Monday, 22 September 2014

Dividing the costs: is there an interface between justice and surmise?

Baxter Healthcare UK Ltd v Fresenius Kabi is a 17 September ruling of Judge Richard Hacon in the Intellectual Property Enterprise Court, England and Wales, delivered extempore on 17 September. This blogger found the case noted on Lawtel's subscription-only service.

In March 2014, without issuing a letter before action, Baxter issued patent revocation proceedings against Fresenius, alleging lack of novelty and inventive step. Fresenius did not counterclaim for infringement and in May 2014, as part of its defence, said that it would not assert the patent against Baxter. No, said Baxter in June, that wasn't good enough: it would still leave Fresenius free to sue Baxter's customers and could cause problems if the patent came into the hands of assignees. After an amendment of the pleadings was ordered, Fresenius itself applied on 1 August for unconditional amendment of the patent that whittled it down to just one claim, effectively giving Baxter everything it wanted. Baxter then sought costs up to 1 August.

Fresenius didn't see why it should have to shoulder the costs. After all, if Baxter had only written a letter before action, the parties would have resolved their differences and arrived at the same point without the need for proceedings and without therefore incurring consequent cost. Fresenius said that it would have offered Baxter a contractual undertaking not to bring infringement proceedings, extended that offer to cover Baxter's customers, and would have agreed to extract an undertaking from any assignee to give the same protection.

Baxter maintained that this was unrealistic: after all, it was only the filing of Fresenius's unconditional amendments to the patent and acknowledgement of non-infringement on 1 August 1 that dealt with its concerns and resulted in its entire protection. Fresenius asserted that it had taken that long for it to realise that Baxter would be content with a patent with only one claim.

Judge Hacon ordered Fresenius to pay 50% of Baxter's costs up to 1 August. In his view:

* It was not easy to draw any sensible conclusion as to what would have happened, had Baxter issued a letter before action, since there was fault on both sides.

* It was virtually always appropriate for a claimant to write a letter before action -- even if there was no reasonable expectation that there would be any sensible response. In this case, Baxter's failure to do so meant that it was not possible to say how matters would have been resolved; the court was thus required to speculate.

* It was likely that there would have been an exchange of correspondence resulting in Fresenius making it clear to Baxter that it did not wish to engage in litigation against it, and that Fresenius would have offered the commitment not to assert the patent against Baxter. It was, however, likely that Baxter would not have been satisfied with that, as it needed protection for its customers and from any assignee of the patent.

* When Baxter had raised its concerns initially in May 2014, Fresenius had not responded with speed and Baxter had only become satisfied with the position on 1 August. Had the letter before action been written, it was possible that matters would have been resolved, but equally possible that they would not  --  so that litigation would have started and costs would have been incurred in any event.

This blogger is prepared to accept that the judge has made the correct decision on the facts before him, but he feels some unease at the amount of speculation and surmise on which the determination of the allocation of the costs burden was based. Judges are expected to know the law and to be able to establish facts, either in absolute terms or on a balance of probabilities. However, they do not come equipped with retrospective crystal balls and reasoning of this nature would, it seems to him, be vulnerable to challenge if closely scrutinised by an appellate court.

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