construction of that order they made a valid election, with the consequence that the action came to an end;
ii) If CareFusion's appeal against Arnold J's decision fails, they appeal against paragraph 5 of Norris J's order. Permission to appeal is needed for this appeal. CareFusion say that the costs order made by Norris J is only justifiable on the basis that the amendments were taken as having been made there and then; and that if it was open to Fresenius not to take up the permission to amend, then CareFusion should have had all its costs of the application to amend;
iii) Fresenius' appeal against paragraph 6 of Norris J's order on the ground that an Earth Closet order should not have been made at all. Permission to appeal is needed for this appeal also.
"… the judge's order was undoubtedly made in the exercise of his discretion and, as a matter of principle, an appellate court will not interfere in such a case unless it is clear that the judge has misdirected himself either because it is clear from the judgment that he has made an error of law -- including taking irrelevant matters into account or leaving relevant matters out of account -- or because his order is plainly wrong so that it must be the result of a misdirection. In our adversarial system of litigation, in a case where each party was professionally represented with plenty of opportunity to formulate and put to the court all points considered to be relevant on a particular point, it seems to me questionable for a judge to be criticised for having failed to take into account a factor which, if relevant, was known or available to all parties and which no party invited him to consider as part of the process of exercising his discretion. It would be one thing if, through inadvertence, the judge overlooked a point of law which should affect his reasoning … but otherwise what is said here is that there was a relevant consideration which the judge failed to take into account. It does not seem to me to be fair either to the judge or to the opposing party or parties for an unsuccessful litigant to be able to challenge the exercise of the court's discretion for failure to take account of a factor which was not in any way hidden and which, if it really is relevant, the exercise of reasonable professional diligence could have brought to light but which was not suggested to the judge as being relevant. This strikes me as being wrong in principle. I am not aware of any authority on the point. I can understand that a court might be reluctant to be dogmatic on the point because, in the context of interlocutory orders which very often involve the exercise of discretion, the relevant circumstances are infinitely variable and there may often be cases in which one side was not represented below or in which the circumstances of the hearing did not allow full preparation or consideration of all potentially relevant factors." (Emphasis added)
"For that reason I do not intend to adopt any hard and fast rule as the basis for my decision on this appeal. However, I do view with considerable scepticism in the present case the attempt to criticise the judge for not taking a point into account which was not submitted to him as being relevant."
"In my judgment the second letter does not amount to a valid exercise of the right of election conferred by paragraph 6 of Norris J's order, since it does not state that CareFusion will consent to an order for revocation of the Patent as a result of the matter introduced by the re-amended statements of case. That is not merely a matter of form, but also of substance, as can be seen when one looks at the first letter."
"2. Your clients made a very late application to amend their Grounds of Invalidity so as to introduce a new allegation of prior use in Japan, only 6 weeks before the trial is due to commence, for which you were given permission by the said Order. The result of this late addition to your client's case is that, in addition to the excessive costs that are involved in going to trial in England, which our client is already required to expend if it continues to defend its position, our client now has to carry out what would be very expensive urgent investigations in Japan into the circumstances of the alleged Japanese prior use based on the limited details given in your client's pleading in the six weeks that remain before trial.
3. It was a condition of such permission to amend that your clients will have to pay our client's costs of these proceedings from 7 January 2011 if our client elects to withdraw the Defence and Counterclaim and to consent to the revocation of the patent in suit.
4. In defending the litigation initiated by your client against ours, as a prudent business organisation our client has to keep the commercial value of these proceedings to its business at the forefront of its mind.
5. Our client firmly believes the patent in suit is valid over all the prior art cited against it, including the Japanese prior use now added, and that if the matter were to go to trial the English court would find in our client's favour that the patent was valid and infringed by your clients.
6. Nevertheless, from a business perspective the negligible benefit to our client's business in defending the English proceedings as outlined above is outweighed by:
(i) the excessive costs of continuing to do so as outlined above; and
(ii) the significant value to our client's business in recouping the costs your clients have forced our client to expend by issuing these proceedings against our client.
7. For these reasons our client has taken the pragmatic decision that the commercial value of succeeding in the English action is not worth the nuisance and expense of continuing to defend these proceedings. Accordingly we refer you to the election in our second letter of today's date."
"The first letter does not state that CareFusion is electing to consent to revocation as a result of the matter introduced by the re-amended statements of case. Rather, it asserts that CareFusion remains of the belief that the Patent in suit is valid over all the prior art cited against it, including the Terumo Device, and that if the matter were to go to trial the court would find that the Patent was valid and infringed. The reason given in the letter for CareFusion desiring to elect to withdraw its defence and counterclaim and consent to an order for revocation is, as it is put in paragraph 6, the negligible benefit to its business in defending the proceedings being outweighed by (i) the excessive costs of continuing to do so and (ii) the value to CareFusion in recouping costs if it does make the election under paragraph 6 of Norris J's order.
The nearest the letter comes to suggesting that the matter introduced by the re-amended statements of case is even a factor in the decision is in the reference in paragraph 6(i) to "the excessive costs … as outlined above". It is fair to say that in paragraph 2 mention is made of a requirement to carry out "very expensive urgent investigations in Japan". However, that is stated to be in addition to the excessive costs that are involved in going to trial in England. Thus the reference to excessive costs in paragraph 6(i) would hold good even if there had been no requirement for the "very expensive urgent investigations in Japan". CareFusion's position, as expressed in paragraph 2, is that the costs were excessive anyway."