FEDERAL COURT OF AUSTRALIA

Actavis Pty Ltd v Orion Corporation (No 2) [2016] FCAFC 159

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed in part.

2.    The orders made on 16 September 2015 in NSD 2456 of 2013 be varied by:

(a)    deleting the reference to claims 17 and 18 in the declaration made in Order 1, so that it reads:

1.    The Respondents and each of them have threatened to infringe each of claims 19, 20, 21 and 22 (insofar as dependent on claims 19 to 21) of Australian Patent No. 765932 (932 Patent).

(b)    deleting the references to claims 17 and 18 in Order 3, so that it reads:

3.    Subject to Order 4, the Respondents and each of them, whether by themselves, their directors, officers, servants, agents or otherwise, be restrained, during the term of the 932 Patent, from infringing or threatening to infringe claims 19, 20, 21 and 22 (insofar as dependent on claims 19 to 21) of the 932 Patent and, in particular, from engaging in the following acts within Australia without the licence or authority of the Applicants:

(a)    making, selling, supplying or otherwise disposing of any LCE Product (as defined in Attachment A to this order);

(b)    offering to make, sell, supply or otherwise dispose of any LCE Product;

(c)    using or importing any LCE Product;

(d)    keeping any LCE Product for the purpose of doing any of the acts referred to in sub-paragraphs (a) to (c) above;

(e)    authorising, inducing, procuring or joining in a common design with other persons to engage in any of the acts referred to in sub-paragraphs (a) to (d) above, including the use of any LCE Product in a method of treating Parkinson’s disease;

(f)    applying for, or taking any other step to obtain, the listing on the Schedule of Pharmaceutical Benefits of any LCE Product, including the pharmaceutical products registered on the Australian Register of Therapeutic Goods under the proprietary names LECAEN, CARLEVENT and ENTACAPONE COMBI ACTAVIS (formerly LECARENT); and

(g)    making or maintaining any commitment or guarantee to supply in connection with any application to list any LCE Product on the Schedule of Pharmaceutical Benefits

other than as permitted by section 119A or 119C of the Patents Act 1990 (Cth).

(c)    deleting the references to claims 17 and 18 in Attachment A to those orders.

3.    Orders 1, 2 and 3 made on 4 December 2015 in NSD 2456 of 2013 be set aside and in lieu thereof the following orders be made:

1.    It be declared that:

(a)    on and after 7 March 2014 the Second Applicant was a proper party to the proceeding and had title to sue for the relief claimed in the Originating Application;

(b)    on and after 30 May 2014 the Third Applicant was a proper party to the proceeding in its capacity as a respondent to the cross-claim;

(c)    the Third Applicant did not have standing to sue for infringement.

2.    The claim for infringement brought by the Third Applicant be dismissed.

3.    Subject to order 4 below, the Respondents pay 60% of:

(a)    the First and Second Applicants’ costs of the claim and cross-claim; and

(b)    the Third Applicant’s costs of the cross-claim.

4.    The Second and Third Applicants respectively pay the costs of the Respondents thrown away that were incurred in respect of:

(a)    the joinder of the Second and Third Applicants up to 7 March 2014; and

(b)    the participation of the Third Applicant in the proceeding thereafter in the capacity of an applicant (but not, for the avoidance of doubt, any costs associated with the participation of the Third Applicant in the proceeding thereafter as a cross-respondent).

4.    The Appellants pay 80% of the Respondents’ costs of and incidental to the appeal.

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

REASONS FOR JUDGMENT

THE COURT:

1    We have concluded that this appeal succeeds in part. Specifically, we have concluded that the primary judge erred in finding that the Actavis products infringe claims 17 and 18 of the patent and that the primary judge erred in finding that Novartis Australia had standing to sue for infringement: see Actavis Pty Ltd v Orion Corporation [2016] FCAFC 121 (our reasons). We have rejected the other grounds of appeal.

2    The questions presently before us are:

    the appropriate orders to be made to give effect to our reasons; and

    the appropriate order for costs of the appeal and of the proceeding below.

