FEDERAL COURT OF AUSTRALIA

Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 3) [2014] FCAFC 126

THE COURT ORDERS THAT:

1.    The respondents pay 60% of the appellant’s costs of the patent case at first instance.

2.    The appellant pay the respondents’ costs of the copyright case at first instance, subject to a 20% reduction for the period between 29 July 2011 and 18 November 2011.

3.    The respondents pay 70% of the appellant’s costs of the appeal.

4.    The matter be remitted to a judge of the Federal Court for an inquiry as to the compensation payable on the respondents’ undertaking as to damages given to support the interlocutory injunction.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1        After determination in the High Court (Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd [2013] HCA 50), the matter has been remitted to the Full Court on the question of costs.

2        Matter No S1 of 2013 related to the question of the patentability of methods of treatment of the human body. Matter No S219 of 2012 related to the question of infringement under s 117. The High Court’s orders were, as to the latter:

1.    Special leave to appeal on ground 3 of the Draft Notice of Appeal filed on 10 September 2012 granted.

2.    Appeal allowed with costs.

3.    Set aside the orders of the Full Court of the Federal Court of Australia made on 18 July 2012 and, in their place, order that:

(a)    the appeal be allowed in part;

(b)    orders 2, 3 and 6 of the Federal Court made on 18 November 2011 be set aside;

(c)    order 1 of the Federal Court made on 24 February 2012 be set aside; and

(d)    so much of the Amended Application dated 22 September 2009 as made in paragraphs 14 to 22 be dismissed.

4.    Remit the matter to the Full Court on the questions of the costs of the appeal to that Court and the costs of the trial (which latter question may, at the discretion of the Full Court, be remitted to the primary judge).

3        The third member of the Full Court on the appeal is no longer a member of this Court. In those circumstances, it is not in dispute that the remaining members of the Court determine the costs of the appeal. We also consider that we are in a position to determine the appropriate order for costs of the hearing before the primary judge. In our view, it is therefore preferable that we make that order rather than remitting the matter to the primary judge for further judicial consideration.

4        There were different issues before the primary judge and the Full Court, not all of which were the subject of the High Court decision. As between the parties, the issues broadly centred on:

    The respondents’ (together, Sanofi) claim of patent infringement.

    The appellant’s (Apotex) cross-claim alleging patent invalidity.

    Sanofi’s claim of infringement of copyright in connection with the product information documents.

5        At first instance:

    Sanofi established patent infringement.

    Apotex failed to establish patent invalidity. That is, Sanofi was successful in upholding the validity of the patent.

    Sanofi was successful in relation to the subsistence of copyright. This was not challenged on appeal.

    Sanofi was also successful in establishing infringement of copyright in the period to 28 May 2011 (the date of commencement of the Therapeutic Goods Legislation Amendment (Copyright) Act 2011 (Cth) (the Amendment Act)

6        In the Full Court:

    The primary judge’s findings as to both patent infringement and validity were upheld. That is, Sanofi was successful and Apotex’s grounds of appeal were not accepted by the Full Court and its appeal dismissed.

    In respect of the copyright claim, Sanofi was successful in relation to the question of the implied licence asserted by Apotex.

    Apotex was successful in relation to copyright infringement on and after 28 May 2011, being the date of commencement of the Amendment Act.

7        In the High Court:

    Sanofi failed to establish patent infringement. That is, Apotex was wholly successful in relation to infringement of the patent and the related claims under s 52 the Trade Practices Act 1974 (Cth) and s 18 of the Australian Consumer Law.

    Apotex failed to establish patent invalidity on the basis argued, which was “reserved” to the High Court appeal. That is, Sanofi wholly succeeded in relation to the validity of the patent.

8        There was some overlap in the arguments relevant to infringement and validity of the patent, in that construction of its single claim was relevant to both. Apart from the patentability of “methods of treatment”, which was reserved for argument in the High Court, Sanofi was successful concerning the issues of novelty and other aspects of manner of manufacture, both at first instance and on appeal.

