Novartis AG & Anor v Johnson & Johnson Medical Ltd & Ors

I handed down judgment in this action on 10 July 2009 and must now decide what order should be made in respect of costs. As appears from my judgment, I have held that EP (UK) 0,819,258 (“the patent”) is invalid for insufficiency. The attacks of lack of novelty and obviousness have failed. The claimants have established that the defendants' Oasys contact lens falls within the scope of claims 1 and 24 but not claims 8 or 11. In the result, the patent must be revoked and the claimants have failed in their attempt to secure relief.

The defendants submit that this is an exceptional case and that for this reason it is appropriate to award them all of their costs, even though they have lost on a significant number of issues. The claimants recognise their claim has failed but submit that the many issues on which they succeeded are sufficiently circumscribed for me to deal with the costs aspects of them separately. Bearing in mind the costs incurred in relation to the issues upon which the defendants failed and the reasons for that failure, the claimants submit that I should make no order as to costs or order the parties to pay their own costs.

The general principles which must guide me in exercising my discretion are set out in CPR 44.3 which provides, as far as material:

"44.3

(1) The court has discretion as to -

(a)

whether costs are payable by one party to 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 must have regard to all the circumstances, including -

(a)

The conduct of all 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)

conduct before, as well as during, the proceedings, and in particular the extent to which the parties followed the Practice Direction (Pre-Action Conduct) or any relevant pre-action protocol;

(b)

whether it was reasonable for a party to raise, pursue or context 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;

(d)

costs incurred before proceedings have begun;

(e)

costs relating to particular steps taken in the proceedings;

(f)

costs relating only to a distinct part of the proceedings; and

(g)

interest on costs from or until a certain date, including a date before judgment.

(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)."

In SmithKline Beecham v Apotex [2004] EWCA Civ 1703; [2005] FSR 24 Jacob LJ confirmed that these matters are as relevant to patent actions as to any other action. He also explained at paragraph [26] of his judgment:

"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".

He continued at paragraph [27] with a warning that such an approach is necessarily imprecise:

"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…"

In Monsanto v Cargill [2007] EWHC 3113 (Pat) Pumfrey J gave further guidance as to the issue based approach at paragraphs [7] and [8] of his judgment:

"7.

… The court is obliged to identify the overall winner of the proceedings. Among other things, the overall winner is likely (save in the most exceptional circumstances) to be entitled to payment of all his costs which are not or cannot be allocated to a particular issue. I shall refer to these as the general costs of the action. In relation to costs that can properly be allocated to issues upon which the party who is successful overall has nevertheless lost, there are two questions: should that party recover his costs of that issue, and should he pay the otherwise unsuccessful party's costs incurred in respect of that issue?

8.

The first question, 'should he recover?', is the question which was traditionally answered by the process of certification. The second question, 'and should he pay the other side?', is to be answered, it seems to me, having regard not merely to the reasonableness or lack of it in raising the issue at all, but upon it being established that there was something more than conduct justifying his being deprived of the costs of the issue in all the circumstances. I take the view that, as one moves away from the general rule that the unsuccessful party will be ordered to pay the costs of the successful party, an increasingly strong justification is required."

The defendants' application for costs is supported by a witness statement of Dr. Watts, a partner in Freshfields Bruckhaus Deringer, their solicitors. He exhibits a summary schedule of costs which reveals that the defendant's professional fees to date are in the region of £3,650,000.

Mr. Roy, an associate in the firm of McDermott Will Emery, the claimants' solicitors, has made two witness statements in response to the defendants' application. He refers to a summary schedule of costs which reveals the claimants' total professional fees to date are in the region of £2,320,000. Accordingly, the defendants' claimed fees are some 57% greater than those of the claimants. Additionally, as he points out, the defendants' total claimed disbursements amount to some £860,000, more than double those of the claimants.

Against this background, I come to consider the particular matters which I believe are relevant to the exercise of my discretion in the context of this case.

First, the defendants are undoubtedly the overall winners of this action. They have successfully defended a claim which threatened their UK business in Oasys contact lenses. As Dr. Watts has explained, the UK is not only the largest European market for Oasys contact lenses but also the European distribution centre for the defendants' products. Losing the case in the UK would have disrupted the defendants' business throughout the whole of Europe.

Second, and as is evident from my judgment, the case was very complex involving no fewer than nine expert witnesses with expertise over a wide range of different disciplines. The trial itself extended over 15 days, many of which involved sitting early and finishing late. In my judgment, that complexity was at least in some measure the result of the decision by the claimants to frame the claims of the patent in what Dr. Watts has described, I believe fairly, as broad functional language.

