Wobben Properties GmbH v Siemens Public Ltd Company & Ors

The first task I have to perform this morning, which is the return day of deciding the consequentials arising from my judgment in this patent case, which is [2015] EWHC 2114 (Pat), is to deal with the incidence of costs.

The parties have approached this with a considerable degree of common ground. It is common ground that the overall winner is the defendants, whom I will refer to compendiously as Siemens, and it is common ground that the claimant Wobben should pay a proportion of Siemens' costs. Siemens' submission is that that proportion should be 91% of Siemens' costs. Wobben's submission is that that proportion should be approximately 70% of Siemens' costs. The question I have to decide is which of those two figures or somewhere in between is the right one.

The basis on which this is argued is the familiar issues-based approach to costs which is taken routinely in patent cases, and in many other cases. The issue focuses on the various different points and in particular, as always in a case like this, focuses on the points which were taken by the winning party but which the winning party did not succeed on. Patent cases are notorious for the fact that in reality whichever side wins has generally taken one or two points which it will not have succeeded on.

In this case the four matters that I need to deal with are Frantz, Shozaburo, insufficiency and novelty over Bossanyi. These references can be understood by referring back to my main judgment and I will not elaborate in any great detail.

Frantz was a piece of prior art which had been pleaded as rendering the claims both lacking novelty and being obvious. Ultimately it was dropped by Siemens during the course of the trial and it is common ground that some deduction should be made from Siemens' costs. Siemens submit that the deduction should be 1%. What is not common ground is the actual cost attributable to Frantz and of more significance is the point that Wobben submit that not only should I make a deduction from Siemens' costs, but I should also notionally make a further deduction from Siemens' costs to account for the fact that I should, in effect, order Siemens to pay Wobben's costs of Frantz. I should say it is also common ground, as is commonly done, that rather than making an order which Siemens would actually have to pay Wobben's costs relating to Frantz if I were satisfied that that was appropriate, necessitating a separate costs assessment, both parties agree that the fair and appropriate way to do that is to make a further percentage deduction from Siemens' costs reflecting the fair proportion of Siemens' costs which would account for that.

The parties are also agreed that, given that the amounts of costs spent by Siemens and Wobben are different, there is, if you like, a conversion factor where one can take a proportion of one side's costs and convert it into a proportion of the other side's costs. These are all matters which are common ground.

The correct approach to deciding this issue was discussed in the judgment of Arnold J in Hospira UK Ltd v Novartis AG [2013] EWHC 886 (Pat), and I will quote paragraphs 2, 3 and 4 of his judgment.

“2.

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.

3.

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 been put in slightly different ways, notably by myself.

4.

The origin of the phrase 'suitably exceptional' is the judgment of Longmore J 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.”

The significance of the point made by Arnold J in paragraph 4 is that the phrase "suitably exceptional" for deciding whether to go further and notionally have the winning party pay a proportion of the losing party's costs, which is a phrase used in the judgment of Floyd J Nokia v Qualcomm [2008] EWHC 777, is that it is not a criterion which is supposed to impose a specific requirement of exceptionality. I respectfully agree with the judgment of Arnold J. It seems to me, as he said, that the question 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 to which it has lost, but to require it to pay the other side's costs. It is notorious that a test of that kind will be difficult to predict its outcome in advance. Nevertheless, I am satisfied that it is the appropriate way of dealing with costs under the CPR today.

The reasons why Wobben submit that I should go further and deprive Siemens of the costs relating to Frantz are these. The point was raised as an attack on validity. Siemens then made a conditional application to amend the claims to insert a feature, the feature being that the wind turbine in question produced electricity, the point being that the Frantz document describes a wind turbine or a windmill (I am not making a specific finding on the meaning of the word "turbine", which I know was an issue) which does not actually generating electricity as described. There was an argument about whether that amendment was added matter, but by May the patentee had produced an alternative amendment, which was not said to add matter by Siemens, which would be something which distinguished the claim over Frantz because it required the windmill or wind turbine to produce electricity connected to an electrical network.

Nevertheless, the point Wobben make is that Siemens also had an argument, which was elaborated in the evidence, that even if the claims were novel over Frantz, they lacked an inventive step. The argument was about whether it would be obvious to connect up the Frantz windmill in order to generate electricity in electrical network.

When the matter came to trial, Wobben altered its position on amendment and made its electricity generating amendment unconditional amendment, which meant that I did not have to decide whether to permit that amendment, except in the most limited sense. The amendment is there in Annex 1 of the main judgment.

After a period of reflection, which I accept a party must be entitled to, Mr. Turner submits his clients then decided to drop Frantz. Accordingly, he submits his clients cannot be accused of behaving in an improper way and therefore should not be notionally required to pay Wobben's costs.

