Hospira UK Ltd v Novartis AG

I now have to deal with the costs of these two actions. As is not uncommon, the parties are a long way apart. The claimants say that they should recover all of their costs. Novartis says that the claimants should pay 25% of Novartis' costs.

The principles to be applied in these circumstances are familiar subject to one small qualification. The court generally approaches the matter by asking itself three questions: first, who has won; secondly, has the winning party lost on an issue which is suitably circumscribed so as to deprive that party of the costs of that issue; and thirdly, are the circumstances (as it is sometimes put) suitably exceptional to justify the making of a costs order on that issue against the party that has won overall.

I say sometimes put because I think a review of decisions of the Patents Court on costs issues over the past five years would show that that particular phraseology is often, but not always, employed. Sometimes it has put been put in slightly different ways, notably by myself.

The origin of the phrase "suitably exceptional" is the judgment of Longmore LJ in Summit Property v Pitmans (A Firm) [2001] EWCA Civ 2020. As has been pointed out recently by Davis LJ in F&C Alternative Investments (Holdings) Ltd v Barthelemy [2012] EWCA Civ 843 at [46]-[49], it is apparent that Longmore LJ was not intending when using the words "suitably exceptional" in the particular circumstances in which he did to impose a specific requirement of exceptionality. The question rather is one of whether it is appropriate in all the circumstances of the individual case not merely to deprive the winning party of its costs on an issue in relation to which it has lost, but also to require it to pay the other side's costs.

Accordingly, the starting point is to ask who has won. So far as that is concerned, counsel for Novartis did not seriously dispute that the overall winners were the claimants. After all, the patents have been revoked. Accordingly, the claimants have achieved their commercial objective. Nevertheless, he submitted that there were a series of issues in relation to which they had lost and that in the circumstances it was appropriate not merely that the claimants should be deprived of their costs of those issues, but also that they should pay Novartis' costs.

I will come to the specific issues shortly, but before doing so it is convenient to record the result which he submitted should follow. He submitted that. in relation to the matters on which the claimants have been successful, they should recover 32% of their respective costs. In relation to the issues on which he contended that Novartis had been successful, he submitted that Novartis should recover 65% of its costs.

Taking into account the fact that Novartis' costs are a little over £1.5 million, that Hospira's costs are slightly less and that Mylan's costs are roughly £500,000, and doing a bit of arithmetic, he arrives at the net result which I have already mentioned, namely that there should be a payment by the claimants of 25% of Novartis' costs.

It is convenient to mention straightaway that in my view the arithmetical calculation that has been adopted to arrive at that result contains a significant flaw, even on the basis of Novartis' own evidence.

As counsel for Mylan pointed out, Mr. Cordery, of Novartis' solicitors, states in paragraph 17 of his second witness statement that the approximate division of time on Novartis' side as between the two claims was 73% attributable to the Hospira matter and 27% attributable to the Mylan matter. That is something which, in my view, must be taken into account as well as the disparity between the totals cost bills of Hospira and Mylan. It is quite understandable that there should be such disparity, both as regards the size of the Hospira and Mylan bills and as regards the amount of time spent on the Novartis side, because Mylan came into the matter at a much later stage. Both for that reason and because of the way the work was divided between them, more of the overall work of the claimants was done by Hospira than was done by Mylan. Correspondingly, Novartis had more work to do responding to Hospira than it did to Mylan.

I turn then to consider the matters in relation to which it is contended that Novartis was successful. I will take them in what, to my mind, are ascending order of seriousness.

First, there was a short Edwards v Cook point that was raised very late in the day and then abandoned. Counsel for the claimants did not dispute that in principle the claimants should pay the costs of that, which Novartis estimates at 1% of its costs. It is suggested that that is a high figure. Whatever is the true figure for Novartis' costs, it is in the scheme of things relatively insignificant. Nevertheless, I will take it into account.

Next was an added matter objection to the amendment of the '689 patent. Novartis estimates its costs of that at 2%. As far as that is concerned, counsel for Novartis points out that the argument was not accepted by the European Patent Office. Against that, counsel for the claimants argue that it was a reasonable objection to run and that it was not run once it became clear that it was not going to add anything to the priority argument.

So far as that is concerned, it seems to me that in all the circumstances it would be right not to require Novartis to pay any costs of the claimants; but I do not think it is appropriate in all the circumstances to go the extra step of requiring the claimants to pay any costs to Novartis.

Next, Novartis points out that there were three items of prior art which were pleaded at earlier stages of the proceedings, in particular by Hospira and to a lesser extent Mylan, which were subsequently abandoned. Novartis estimates its costs attributable to that as being some 13% of its overall costs.

As far as that is concerned, counsel for the claimants points out that Hospira initially pleaded the three items of prior art in question prior to the amendment application by Novartis. He submitted that it was, therefore, entirely reasonable for that prior art to have been pleaded. The amendment application was launched in May 2012 and the prior art in question was ultimately abandoned in November 2012. I think it is, therefore, correct, as counsel for the claimants submitted, to concentrate on that period.

