Date: 19990923
Docket: T-2870-96
BETWEEN:
APOTEX INC.
Plaintiff
- and -
SYNTEX PHARMACEUTICALS INTERNATIONAL LIMITED
and HOFFMANN-LA ROCHE LIMITED
Defendants
REASONS FOR ORDER
REED, J.:
[1] The plaintiff brings a motion asking that directions be given to the assessment officer with respect to the costs that should be paid by the defendants to the plaintiff. The plaintiff seeks directions respecting: (1) the scale at which costs should be assessed; (2) the doubling of costs as a result of an unaccepted offer to settle; (3) the allowable disbursements as they relate to the fees and travel costs paid to experts, the amounts paid for photocopying, and the amounts paid for long distance telecommunications, including facsimile and courier charges; (4) the inclusion of fees for services provided by law clerks and articling students. In the notice of motion, the plaintiff also sought an order directing the assessment officer to assess and allow pre-judgment and post-judgment interest on all costs and disbursements, however, the plaintiff did not pursue this claim on the hearing of the motion.
[2] Counsel for the plaintiff rightly states that the motion should be decided in accordance with the spirit of the 1995 amendment to the costs provisions of the Federal Court Rules (SOR/95-282). The purpose of awarding costs to a successful party has two aspects: to discourage unmeritorious litigation and to partially indemnify the successful party for the costs incurred defending or prosecuting an action as the case may be.
[3] While full compensation may never have been the objective of costs awards, in recent years, the Tariff in the Federal Court Rules, as well as those of other jurisdictions, led to awards that were ridiculously low.
[4] The 1995 amendments to the Federal Court Rules introduced a new flexible scale of costs and conferred on the Court a broad discretion to direct additional costs beyond the amounts described in the Tariff in appropriate cases. The Federal Court Rules have been described as now reflecting the philosophy that an award of costs should reasonably reflect the actual costs incurred in the conduct of the litigation:
| The more current rule brings a new approach to taxing costs. Under the old regime, the jurisprudence was clear; the parties could not expect to recover all their costs under the tariff relating to party and party costs. However, under the new rule the general philosophy is that party and party costs should bear a reasonable relationship to the actual costs of the litigation. |
| This new tendency is to ensure that parties will be able to recover closer to actual costs related to the litigation, always under the scrutiny of the Court's discretion. Procedures and delays which could reasonably have been avoided by a party, will be taken into consideration when determining taxation of costs. In other words, a clear message is sent to the parties: a party that has not been diligent will have to pay for the consequences. [Emphasis added.] |
| Sanmammas Compania Maritima S.A. et al. v. Ship Netuno et al. (1995), 102 F.T.R. 181 at 184 (F.C.T.D.). |
Scale of Costs
[5] The plaintiff seeks an increase above column III of Tariff B level costs (the level at which costs are assessed unless otherwise ordered by the Court). Column III level costs are designed to address a case of average complexity. Roger Hughes notes in the looseleaf Federal Court of Canada Service that "Column III was intended to cover approximately half of a modest bill." The plaintiff proposes a number of alternatives to Column III level costs: solicitor-client costs; three-quarters of solicitor-client costs; the maximum rates in column V of the Table to Tariff B plus 20%; or the maximum rate in column V of the Table to Tariff B. If a Tariff B level is found to be the appropriate level, the plaintiff seeks a direction that the allowable costs include fees for two senior and one junior counsel.
[6] A non-exhaustive list of factors that the Court may consider when determining the appropriate scale of costs is set out in Rule 400(3). The following factors are relevant to Apotex's application:
| 400(3) In exercising its discretion under subsection (1), the Court may consider |
| (a) the result of the proceeding; |
| . . . |
| (c) the importance and complexity of the issues; |
| . . . |
| (e) any written offer to settle; |
| . . . |
| (g) the amount of work; |
| (h) whether the public interest in having the proceeding litigated justifies a particular award of costs; |
| (i) any conduct of a party that tended to shorten or unnecessarily lengthen the duration of the proceeding; |
| . . . |
| (k) whether any step in the proceeding was |
| (i) improper, vexatious or unnecessary, or |
| . . . |
I now turn to consider some of these factors.
[7] The plaintiff was completely successful in its claim. During the course of the trial, both the correctness of the plaintiff's position and the weakness of the defendants' position was obvious. Counsel for the plaintiff refers, in characterizing the defendants' position as without merit, to the fact that the defendants produced no lab notes or experimental records, nor were records produced to show that developmental costs had been incurred. Representatives of the defendants were not called as witnesses, nor were the inventors called. Counsel for the defendants argued that this kind of evidence is not relevant to the question of obviousness and therefore its absence in this case is not relevant to an assessment of the merit or lack thereof of the defendants' position.