3    We have received written submissions from the parties. The parties disagree on both questions although, on the question of the orders to be made to give effect to our reasons, the disagreement appears to be largely one of form.

Orders to be made

4    We do not propose to address in detail the competing versions of the orders proffered by the parties. It is sufficient for us to record that, in accordance with the appellants’ draft, the orders should reflect the fact that the appeal was successful in part. However, in accordance with the respondents’ draft, we think it preferable that the orders should reflect variations to the orders made below, where it is possible to do so, rather than completely redrafting them. In this connection, we note that the form of the orders made below was not a matter of challenge or debate before us. We recognise that this approach has not been possible for all orders.

5    We deal in more detail with some aspects of the orders to be made when considering the position of costs at first instance at [11]-[22] below.

Costs of the appeal

6    The parties advocate an “issues-based” approach to determining the costs of the appeal. They agree that an order should be made in favour of the respondents, discounted to reflect the parties’ respective successes on the issues raised on appeal. This is where the agreement ends.

7    The appellants submit that they were successful in two out of five principal issues raised in the appeal, namely the issues we have noted at [1] above. On the other hand, the respondents were successful in relation to fair basis, lack of clarity or definition, and the standing of Novartis to sue for infringement as an exclusive licensee. The appellants submit that it is appropriate that the costs of the appeal be apportioned accordingly, so that they should pay 60% of the respondents’ costs of the appeal.

8    The respondents seek 80% of their costs of the appeal. They point to the fact that the appellants failed on the major issue in the appeal, which was the construction of the specification and the consequences of that construction for the issue of fair basis. They also submit that, even though the appellants succeeded on the issue of Novartis Australia’s standing to sue for infringement, that issue was one which they (the respondents) effectively conceded. Further, they submit that the other issue on which the appellants succeeded (whether claims 17 and 18 were infringed) occupied a relatively small part of the appeal. Thus, the respondents submit that no reduction greater than 20% is warranted. They submit that this is particularly so when the end result of the litigation is “factored into the equation” – the patent remains wholly valid and infringed in respect of each of the Actavis products.

9    We accept that the construction of the specification was the major issue in the appeal. It certainly occupied the greater part of the oral argument at the hearing. On the other hand, the time devoted to the question of whether claims 17 and 18 were infringed was relatively modest, as was the extent of the argument in the written submissions (7 pages out of 53). Similarly, the issue of Novartis Australia’s standing to sue occupied a relatively modest amount of time at the hearing, with most of the argument captured in the written submissions (approximately 2.5 pages out of 53). Further, the issue was the subject of the concession referred to at [250]-[251] of our reasons.

10    In all the circumstances, we agree with the respondents’ submission that, given their overall success on the appeal, and given the relatively limited nature of the issues on which the appellants were successful, a reduction greater than 20% is not warranted. In our view, an order that the appellants pay 80% of the respondents’ costs of the appeal reflects a proper weighting and balance between the parties of their respective successes and failures, having regard to the issues involved.

Costs at first instance

11    We deal, firstly, with costs associated with the joinder of Novartis and Novartis Australia as applicants in the infringement proceeding.

12    The primary judge found that Novartis had standing to sue for infringement of the patent by reason of the 2014 licence that was entered into on 7 March 2014, but not by reason of the 2013 licence entered into on 3 December 2013. The primary judge also found that Novartis Australia had standing to sue for infringement of the patent by reason of the 2014 sub-licence that was entered into on 11 March 2014, but not by reason of the 2013 sub-licence entered into on 4 December 2013. The proceeding was commenced on 5 December 2013.

13    In the result, the primary judge ordered that Novartis and Novartis Australia respectively pay the costs of the appellants thrown away that were incurred in respect of the joinder of Novartis up to 7 March 2014 and Novartis Australia up to 11 March 2014. His Honour otherwise made an order for costs against the appellants (as respondents below) in favour of the respondents (as applicants below) on a proportionate basis. His Honour also made declarations as to standing. This relief is reflected in Orders 1, 2 and 3 made by the primary judge on 4 December 2015.