Third, the general costs of the action are undoubtedly substantial. Mr. Roy estimates the claimants' costs that could not be ascribed to any particular issue in the time he had available at about 56%. Dr. Watts puts the equivalent figure for the defendants rather lower at about 33%. In my judgment, the general costs of the action should normally go to the overall winner. I see no reason to adopt a different approach in the circumstances of this case. Accordingly I consider the defendants should have the general costs of the action.

Fourth, the defendants submit that the conduct of the claimants was highly tactical, that they deliberately straddled fences and sought to obfuscate issues when it was expedient to do so. The most stark example of this is, they say, is the approach taken by the claimants in relation to the attack of lack of novelty over Hopken and Domschke. I addressed this in paragraphs [113] to [136] of my judgment. It required a consideration of two issues: first, whether the patent was entitled to its claimed priority date and, second, if it was not, whether Hopken and Domschke provided an enabling disclosure of lenses falling within the scope of the claims. In the event, I found in favour of the defendants on the first issue but against them on the second.

The defendants now say that the position taken by the claimants on the second issue was unprecedented and cynical in that it was never explained why the claimants did not know whether the examples in the patent met the requirements of the claims.

I have to say that I was not a little surprised by the position taken by the claimants which first became apparent when the defendants launched an application for summary judgment in 2008. Nevertheless, and as I recorded in paragraph [135] of my judgment, by the end of the trial I understood the parties to have adopted a common position that I did not have sufficient evidence to enable me to come to a conclusion as to whether the examples and classes of lenses described in Hopken and Domschke do or do not satisfy the requirements of the claims.

The defendants say that a second example of the tactical conduct of the claimants in this litigation was to contend that they had discovered and claimed the valuable parameter of ion permeability that could be measured according to the novel Ionoton and Ionoflux methods when internal e-mails and an objective assessment of the data indicated that wrong values appeared in the patent. The defendants continue that the claimants never sought to deal with this crucial matter properly and that Professor Freeman, and ultimately the court, were left with the task of conducting a forensic analysis of notebooks and e-mails.

Against this, however, I must weigh in the balance that, as Mr. Baldwin QC, who has appeared on behalf of the claimants today, explained, the claimants were in the difficulty that a considerable number of relevant documents have been lost but that, at the time, the claimants looked into the issue and concluded that the values contained in the patent were in fact correct. In those circumstances, he submits, with some force, that it cannot be said that the position taken by the claimants was unreasonable and, in any event, that the costs have not been increased to any significant extent.

Conversely, the claimants say that the defendants have themselves engaged in conduct which has unnecessarily increased the costs of these proceedings. I have no doubt that the defendants have engaged in conduct which has resulted in an unnecessary increase in the costs of these proceedings as matters have turned out but again, I am not satisfied that they have behaved unreasonably.

What emerged clearly to me through the course of the trial is that this is litigation which has been extremely hard fought on both sides, no doubt because so much depends upon it, and that the parties developed their respective cases as the evidence has emerged, emphasizing the points and arguments which they considered would be most likely to succeed, with the result that by the end of the trial virtually every conceivable point was being taken, if not by one side then by the other.

Fifth, I must have regard to the issues on which each side won. This is a point on which the claimants particularly rely. They say they have succeeded in relation to the overwhelming majority of issues, namely infringement of claims 1 and 24, lack of novelty over Hopken and Domschke, lack of novelty and obviousness over Chang and Lai and Keogh, and obviousness over Sokolyuk, Hamano and the common general knowledge. Conversely, they say that the defendants have only succeeded in relation to infringement of claim 24 and insufficiency.

This, it seems to me, is a significant factor. Despite the matters to which I shall come in a moment, I believe that the additional costs incurred in relation to those issues upon which the claimants won are sufficiently circumscribed to justify consideration of an issue-based approach.

Mr. Roy has also attempted to assess the proportion of additional costs attributable to those issues. The way this was carried out is explained in paragraphs 13 and 14 of his first witness statement. He reviewed his firm's bills in the matter and marked those time entries and disbursements relevant to each of the issues. Where an entry related to more than one of the issues, the time was divided accordingly. These marked up time entries and disbursements were then used by the claimants' costs draftsman to generate individual breakdowns in respect of each issue. The experts' costs of attending the trial were broken down according to the proportion of each expert's reports relating to each of the relevant issues. His firm's professional fees over the trial period were apportioned according to the issues dealt with on each day of the trial.

