England and Wales High Court (Patents Court) Decisions

IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT

		Royal Courts of Justice Strand, London, WC2A 2LL
		17/10/2008

JUDGMENT RE COSTS

MR. JUSTICE KITCHIN: :

1. On 31st July 2008 I handed down judgment in this action. I decided that European Patent (UK) 0,939,804 is invalid for lack of industrial applicability, insufficiency and obviousness. Aspects of proposed amendments to the patent were also successfully opposed. However, Lilly failed on one important ground of objection, namely, obviousness over the Fujiwara EST and the IMAGE clone. The parties referred to this as the bioinformatics issue and in this judgment I shall do the same.
2. The action now returns before me to decide the issue of costs. The principles to be applied in deciding what order to make in relation to costs are set out in CPR 44.3, which provides, so far as material:

"(1) The court has discretion as to –

(a) whether costs are payable by one party or another;
(b) the amount of those costs; and
(c) when they are to be paid.


(2) If the court decides to make an order about costs –

(a) the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party; but
(b) the court may make a different order.


….

(4) In deciding what order (if any) to make about costs, the court may must have regard to the all the circumstances, including -


(a) the conduct of the parties;
(b) whether a party has succeeded on part of his case, even if he has not been wholly successful.
….

(5) The conduct of the parties includes -


(a) the conduct before as well as during, the proceedings, and in particular the extent to which the parties followed any relevant preaction protocol;
(b) whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) the manner in which a party has pursued or defended his case or a particular allegation or issue;
(d) whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.


(6) The orders which the court may make under this rule include an order that a party must pay -


(a) a proportion of another party's costs;
(b) a stated amount in respect of another party's costs;
(c) costs from or until a certain date only;

….
(e) costs relating to particular steps taken in the proceedings;
(f) costs relating only to a distinct part of the proceedings;

….


(7) Where the court would otherwise consider making an order under paragraph (6)(f) it must instead, if practicable, make an order under paragraph (6)(a) or (c)."