14    In light of our findings that Novartis did have standing to sue for infringement under the 2014 licence, but that Novartis Australia did not have standing to sue for infringement under the 2014 sub-licence, the appellants seek orders that:

    set aside Orders 1, 2 and 3 made by the primary judge on 4 December 2015;

    declare that Novartis had standing to sue for infringement from 7 March 2014 but that Novartis Australia did not have standing to sue for infringement;

    dismiss the amended application insofar as it was brought by Novartis Australia;

    order the appellants to pay a percentage of Orion’s and Novartis’ costs of the claim and cross-claim and Novartis Australia’s costs of the cross-claim;

    order Novartis to pay the appellants’ costs in respect of its joinder up to 7 March 2014; and

    order Novartis Australia to pay the appellants’ costs of the infringement proceeding “insofar as that claim concerned” Novartis Australia.

15    We accept that it is it necessary to set aside Orders 1, 2 and 3 made by the primary judge on 4 December 2015. We also accept that it would be appropriate to dismiss the claim for infringement brought by Novartis Australia. The latter order is not opposed by the respondents.

16    As to the costs of the joinder of Novartis up to 7 March 2014, we can see no reason to interfere with the primary judge’s approach of ordering that the costs awarded to the appellants be only those thrown away by reason of that joinder.

17    The same position should be adopted in respect of the joinder of Novartis Australia up to 11 March 2014, and also thereafter. Such an approach is reflected in the orders sought in the amended notice of appeal. Further, we agree with the primary judge (at [70] of Reasons 3) that justice will be done by an order in that form. Thirdly, we accept the respondents’ submission that, both up to 11 March 2014 and thereafter, any attempt to separate out the costs of Novartis Australia bringing its claim for infringement from the costs of Orion and Novartis bringing their respective claims for infringement, will likely introduce unwarranted complications into any taxation of costs. No matter has been brought to our attention that would lead us to conclude that the costs of conducting the infringement proceeding would have differed depending on whether Novartis Australia was, or was not, a party. However, if Novartis Australia’s participation in the infringement proceeding has resulted in any additional costs that are separate from those that would have been incurred by the appellants in any event, then the “thrown away” formulation should adequately capture those costs.

18    The next issue is what reduction in the costs of the proceeding below, if any, should be made in light of our finding, contrary to the primary judge’s conclusion, that claims 17 and 18 of the patent are not infringed by the Actavis products.

19    By Order 2 made on 4 December 2015, the primary judge ordered that the appellants pay two-thirds of the respondents’ costs of the claim and cross-claim. The appellants’ position is that, in light of the findings on appeal, they should pay 50% of Orion’s and Novartis’ costs. The respondents’ position is that the appellants should pay 60%.

20    In their written submissions, the parties sought to justify their respective positions by reference to the significance, in the context of the proceeding below, of the allegation that claims 17 and 18 were infringed. In light of those submissions, we accept that some reduction in the percentage costs ordered by the primary judge should be made.

21    However, we are not persuaded that a reduction to 50%, as sought by the appellants, is warranted. In our view, a reduction to 60%, as argued by the respondents, more appropriately reflects the appropriate weighting and balance.

22    In this connection, we accept the respondents’ submission that due regard must be had to the fact that costs should reflect the “event” of the litigation, which in this case is that Orion and Novartis were successful in vindicating their rights, as patentee and exclusive licensee respectively, by obtaining relief to restrain the exploitation of the Actavis products on the basis that, in each case, the product infringes one or more of claims 19 to 22 of the patent. The respondents also resisted the appellants’ attacks on the validity of the patent, which had been advanced on numerous grounds. We accept the respondents’ submission that the infringement of claim 17 and dependent claim 18 was just one of numerous issues to be decided in the proceeding below.

Associate:

Dated:    23 November 2016

SCHEDULE OF PARTIES