On this basis, he estimates that only some 4% of the claimants' allocated costs were incurred in relation to the issues on which the defendants won. It is essentially for this reason that the claimants say that I should make no order as to costs.

Against this, however, I think it is right to take into account a number of matters urged upon me by the defendants and, in particular, the submission that the allegations of lack of novelty and obviousness on the one hand and insufficiency on the other were run very much hand-in-hand with the one providing a squeeze in relation to the other. Dr. Watts explained that the defendants considered that the only effective way to attack the patent was to raise all these allegations. It was on this basis that the case was pleaded from the outset. For example, he says, had novelty allegations not been raised, it would have been open for the claimants to defend the claims against insufficiency by asserting that the threshold for ophthalmic compatibility is low. The claimants might have said that all that is required to determine whether a lens falls within the claims is a quick assessment of movement on the eye or they might have said that ophthalmic compatibility follows where the product meets the numerical thresholds of oxygen transmissibility and ion permeability and there is no need to test that at all. The claimants therefore formed the view that it was essential to raise the allegations of lack of novelty and obviousness in order that the insufficiency case could be properly exposed.

Further, he continues, the defendants considered that since the patent introduced unusual methods of measurement and the claims were limited by functional criteria, it was necessary to test the prior art by reference to recreations and experiments and not just rely on paper disclosures. Moreover, it was prudent to raise these challenges to expose the problems with the patent. The complexity and difficulty of assessing whether the Chang and Lai lenses were ophthalmically compatible illuminated key aspects of the insufficiency arguments.

In my judgment there is some merit in these points. I believe the lack of novelty and obviousness arguments were reasonable ones for the defendants to run and my consideration of them and findings in relation to them did serve to support the defendants' contentions that the patent was insufficient.

There are also some more specific matters which I believe to be relevant. As for the allegation of lack of novelty over Hopken and Domschke, I have in mind that a significant part of the attack required the defendants to establish that the first two priority claims of the patent were invalid. As I have said, on this point they succeeded. As for the allegations of lack of novelty and obviousness over Chang and Lai, the claimants were successful on the issue as to whether the recreations were a faithful reproduction of the teaching of the documents and the defendants failed to establish that the Chang recreations had the necessary oxygen permeability. Conversely, however, the defendants were obliged to carry out measurements of ion permeability which were not challenged and extensive clinical trials to show the recreations were ophthalmically compatible. On both these sub-issues, the defendants were successful.

Sixth, weighing these various matters together, I have come to the conclusion that it would be right to disallow the claimants their additional costs attributable to the issues on which they fought and lost, namely infringement of claims 1 and 24 and invalidity over Hopken, Domschke, Chang, Lai, and the common general knowledge, but that it would be wrong to award the claimants their costs of these issues. They are, as I have said, sufficiently circumscribed to justify an issue-based approach but the circumstances are not such as to make it appropriate to make an adverse costs order in respect of them. As for the prior art which the defendants abandoned, namely Sokolyuk and Hamano, it seems to me the claimants should have their costs.

That brings me to consider the size of the deduction it is appropriate to make. Mr. Roy attributes 8% of the claimants' costs to the issues arising in relation to infringement of claims 1 and 24. Dr. Watts puts the defendants' equivalent costs at 3%, having carried out an exercise which involved counting the pages of the defendants' evidence and the time taken at trial relating to these issues, together with his impression. This, it seems to me, is a somewhat less precise way of assessing the relevant costs than that carried out by Mr. Roy, and to which I have referred.

It is of course the defendants' costs with which I am primarily concerned, but I have to say that Dr. Watts' estimate seems to me to be rather low. In the circumstances, and doing the best I can, I have reached the conclusion that it is appropriate to allow 5% in respect of these particular issues.

As for the allegations of lack of novelty in the light of Hopken and Domschke, Mr. Roy attributes some 4.2% of the claimants' costs to these failed attacks. Dr. Watts says the claimants' equivalent figure is 1.5%. Again, I think Dr. Watts' figure is an under-estimate and that a fair sum to deduct is 3%.

Turning to Chang and Lai, there is a marked difference between the parties. Dr. Watts says a total of about 14% of additional costs were incurred by the defendants, but the claimants' costs were, says Mr. Roy, approaching twice as much at 23%. I believe an appropriate figure to deduct in respect of Chang and Lai is 17%.

As for the other art and the common general knowledge, and allowing for a contribution to the claimants in respect of the abandoned prior art, I believe a fair deduction is 5%.

Accordingly, overall, I think justice would be served if I allow the defendants 70% of their overall costs of these proceedings, such costs to be assessed.