3. In patent cases the issue-based approach is now the norm, as Jacob LJ explained in SmithKline Beecham v Apotex [2005] FSR 24, at [24]-[28]. It is one which should be applied so far as it can be because of the large number of issues which such cases frequently involve and because of the extensive costs which may be incurred in relation to them. This case is no exception.
4. I begin with Lilly. Mr. Hodgson, a partner in the firm of Howrey LLP, the solicitors acting for Lilly, has made two statements in which he explains Lilly's total costs amount to approximately £1,380,000, comprising approximately £730,000 solicitors' costs, approximately £533,000 counsel's costs and approximately £117,000 experts' costs and other disbursements. He also explains that the case has been of considerable importance to Lilly which has been pursuing its Neutrokine-a programme for over 10 years. To date, Lilly has invested US$55 million in developing a therapeutic antibody to Neutrokine-a with a further US$250 million projected to be spent in the months and years ahead to attempt to get such a therapeutic antibody to the stage of regulatory approval for marketing.
5. As for the breakdown as to how the costs have been incurred, Mr. Hodgson estimates that approximately 30-40% are attributable to the general costs of the action, 30% are attributable to bioinformatics and other grounds on which Lilly was unsuccessful, and the remainder are attributable to the issues on which Lilly succeeded.
6. He has arrived at these estimates by analysing the judgment, estimating the time spent by the solicitors on each issue, considering how the experts' costs were incurred and by producing and analysing a breakdown of which issues were addressed on particular days of the trial.
7. Turning to HGS, Dr. Gilbert, a partner in the firm of Powell Gilbert LLP, the solicitors acting for HGS, has also made two witness statements addressing the costs issue. She explains that HGS's overall costs amount to approximately £2,220,000, comprising approximately £1,389,000 solicitors' costs, approximately £439,000 counsel's costs and the remainder comprising experts' costs and other disbursements. Dr. Gilbert also emphasises Neutrokine-a is of very great commercial importance to HGS. Large amounts of money have been invested in developing and testing Lymphostat B, an antibody raised against Neutrokine-a. Lymphostat B is at an advanced stage of clinical testing in patients with Lupus and is regarded by HGS as one of its two key lead products. HGS anticipates BLA filing in the US in the first half of 2010, assuming a positive outcome in the ongoing Phase III trials.
8. Dr. Gilbert also explains that the bulk of work undertaken in preparation for trial was directed to the bioinformatics issue. Meeting the case involved responding to issues arising from an experimental programme put forward by Lilly and submitting experiments in reply. It also required HGS to answer Lilly's case on a piece of art called Wiley pleaded in relation to obviousness by Lilly but abandoned on 28th June 2007. She says that her general impression of the case is that the question of obviousness occupied the major part of the action. It was a heavily fact dependent issue involving not just experiments but lengthy expert reports. To assess the time spent on the issue more objectively, she has prepared schedules estimating the time spent on the main issues in the case and the costs attributable to them by reference to the proportion of the experts' reports and the witness statements devoted to each issue and the proportion of time spent at trial on each issue based on a review of the trial transcripts.
9. These schedules lead Dr. Gilbert to conclude that 70% of HGS's solicitors costs and 40% of counsel's time were spent dealing with bioinformatics. Together the costs attributable to the issue amount to just over 50% of HGS's entire costs of the proceedings, that is to say, approximately £1,148,000. I would observe at this point that the figure is only some £232,000 less than Lilly's total costs of the action.
10. Based on these figures, Lilly submits that any deduction to its costs should be no more than 30%.
11. HGS submits that bioinformatics was a discrete and expensive issue on which Lilly lost and that it is proper in all the circumstance that Lilly should not only be deprived of its costs of the issue but that HGS should be awarded its costs of dealing with it. I am not invited to make a separate order for the assessment of HGS's costs, but it is submitted that they were of such a magnitude that there should be a substantial discount from any award to Lilly. Overall it submits that I should make no order for costs or that Lilly should only be awarded a very small percentage of its costs.
12. In my judgment and in the light of this evidence and my own impressions of the case, the following matters are particularly material. First, Lilly is the successful party overall. It has achieved its commercial objective of having the patent revoked.
13. Second, the case is clearly of very great commercial significance to both parties. It has, as a result, been extremely hard fought. In making that observation I intend no criticism of the conduct of either side. It seems to me that the allegations which have been made by Lilly have all been reasonable, as has the manner in which HGS has chosen to defend itself against them.
14. Third, there is no dispute that Lilly should be awarded the general costs of the action and the costs of the issues on which it won.
15. Fourth, the bioinformatics issue is a self-contained issue and it did undoubtedly result in a substantial increase in the costs of the action. I therefore consider it is appropriate to adopt an issue-based approach.
16. Fifth, I am conscious that the costs incurred by HGS are substantially greater than those of Lilly and that were I to deprive Lilly of its costs of the bioinformatics issue and require it to pay HGS's entire costs of that issue, it would mean that Lilly would not recover any costs of the action. Indeed, taken to its logical conclusion, Lilly would be required to make a net payment to HGS. Bearing in mind Lilly has succeeded overall and has conducted its case in a measured and reasonable way, I think that would produce a wholly unjust result.
17. Sixth, I must have regard to the fact that approximately 30% of Lilly's costs and approximately 50% of HGS's costs are attributable to the bioinformatics issue. These do not seem to me to be necessarily inconsistent, having regard to the different burdens imposed on each side. I recognise that considerable care has been taken to arrive at an accurate assessment as possible by the solicitors representing the parties.
18. Finally, I must take into account the fact that a number of Lilly's submissions on the bioinformatics issue were accepted. It is, as Mr. Waugh QC submitted this morning, by no means a matter that was all one way.
19. Overall and weighing these matters as best I can, I think a fair and proportionate result would be achieved by an award which both disallows Lilly's costs of the bioinformatics issue and involves a modest uplift in (that is to say, increase in the amount of) the deduction. I have reached the conclusion that Lilly is entitled to 60% of its costs of the action as a whole and I so order.
(For continued proceedings: see separate transcript)