MMI Research Ltd v Cellxion Ltd & Ors

This is the Court’s judgment about costs following our main judgment [2012] EWCA Civ 7. Both sides have provided us with detailed written submissions as to these. At one stage they asked us to remit all questions of the costs at first instance to the trial Judge. This we were not willing to do: it would certainly have resulted in delay and most likely into a greatly amplified satellite argument. We decided that with just written submissions we would be in a position to decide the questions with as much precision as is reasonably possible given the complexities involved. Having now read the submissions we remain satisfied that we took the right course, that either remission or oral argument before us would be an unnecessary escalation of the point.

The questions are, what is to be done about the following sets of costs:

We turn first to the applicable principles. So far as patent actions are concerned, Jacob LJ (with whom the other members of the court agreed) addressed these in SmithKline Beecham v Apotex [2004] EWCA Civ 1703:

“Costs of Patent proceedings and the CPR

24.

In respect of all intellectual property matters the general rule is that the CPR and associated practice directions apply, unless a rule in Part 63 or its practice direction provides otherwise (CPR 63.2). There is no such rule. So, subject to the two statutory provisions discussed above, the general rules apply as much to patent actions as to any other action.

25.

It follows that all the factors and matters set forth in CPR 44.3 apply to how the court should exercise its discretion as to costs. Prior to the CPR a party who was successful overall was not normally deprived of its costs of an issue it took unsuccessfully unless it has done so unreasonably, see Re Elgindata (No. 2) [1992] 1 WLR 1207. But since the CPR a more issue-by-issue approach is appropriate, see Summit Property v Pitmans [2001] EWCA Civ 2020, applied in a patent action, Stena v Irish Ferries [2003] EWCA Civ 214. Even before the CPR an issue-by-issue approach was, as an exception to the Elgindata approach, applied in patent actions because of the "large number of issues and the very extensive costs that can be incurred" per Aldous LJ in Rediffusion v Singer Link [1993] FSR 369 at 410.

26.

An issue-by-issue approach is therefore one that should be applied so far as it reasonably can. On the other hand such an approach is not the be-all and end-all. Whether or not "it was reasonable for a party to raise, pursue or contest a particular allegation" remains a relevant factor to be taken into account as part of the conduct of the parties (see CPR 44 rule (3)(a) and (5)(b).

The impossibility of great precision

27.

Before turning to this particular case I should say something about this. Although an issue-by-issue approach is likely to produce a "fairer" answer and is likely to make parties consider carefully before advancing or disputing a particular issue, it should not be thought that it is capable of achieving a "precise" answer. The estimation of costs, like that of valuation of property, is more of an art than a science. True it is that one can measure certain things (such as pages of witness statements or transcript devoted to a particular issue) but they can only be indicia to be taken into account. It would be dangerous to rely upon them as absolutes. Indeed brevity of a document, or a cross-examination, may be the result of great care: was it Hazlitt who apologised for the length of a letter, excusing himself on the grounds that he had not enough time to compose it?

28.

It follows that there is no "precise" figure of costs which, in theory with perfect measurement tools, one could reach. The best that can be achieved is an estimate which is necessarily going to be somewhat crude”.

Shorter statements of principle are to be found in Monsanto v Cargill [2007] EWHC 3113 at [6-8], Pumfrey J and Qualcomm v Nokia [2008] EWHC 277. In the latter Floyd J pithily put it thus:

“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.”

Neither side challenges any of this. Mr Howe QC for MMI sought to emphasise the issue by issue approach whereas Mr Wilson QC for the defendants emphasised the “was it reasonable to raise the point” approach.

We take these together. For although formally the remitted issues were distinct, in substance they formed further defences and challenges to the patent. That they were dealt with discretely was due only to the happenstance of the late evidence. Of course they cost more (probably a lot more) as a result, but that is only a factor to be taken into account in considering all the failed defences.

Mr Howe contended, as regards the proceedings before Floyd J, that the defendants had raised so many issues upon which they lost, that even though they eventually won on the single issue of obviousness over Fox, the defendants should be the overall payers. He provided us with a table of issues. There are no less than 41 and, said Mr Howe, the defendants lost 40 of them. He suggested that the winning issue (obviousness over Fox) would have required limited expert evidence and that the trial of the main action would have taken 2-3 days at most. As it was it took 7 days, involving more witnesses, and on top of that the remitted issues trial took 3 days. He says the specific costs of Fox amounted to only 6% of the trial costs to which should be added something for the general costs of the proceedings. These he accepted were payable by MMI. But the remainder, the bulk, should go the other way.

Mr Wilson contended that although the defendants lost on these points it was not unreasonable for any of them to have been taken. So there should be no question of the defendants paying for any of them. It was a deduction only case. He said Mr Howe’s table included a lot of points which did not add significantly to the costs or involved double counting. As regards the costs of the attack based on common general knowledge alone they were part of the successful case since the patent was held obvious over Fox in the light of the common general knowledge.

We have formed the view that there is quite a lot, but not as much as he urged upon us, in Mr Howe’s contentions. We think the defendants were indeed profligate in the number of points they took. A defendant cannot take as many “reasonable” points as it likes and not have to pay for any of them if they are unsuccessful. If he has a large number of potential such points he should make a judgment as to which are the better ones. A good test to apply is not merely “is this point a reasonable runner?” but also “which of my reasonable runners are the best few?” If only a few such points are run and all but one fails, the court may deprive the party of its costs of the unsuccessful points. But there comes a point when more sanction is called for. This is particularly important in a patent action where very often a host of possible defences could be run. A reasonably strict costs regime should make a defendant concentrate on his best – which may indeed also give him a better chance of winning.

What then is the right result here? We have formed the view that there should be no order as to these costs. That takes into account inter alia:

This goes further than merely depriving the successful defendant of its costs of its unsuccessful defences. For it deprives it of the costs of the point on which it won too. That we think is the appropriate price to be paid for its profligacy.

These were awarded to MMI. We can see no reason for disturbing the Judge’s order in respect of them. Normally post judgment costs are slight and merely consequential. Here a lot more was involved, but the defendants brought those costs on themselves.

Again we think the costs should be dealt with collectively, whether or not Mr Howe is right that technically the appeals from the main judgment and the remitted issues judgment are distinct appeals.

The defendants were successful in relation to their obviousness appeal but lost on the remitted issues appeal. It is accepted that they should have the costs of the former. The dispute is about the costs of the latter. Mr Howe submits the defendants lost it and so should pay. Mr Wilson accepts that the defendants should be deprived of the costs of the remitted issues appeal, but that the court should go no further. Mr Howe responds by saying the remitted issues appeal was so hopeless that that the court should indeed go further.

We have decided that the appropriate order is that the defendants should have 70% of the costs. We agree that the remitted appeal was close to hopeless (not least because it in part depended on running a point not open on the permission to appeal and because there was no real answer to the question of confidentiality) but we do not think it added vastly to the appeal.

We believe we have now dealt with the issues of costs. The draft order submitted to us covers other issues (e.g. interim payment and interest). We have received no submissions as to these. We hope that now the costs questions have been settled the parties can agree the remainder. If not, then within seven days of the date of this judgment they must specify what point(s) remain to be resolved and what their respective positions concerning these are. We will then direct what steps should be taken so that the points can be decided.