Monday, 23 March 2009

Euro costs in UK litigation

Actavis UK Ltd v Novartis AG [2009] EWHC 502 (Ch) was a decision last Friday from Mr Justice Warren in the Patents Court for England and Wales.  This decision is not yet available on BAILII but has been noted by the LexisNexis Butterworth subscription service.

Actavis sought to revoke Novartis's patent on the grounds of insufficiency and lack of inventive step, while Novartis counterclaimed for infringement. In January 2009 the court upheld Actavis's attack on four claims for obviousness succeeded, but that the challenge based on insufficiency failed. The court also let Novartis amend its patent. In a subsequent application for costs Novartis accepted that Actavis was entitled to its general costs of the action, i.e. those costs which could not be allocated to a particular issue. There were however some issues on which the parties could not agree:

* Actavis submitted that a costs order should be made in its favour on the basis that it had won the action by establishing that the patent was invalid. Novartis disagreed: such an order would not reflect fairly the time and costs incurred in relation to issues on which it was successful; better would be an issue-based award, having regard to the fact that Actavis only succeeded on one narrow point concerning technical obviousness, and Novartis should recover 45 per cent of its overall costs rather than a strictly issue-based order (the obviousness arguments having been divided into 'Notional Task' obviousness and technical obviousness),

* Actavis asked for its costs in Euros, since its solicitors had conducted the case with the intention of submitting bills stated in Euros. If not, the sterling costs should reflect the exchange rate applicable at that point in time, so that Actavis would received an amount in sterling equivalent to the amount in Euros which it had actually paid. Novartis argued that the bills paid in Euros should be converted into a sterling equivalent at the time of payment, it being unfair for it to be penalised by reason of sterling's current weakness against the Euro.

Warren J ruled as follows:
(i) In considering whether to make an issue-based costs order, the court had to identify the overall winner of the proceedings. The overall winner was almost always likely to be entitled to payment of all his costs which were not or could not be allocated to a particular issue ("the general costs of the action").

(ii) as to costs which could properly be allocated to issues upon which the party who was successful had nevertheless lost, there were 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? Here, subject to the point relating to the conversion of Euros into sterling, Actavis's overall costs would be disallowed by 50 per cent to reflect the results in relation to the notional task issue and two of the pleaded prior art publications taken together. Another 5 per cent would be disallowed in respect of infringement and Kabadi (a publication that Actavis originally relied on as a piece of prior art, but abandoned a few days before exchange of expert evidence), the disallowance being pitched at a level to reflect, on a pure-based approach, the decision that Actavis should not only be deprived of its own costs, but should also meet those of Novartis. Accordingly, Novartis must pay 45 per cent of Actavis's costs of the action, to be assessed on the standard basis if not agreed.

(iii) Conventionally, costs judges only made sterling awards and converted foreign currency disbursements or fees into sterling at the rate prevailing at the time of payment, where payment had been made before the assessment had been completed; any outstanding amounts would be converted at the rate prevailing when the assessment was carried out. Here, the practice of the costs judges was correct. This was proceeding in an English court, the subject matter being a UK patent and the infringement relating to activities in the UK. Both sides conducted business in the UK. This being so, the case did not concern any foreign element and Actavis was not entitled to have those items of recoverable costs payable by it in Euros or the sterling equivalent of the total Euro amount converted into sterling at the date of the assessment or enforcement.

(iv) It was a matter for a costs judge in conduct of the assessment to determine how Euro bills were to be dealt with.

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