I am quite satisfied that it cannot be said that anything Siemens have done was improper. However, it seems to me that Mr. Lykiardopoulos is right to submit that these are circumstances in which it would be appropriate, notionally at any rate, to award Wobben its costs in relation to Frantz. The reason is because what was dropped in the end was an argument about obviousness which was being advanced irrespective of the form of claims. That decision to remove Frantz cannot be said to arise from the fact that the patentee made an amendment or made a conditional amendment. That means that it would be fair in this case to require Siemens to pay Wobben's costs in relation to this piece of prior art.

The other question I have to decide is what percentage I should attribute to Frantz. Mr. Bowler, a solicitor for Siemens, at Bristows, gave evidence dealing with the amount of time spent on these issues and concluded that a percentage that would be fair would be 1%. However, it was recognised that that 1% is not simply an assessment of time or costs spent on Frantz, but was to reflect the fact that all I should be considering is the time attributable to the situation after the amendment was made unconditional, so I will not take 1% as the appropriate figure. Mr. Wilson, who is the solicitor at Powell Gilbert for Wobben, estimates that the costs attributable to Frantz were about 6%. In my judgment that is about right and I will therefore take that as the appropriate figure.

The correct way to deal with it is to make a deduction from Siemens' costs which reflects 6% of Wobben’s costs (which comes to a deduction of 5%) and also to make a deduction from Siemens of its own costs, which I will take as a further 6%. That takes the overall deduction relating to Frantz 11%. That is the figure that I will use.

The next topic I need to deal with is Shozaburo. That document is described in more detail in my judgment. Siemens argued that the patent lacked novelty over Shozaburo. I held in the end that it did not. However, as Mr. Turner points out, I did indicate in my judgment that I was initially attracted by that argument. That is a significant element in the consideration of whether I should not only deprive Siemens of its costs in relation to this article, but also make an order notionally requiring Siemens to pay Wobben's costs. I am not satisfied in this case that I should make such a further order. I will therefore only deduct from Siemens its costs relating to Shozaburo. The question then is whether that should be 8% or 10%.

Mr. Lykiardopoulos submits that the 8% figure, which comes from Mr. Bowler's evidence, is a little on the light side, based on the approach that was taken of counting paragraphs in an expert's report, but only counting paragraphs relating to Shozaburo itself and not counting paragraphs relating to the common general knowledge elements which were relevant because the argument on Shozaburo involved a debate about how you start up a wind turbine.

Mr. Wilson's evidence for Wobben is that in the round 10% is a fairer figure. I accept Mr. Wilson's evidence. It accords with my own impression that Shozaburo was a significant part of the time and costs spent in the proceedings and I will deduct 10% for that.

I now turn to the next issue, which is insufficiency. The point made by Siemens in relation to that is that the majority of the insufficiency points were squeezes which in the end did not fall to be dealt with because they had, as it were, achieved the objective which the pleading party wanted to achieve. That was to make sure that the patentee did not run arguments which at least on the face of it were arguments that one would have expected the patentee to run or which one could at least conceive the patentee might run, having regard to the nature of the patent and the terms of the claim.

Mr. Lykiardopoulos submits that that does not alter the fact that evidence was called relating to those matters and costs were spent and the point was never dealt with and, therefore, his clients should get their costs relating to insufficiency. I do not accept that. In my judgment it is clear that, subject to one point on the word "automatic" on which the costs would be extremely small, these points were all proper points which any reasonable patent attorney or patent lawyer would have taken on the defendants' side in this case to ensure that the patentee did not make the arguments. The fact the patentee did not make the arguments does not prove that it would not have done if the points had not been taken. It seems to me that I should not make any deductions for insufficiency.

Nor am I prepared to make any deduction for novelty over Bossanyi. Mr. Lykiardopoulos submitted in answer to the point made by Siemens, that it was inevitable that one would have to consider the disclosure of Bossanyi from the point of view of the obviousness case, is that somehow looking at the document for novelty is different. I fail to see how it is different and I will make no deduction for Bossanyi.

The next matter I need to deal with is the question of a payment on account of costs. I have decided that the order for costs will be that Wobben are to pay 79% of Siemens's costs of these proceedings and it is common ground that I should make an award of an interim payment that Wobben should pay Siemens. The question is how much.

The first matter I will deal with is the principles to be applied. I have been referred to the judgment of Christopher Clarke LJ (sitting at first instance) in Excalibur Ventures LLC v Texas Keystone at [2015] EWHC 566. There the learned judge dealt with the significance of the terms of CPR rule 44.28 for the test to be applied in deciding how to make a payment on account. In paragraphs 14-23 he deals with those principles and in the course of doing so he takes into account two judgments of mine, one in Hospira v Genentech in which I had referred to the test being to ensure that the court finds an “irreducible minimum” and another, in Teva v Leo, that it would be useful for the figure not to be too much below the likely level of detailed assessment.