Previous costs orders

9        The primary judge ordered Apotex to pay all of Sanofi’s costs of the trial, with a discount applied to the period after delivery of her Honour’s judgment. A further specific order for costs made by the primary judge is not presently relevant. The Full Court ordered that Apotex pay Sanofi’s costs of the appeal.

10        These costs orders need further consideration after the appeal to the High Court which set aside the costs orders made by the Full Court and by the primary judge.

APOTEX’S SUBMISSIONS

Costs at first instance

11        Apotex submits that as it wholly succeeded in its defence of the claim for patent infringement, it should have its costs of the proceedings at first instance, including after the delivery of her Honour’s principal reasons. This is subject to the discrete copyright issue.

12        Apotex accepts that it should pay Sanofi’s costs of the trial so far as they relate to the copyright claim at first instance up to delivery of her Honour’s principal reasons. Apotex submits that the most simple way of achieving a fair result on the copyright case is for Apotex to pay Sanofi’s discrete costs of the copyright claim up to the first day of trial, for an apportionment of the costs of the trial reflecting the copyright issue, and for Sanofi to pay all of Apotex’s costs at first instance thereafter. That is, costs follow the event and there is no issues-based apportionment except as to copyright. Apotex proposes a deduction of 10% of its costs of the trial, and submits that this approach is the simplest way of achieving a fair result on the copyright case.

13        Alternatively, Apotex submits that “a further reduction of no more than 15%” would reflect its lack of success on invalidity at first instance. On the alternative approach, assuming that this means a proposed reduction of 25%, Apotex submits that Sanofi should pay 75% of its costs.

Costs of the appeal

14        In addition to the first instance costs, Apotex submits that Sanofi should pay all of the costs of the appeal, again subject to a small percentage deduction for the costs in the appeal of the copyright issue as to implied licence, which occupied, it says, a ‘small proportion’ of the written and oral submissions on appeal, accounting for nor more than 5%.

15        Apotex’s primary submission is that there are no costs implications arising from its lack of success in invalidating the patent, in particular because the argument on methods of treatment was “saved” for the High Court and because the question of construction, on which it was successful, was central to both infringement and validity. Alternatively, Apotex submits that a reduction of 10% of the costs on appeal would reflect the extent of its lack of success on validity.

SANOFI’S SUBMISSIONS

16        Sanofi primarily urges the Court to adopt an issues-based approach to costs.

17        On Sanofi’s submission it would follow that, at first instance and in the Full Court:

    Sanofi should pay Apotex’s costs of the infringement claim, including the costs of argument on construction;

    Apotex should pay Sanofi’s costs of the revocation claim; and

    Apotex should pay Sanofi’s costs of the copyright infringement claim.

18        Sanofi submits that this represents a fair outcome and accords with the reasoning of the Full Court in PAC Mining Pty Ltd v Esco Corporation (No 2) [2009] FCAFC 52 (PAC) at [11], in particular the relevance of Apotex’s lack of success in challenging the validity of the patent which, it says, involved arguments that were independent of those concerning infringement and which affected the time and cost of the hearings.

19        In any event, Sanofi says, it should have the costs of the copyright infringement claim, as the varying ways by which Apotex resisted the claim failed at first instance and, to the extent raised on appeal, failed in the Full Court. Sanofi resists Apotex’s proposal as to a reduction. It submits that the course taken by the primary judge, to reduce Sanofi’s costs for the post-judgment period by 20%, should be applied to any award of costs in its favour.

20        Sanofi maintains its right to a separate order for the costs of the copyright claim but, in the alternative, sets out its basis for apportionment. It submits that any award of costs to Apotex for the appeal should be reduced by around 30%, to reflect the time taken for arguments on which Apotex failed. As to the trial, Sanofi submits that a reduction of the order of 80% would be appropriate, but that this question should be remitted to the primary judge for determination. Sanofi points out that the time spent at trial was not all attributable to the patent case and says that the copyright case, on which it was successful, occupied at least 40% of the hearing time at trial and well in excess of 5% of the appeal.