As far as that period is concerned, counsel for the claimants pointed out that it was during that period that Mylan launched its claim and there was a hearing before Floyd J in July 2012, the ultimate result of which was that the Mylan claim was ordered to be tried at the same time as the Hospira claim. After the summer vacation, the two claimants cooperated with a view to deciding how best to present a united front in an efficient manner having regard to the amendment application and it was in the light of that consideration that prior art was dropped. Against that, counsel for Novartis relies upon the evidence from Mr. Cordery that during that period Novartis was spending time with its experts considering the prior art in question.

As far as this issue is concerned, it seems to me, as I think I have already indicated, that the claimants were justified in pleading this prior art at the outset. It seems clear that it was that prior art which led to the amendment application. So far as the period after the application to amend is concerned, the real question as I see it is whether the claimants unreasonably delayed in dropping that prior art. I have to say it seems to me that they were a little slow, but equally it seems to me that in the circumstances that I have described it was inevitable that some period of time would elapse while they were sorting out their position.

In all of those circumstances, it seems to me that it would not be right to require the claimants to pay Novartis' costs in relation to the abandoned prior art. Nor, in my view, would it be right to deprive the claimants of all of their costs in relation to the abandoned prior art. On the other hand, I think there should be some reflection made of the fact that the claimants were a little slow in abandoning those items.

I turn then to the two major contentions as I see it. These both relate to the fact that the obviousness attack was ultimately unsuccessful. Novartis' position is that, the obviousness attack having been unsuccessful, the claimants should pay. The claimants argue that in this case there was a squeeze between the issues of priority and obviousness such that it was reasonable for the claimants to run both arguments. The claimants say that, while it may with the benefit of hindsight have been unlikely that they would succeed on both arguments, nevertheless the squeeze was such that failure on one was likely to assist them on the other. So it is, they say, that the reasons why they failed on obviousness fed into their success on priority.

That then takes me on to the second aspect of the matter, which is common general knowledge. The claimants say that, to the extent that the findings on common general knowledge were adverse to their case on obviousness, so those findings supported their case on priority. Novartis says that not only were the claimants unsuccessful at the end of the day on obviousness, but also, if one looks a little more closely at the common general knowledge issues, in fact the claimants were unsuccessful on a series of common general knowledge issues which, at the end of the day, only related to the question of obviousness. Accordingly, Novartis says that the claimants should not only pay Novartis' costs in relation to the issue of obviousness (which are estimated at 23% of its overall costs), but also should pay the majority of Novartis' costs in relation to the common general knowledge issues. So far as the latter is concerned, Novartis estimates its overall costs in relation to common general knowledge issues at 33% and says that the claimants should pay 80% of that figure.

So far as those two matters are concerned, my view is that, while the claimants are correct to say that there was some degree of relationship between priority and obviousness, I do not agree that there was a direct squeeze. I accept that some of the findings in relation to common general knowledge which were adverse to the claimants' case on obviousness assisted the claimants' case in relation to priority. Nevertheless, the fact of the matter remains that, for the purposes of the attack on obviousness, Novartis and its experts and the court had to consider the prior art relied on and had to consider arguments in relation to obviousness that would not have been necessary if the obviousness argument had not been run and only the priority and insufficiency arguments had been run. Furthermore, while I do not agree with Novartis' division of the common general knowledge issues, it does seem to me that, at least to some degree, the investigation of common general knowledge was a little more extensive than it would have needed to have been had the obviousness attacks not been run.

Accordingly, it seems to me that this is a case in which it is appropriate, first, to deprive the claimants of their own costs in relation to obviousness and, secondly, to require them to pay Novartis' costs. I also need to take into account the other matters to which I have already referred. The problem is how to translate all of that into a final order in the circumstances that I have already related regarding the disparity between the Hospira and Mylan costs and Novartis' costs incurred in relation to the two claims.

It is well recognised that in dealing with these costs issues it is necessary to take a broad brush approach and the exercise is not one which is susceptible of precision. It is recognised that it is generally better for the court to do its best to arrive at a percentage figure rather than to put the parties to the costs of a detailed assessment. In the circumstances of the present case, I am acutely conscious of the fact that the task which confronts me is one which is even less susceptible to precision and even more requiring a broad brush approach than usual. Nevertheless, I am convinced that the usual approach taken in these case and doing the best one can to arrive at an ultimate percentage figure, while necessarily impressionistic, is the correct one.

Doing the best that I can, taking into account all the factors that I have mentioned, it seems to me that a fair overall order in the circumstances of the case is that, as far as Hospira is concerned it should recover 40% of its costs from Novartis and that, as far as Mylan is concerned, it should recover 60% of its costs from Novartis.