[8] It is trite law that an inventor's subjective views and knowledge is not relevant to whether an "invention" was actual made, and that the amount of work or experimentation involved in is not necessarily significant in assessing whether there has been an "inventive step". I think it is too broad a statement, however, to say that the lab notes and developmental records are not relevant. They may be relevant, and they may not, depending on the particular circumstances of the case and the particular issue to which evidence arising therefrom is addressed. Counsel for the plaintiff is not in error in referring to the lacunae in the evidence in these areas for present purposes, but the weight that aspect of the plaintiff's argument enjoys is limited.
[9] This case, while not the most complex of patent cases, did exceed the average complexity of an average case. An increase in complexity justifies an increase above column III level costs. The amount of work was average for a patent proceeding, but exceeded that of an "average case." Many of the issues had already been partially considered in previous proceedings, but counsel for the plaintiff notes that costs for these would not, in any event, be claimed. Counsel for the plaintiff argues that there was a public interest in having the proceeding litigated because a successful result for the plaintiff means that there is competition in the market place and consequently lower priced drugs. I am not persuaded that there was any public interest component, separate from or additional to the plaintiff's private interest that motivated the plaintiff to pursue the litigation. This is not a case in which there is a public interest component that justifies a higher award of costs to the plaintiff.
[10] The defendants' conduct did lengthen the proceedings unnecessarily, but not egregiously so. The defendants insisted on compliance with the letter of the Rules; for example, Syntex being a foreign corporation insisted on having 60 days to respond to the plaintiff's statement of claim issued January 1997 and again to the plaintiff's amended statement of claim in May 1997, despite the fact that Syntex had been the defendant in earlier proceedings and, as a result, would have extensive knowledge of the claim. The defence, when finally filed, was pro forma. The defendants also brought a motion to strike a number of paragraphs from the Amended Statement of Claim, seeking in the alternative an order requiring production of particulars. The motion resulted in the deletion of one redundant paragraph, the amendment of another, but was otherwise dismissed. However, some of the steps taken by the plaintiff, also lengthened the proceedings, such as the application for summary judgment in November 1997.
[11] A major premise behind counsel for the plaintiff's argument that costs above the Tariff are appropriate is that the defendants' conduct of the litigation was governed by a desire to keep the plaintiff out of the market for slow release naproxen tablets for as long as possible, not by the desire to defend a patent genuinely believed to be valid. This strategy by the defendants was possible because a prohibition order was in place as a result of the plaintiff's unsuccessful attempt to demonstrate that its product did not infringe a patent held by the defendants, Canadian Patent 1,204,671. The prohibition order was obtained pursuant to the procedure set out in the then relatively new Patented Medicines (Notice of Compliance) Regulations (see T-1893-93). Counsel for the plaintiff argues that the defendants' conduct of the action was based on a business decision to delay the plaintiff's entry into the market for the longest time possible because the advantages to the defendants in doing so outweighed any costs that they might incur. Counsel notes that there is no provision in the Regulations requiring a patentee to give an undertaking to recompense the party seeking to manufacture and sell the drug (the generic) as a result of the listing under those Regulations of an invalid patent and the consequent exclusion of that party from the market.
[12] There is merit in counsel for the plaintiff's argument that an inference arises that the defendants' main objective in continuing the litigation was to keep the plaintiff out of the market for as long as possible. The Regulations in effect provide a protective shield behind which the defendants can conduct their litigation, similar to an interlocutory injunction, without an undertaking for damages having been given.
[13] Taking the above factors into account, I conclude that the circumstances of this case justify costs assessed at the maximum end of the column V level. I have also been persuaded that fees for two senior counsel and one junior counsel, at trial, should be allowed. The defendants themselves had three counsel in court. The nature of the case justified this number.
Offer to Settle
[14] I turn then to the relevance of the offer to settle. Counsel for the defendants argues that there was no offer made because (1) the letter, dated July 3, 1998, only stated that counsel for the plaintiff was prepared to recommend to his client the course of action proposed, and (2) the "offer" contained no compromise but was merely a request for capitulation.