CONSIDERATION

21        The factors relevant to the broad discretion to award costs under s 43 of the Federal Court of Australia Act 1976 (Cth) in complex patent litigation such as this have been referred to and summarised, for example, in PAC, H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 (Lundbeck) and DSI Australia (Holdings) Pty Ltd v Garford Pty Ltd [2013] FCA 268 (DSI). .

22        Apotex says that the invalidity claim should be treated as a defensive claim against infringement. It is, of course, not uncommon for an allegedly infringing party to cross-claim for revocation. However, as explained in PAC, that may have costs consequences.

23        In PAC, the Full Court discussed the competing factors where a party was successful in defending infringement but unsuccessful in a cross-claim for revocation of the patent. As their Honours said at [11], and is the case here, the respondent to the infringement action (here Apotex), could have successfully defended infringement without putting validity in issue. The claim for revocation was, their Honours observed, more than the presentation of conventional alternative defences to infringement, it was also a challenge to the validity of the patent. An unsuccessful attack entitled the patentee (here Sanofi), to obtain a certificate of validity. Their Honours were of the view that, in awarding costs, once a challenge is made both by way of defence and by way of attack, there is a case that has to be met. The Full Court distinguished between assertions of lack of novelty and obviousness on one hand, which could be considered discrete issues, and lack of fair basis which, may be ‘wrapped up’ in the arguments on construction.

24        In DSI, Yates J took the view that the interplay in that case between claim infringement and claim invalidity by reason of construction was such that it was not possible to apportion costs on the basis of issues. This did not apply to manner of manufacture, sufficiency of description, best method or utility but, his Honour said, those issues occupied ‘minimal time’.

25        These observations are apposite to this case.

Costs of the appeal

26        In our view, it is appropriate to make orders for the costs of the appeal compendiously, that is, of the patent case on infringement, the patent case on validity and the copyright infringement case. The question of construction was necessarily relevant to patent infringement and validity. We take into account that Apotex was ultimately successful in defending patent infringement but that its attack on the patent validity failed; Sanofi was successful in upholding patent validity in the face of the attack pressed in the appeal. Sanofi was successful in the copyright case but that occupied a relatively small part of the appeal.

27        The fair result should take account of Apotex’s success in defending patent infringement. However, there should be recognition of its failure to invalidate the patent claims on the bases argued in the appeal and to avoid copyright infringement.

28        The appropriate order is that Sanofi pay Apotex’s costs of the appeal but that Apotex’s entitlement to costs be reduced by 30%, that is, that Sanofi pay 70% of Apotex’s costs of the appeal.

Costs at first instance

29        Bearing in mind that the copyright case formed a more substantial part of the hearing at first instance, it is appropriate in our view to consider the patent and copyright cases separately, but to consider the patent infringement and validity cases together.

30        It is necessary that the costs order reflects Apotex’s success on infringement, that is, on the case brought by Sanofi. Again, the cross-claim for revocation was a defence to the claim for infringement and also an attack on the validity of the patent. At first instance, Apotex raised grounds of invalidity as to which it was not successful, such as utility, sufficiency and fair basis and these findings were not challenged on appeal. Apotex was unsuccessful in its claim that the patent lacked an inventive step.

31        In our view, the fair result is that Sanofi pay Apotex’s costs of the primary proceedings relating to patent infringement and patent validity but that Apotex’s entitlement to costs be reduced by 40%, such that Sanofi pays 60% of Apotex’s costs of the patent case before the primary judge.

32        As to the copyright case, Apotex should pay Sanofi’s costs of the copyright claim. However, we adopt the same position as the primary judge on an appropriate reduction of that entitlement, such that Sanofi’s entitlement is reduced by 20% for the period after 29 July 2011 and until 18 November 2011.

Associate:

Dated:    26 September 2014