The learned judge respectfully disagreed with my formulation when I used the words "irreducible minimum" and I will not lengthen this judgment other than to say that I respectfully agree with Clarke LJ. In that case he has had the benefit of the citation of considerably more authority and argument on the question than I have I think ever had sitting in the Patents Court in the short time that I have been doing that.

I agree with everything that Clarke LJ says in those passages of his judgment and in particular in paragraphs 21-23. The test is not to find an irreducible minimum. The test, as required by CPR rule 44.2(8), is to make an award "to pay a reasonable sum on account".

I do maintain, and indeed I note that Clarke LJ also agreed, that to find a figure not too much below the likely level of detailed assessment is an appropriate way of considering the matter.

The other aspect which I wish to mention arising out of Excalibur is that the learned Lord Justice in that case also indicated, and I respectfully agree with him, that consideration of the other party's costs is a factor that one can properly and sensibly take into account in coming to that determination.

In this case the position is as follows. Wobben's actual costs of these proceedings given in the evidence is £2.07 million. That is in Mr. Wilson's evidence. Siemens's actual costs in the evidence of Mr. Bowler are £2.7 million. Siemens's position is that its costs are not disproportionate in the context of the commercial significance and commercial value of these proceedings. Wobben's submission is that those costs are extremely high and that therefore I should exercise real caution when taking a figure of that amount as a starting point for working out what a fair interim award should be.

Mr. Lykiardopoulos also submits that the scant detail, as he calls it, in the evidence from Mr. Bowler is another reason why I should exercise real caution.

The final bottom line submissions are from Siemens that I should award £1.2 million by way of an interim award. That represents 56% of the relevant proportion of Siemens's actual costs (which would come down to £2.1 million as 79% of £2.7 million). Mr. Lykiardopoulos submits that I should award £800,000 as a better estimate of a reasonable sum to be paid.

The specific factors that bear on this question I can deal with as follows. First is the question of the commercial significance of this action. One of the submissions from Mr. Turner was that Mr. Lykiardopoulos's clients, Wobben, had adopted an aggressive strategy in these proceedings.

I do not say that the question of whether a party has adopted an aggressive strategy is irrelevant to this question, but, in my judgment, it is not possible to say in this case that Wobben have adopted an aggressive strategy in this case. What can be said, however, is that the factors that Mr. Turner relies on for his submission are indications, not of an “aggressive strategy”, but of the real commercial significance to both sides of this dispute.

It is quite clear that this is a commercially valuable dispute. The figure I gave in my judgment, which I was given by Wobben, is of £13 million as an estimate of its value. I note in Mr. Bowler's evidence he has pulled out other examples where other figures were given which are higher.

The particular aspect which Siemens relied on in castigating Wobben's litigation strategy was about the joinder of various customers into the proceedings, and separate proceedings against other customers, and an application before Morgan J for disclosure of customers of Siemens to be given, which was ultimately given. As I say, I do not accept the submission that I can find that that was an “aggressive strategy”, but the fact that Wobben wish to take that course is indicative of the commercial significance of these proceedings.

Looked at overall, I am not satisfied that £2.7 million is a disproportionate sum to spend on this kind of litigation.

Moreover, I am also not satisfied that there is any material difference, and I mean material, between the figure of £2.7 million spent by Siemens and the figure of costs spent by Wobben. I say that for two reasons.

First of all, although £600,000 odd (the difference between the two) is a very large sum of money, in proportionate terms it is not such a very great difference. As a share of Siemens’s costs it is just over 20% (0.6M/2.7M). I am not at all convinced that the fact that there is a difference of that magnitude indicates any significant difference in the way in which costs have been incurred on either side.

It is unusual, in my judgment, to see a patent case finish where the parties' costs are much closer than they are in this case. I do not say that these figures are exceptionally close. They are not. But a proportionate difference of this sort of scale is within the normal range, in my experience, for the proportionate differences between the expenditure by one side and the other in a patent case.

Second, there is some force in the submission from Siemens that we do not in fact know the total costs associated with Wobben are. That is because a significant amount of work was done by a German attorneys firm called Eisenführ Speiser and those costs are not taken into account.

Mr. Lykiardopoulos on behalf of his clients submits that they were to be regarded as taking the role of an in-house legal department and I do not doubt that that may well be true. But it remains the case that one cannot properly say what the costs figure to be attributed to Wobben really is in order for it to be compared with the costs incurred by Siemens without information about Eisenführ Speiser, which I do not have.

Turning to the question of what the interim award should be, in my judgment, £1.2 million is a reasonable sum in these circumstances. Recovery of about 56% of the likely costs is a figure which is not too much below the likely level to be recovered on a detailed assessment in this case and that is the figure I will take.