[15] The letter in question reads:
| . . . |
| You and your clients have now had considerable time to consider our client's formulation of its Naproxen SR tablets. |
| In our view, it should be apparent that Apotex's controlled release Naproxen tablets could not infringe the '671 Patent. Our client is convinced that this litigation will confirm that view. We believe nevertheless that our client would be willing to settle this action. |
| We are therefore prepared to recommend that Apotex discontinue the action on a without costs basis. The defendants will acknowledge that Apotex's formulation for Naproxen SR tablets is not infringing and will consent to the Minister issuing Apotex its Notice of Compliance. |
| Please notify the undersigned whether this offer is acceptable to your client by close of business on Monday, July 6, 1998. |
[16] On July 9, 1998, counsel for the plaintiff wrote again to counsel for the defendants, asking for a reply to the July 3rd letter. On July 10, 1998, counsel for the defendants' sent the following response:
| . . . |
| With reference to your letters of 3 and 9 July 1998, the offer made on behalf of Apotex is not acceptable to our clients. |
| However, should Apotex wish to put forward a different offer, we would of course be prepared to consider it. |
[17] Despite the use of the words "we are therefore prepared to recommend", in the letter of July 3, 1998, counsel for the defendants had no difficulty understanding that the letter was an offer, and treated it as such. I do not think this was a misinterpretation. In my view, the July 3, 1998 letter, contained an offer and the defendants responded that the terms contained therein were not acceptable to them. Also, a compromise is present in the offer. The plaintiff's formulation would have been acknowledged as non-infringing, but the attack on the patent's validity would have been discontinued. A discontinuance of the action would have left the defendants' patent unchallenged. As counsel for the plaintiff notes, there was also room for a counter-offer, the defendants could have offered to licence the plaintiff.
[18] Rule 420(1) provides:
| Unless otherwise ordered by the Court, where a plaintiff makes a written offer to settle that is not revoked, and obtains a judgment as favourable or more favourable than the terms of the offer to settle, the plaintiff shall be entitled to party-and-party costs to the date of service of the offer and double such costs, excluding disbursements, after that date. |
The plaintiff is entitled to an assessment of costs in accordance with that provision.
Disbursements - Experts' and Other Charges
[19] I turn next to the issue of disbursements. I understand there is no dispute that reasonable disbursements for photocopying and long distance telecommunications, including facsimile and courier charges, should be allowed. It is the amounts paid to the experts that are in dispute. The plaintiff had four experts prepare reports: Drs. Langer, Robinson, Carstensen, and De Luca. Only two, Dr. Robinson and Dr. Langer, were called as expert witnesses. Dr. De Luca and Dr. Carstensen acted as advisors during the trial (Dr. Carstensen attended at trial throughout its evidentiary phase, and Dr. De Luca attended the final three days of the trial prior to argument). Counsel for the defendants is also right that there was unnecessary duplication in the expert evidence provided to the plaintiff. Counsel is correct in noting that there is considerable commonality in the expert reports (particularly those of Dr. Robinson and Dr. De Luca), which appear to have been drafted from a common document.
[20] In addition, while the amounts paid by the plaintiff to Drs. Robinson, De Luca and Carstensen were in the same "ball park", Dr. Langer's charges appear to be outrageous. Dr. Langer is pre-eminent in his field and he is an excellent witness - he presents his evidence with confidence, and with great simplicity, without becoming obviously adversarial. He was the plaintiff's main expert witness at the trial. At the same time, the costs for which a defendant will be required to indemnify a losing party are the reasonable expenses of the litigation. If a party chooses to hire a "Cadillac" of experts, the unsuccessful opposing party will not be responsible to compensate for extravagance; see Allied Signal Inc. v. Dupont Canada Inc., et al. (1997), 81 C.P.R. (3d) 129 (F.C.T.D.) at para. 77.
[21] I am not prepared to instruct the assessment officer in the manner the plaintiff seeks. In the context of the present case, four experts were excessive. Three could be justified (two as witnesses and one as an advisor.) The fact that the defendants used only one expert witness is not significant. This could accord with a decision by the defendants not to defend the action vigorously at trial. It could result from difficulty finding experts to support the defendants' position. Only reasonable and properly documented experts' fees should be allowed. In addition, I consider an hourly or daily rate above that charged by Dr. Robinson to be excessive.
Fees for Articling Clerks and Students
[22] The claim for fees paid to articling students and law clerks is another matter that should be left to the assessment officer. Section 28 of the Table to Tariff B provides for the costs of services provided by students-at-law, law clerks or paralegals to be paid at 50% of the rate that would be calculated for a solicitor. Whether these fees are part of the firm's overhead and already subsumed in counsel's fees, or whether they are separately assessable, depends on the nature of the services provided. Where the services are of a secretarial or clerical nature, the costs are already subsumed in counsel's fee as part of the overhead. However, where the services provided are in the nature of research work that would ordinarily have been done by a lawyer, then the cost is allowable under the Tariff. I see no reasons to expand what the Tariff allows, and the type and amount of expenses the plaintiff can claim under that heading is, in the first instance at least, a matter for the assessment officer.
Conclusion
[23] For the reasons given, the plaintiff is entitled to costs assessed in the maximum end of column V of the Table to Tariff B, to counsel fees for two senior and one junior counsel, for double costs in accordance with Rule 420(1) and disbursements as indicated above. The plaintiff shall also recover its costs on this motion, at the column III scale.
Judge
OTTAWA, ONTARIO
September 23, 1999