FEDERAL COURT OF AUSTRALIA

Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7

ORDERS

THE COURT ORDERS THAT:

1.    The appellants pay 90% of the respondents’ costs of and incidental to the appeal including in relation to the notice of contention.

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

REASONS FOR JUDGMENT

THE COURT:

1    On 7 December 2017, we published our reasons for judgment (the appeal reasons). In relation to costs, we ordered that each party file and serve a short submission within 14 days. The parties have now filed written submissions and these reasons deal with costs. These reasons should be read together with (and adopt the abbreviations used in) the appeal reasons (see Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd [2017] FCAFC 196).

2    On the issue of costs, we relevantly stated at [327] of the appeal reasons that:

Idenix’s appeal must be dismissed. Gilead’s grounds of contention are also rejected. Prima facie, Gilead would ordinarily be entitled to costs, but that position may be affected in part by its lack of success on the grounds of contention.

3    The power of the Court in relation to costs is well established. Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a wide discretion in awarding costs. The exercise of the Court's discretion is not without principles or practices; it must be exercised judicially (Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [305] per Bennett, Besanko and Beach JJ). The ordinary rule is that costs follow the event, although a successful party may be awarded less than its costs, or costs may be apportioned, based upon success on the issues (Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; Les Laboratoires Servier at [297] to [298] and [303]).

4    Gilead contends that Idenix should pay its costs of the appeal without reduction. It says that it succeeded, the appeal was dismissed and costs should follow that event.

5    Gilead submits that although the Court can apportion costs, it should not “cast undue analysis upon whether a successful party has been unsuccessful on ‘particular issues’ in the context of its predominant success in the controversy overall” (NV Sumatra Tobacco Trading Company v British American Tobacco Services Ltd [2011] FCA 1295 at [17] per Greenwood J). It says that a party with a single cause of action should generally be entitled to bring forward all alternative arguments which may be successful. If successful, generally speaking, that party should be regarded as having succeeded in the event and should be entitled to costs (GG v Australian Crime Commission (No 2) [2010] FCAFC 63 at [5] per Downes, Jessup and Tracey JJ). It says that justice may not be served if parties are dissuaded from canvassing all issues which might be material by the risk of adverse costs orders (Dodds Family Investment Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271; [1993] FCA 346 per Gummow, French and Hill JJ), and that the public interest in ensuring that invalid patents are removed from the Register reinforces this principle in patent cases.

6    Gilead contends that where a notice of contention occupies only a limited amount of time at the appeal hearing, it may be inferred that it did not occasion significant costs and its rejection need not lead to a varied costs order (Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158 at [12] per Greenwood, Rares and Moshinsky JJ). Noting that it is almost inevitable in complex litigation (including patent cases) that the successful party may not win every argument, Gilead submits that where a litigant has succeeded only upon a portion of its claim, provided that the unsuccessful points were not frivolous and did not unduly waste time and costs, full recovery of costs remains appropriate (Bradken Resources v Lynx Engineering Consultants (No 2) [2012] FCA 1478 at [5] per McKerracher J; Damorgold Pty Ltd v JAI Products Pty Ltd (No 2) [2014] FCA 377 at [32] to [44] per Middleton J). Accordingly, the fact that we rejected Gilead’s notice of contention should not, so Gilead contends, lead to a variation of the usual order.

7    Gilead notes that its contentions occupied two hours of the three-day appeal and submits that we should infer that it did not occasion significant costs, relatively speaking. Further, it says that there was no suggestion that its contentions were raised unreasonably. Lastly, quoting the appeal reasons, Gilead says that Idenix’s approach to the appeal was “simply to ‘put the dice into the box for another throw’” (at [146]) and to challenge factual findings in an “overly elaborate way and with a view … to having [the Full Court] conduct a re-trial of the complex factual questions litigated before [the primary judge]” (at [141]). Consequently, it says that there is no reason to relieve Idenix of the costs burden of the appeal.

8    Contrastingly, Idenix submits that while a successful party is ordinarily generally entitled to an award of costs, this is not an automatic rule; the Court may depart from the general position where circumstances make it reasonable or fair to do so, or where justice requires it (Ruddock v Vardarlis (No 2) (2001) 115 FCR 229 at [11] per Black CJ and French J; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] per Finkelstein and Gordon JJ; Dodds Family Investments Pty Ltd at 271-272). It submits that such departure may be justified where there has been mixed success on the issues; a successful party may then be awarded less than its costs or there may be an order apportioning costs (Les Laboratoires Servier at [297]; H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 at [8] per Bennett and Middleton JJ; Dodds Family Investment Pty Ltd at 271-272). It also refers to Firebird Global Master Fund II Ltd where the High Court observed that if it can be argued that the event of success is contestable, by reference to how separate issues have been determined, circumstances may warrant departure from the general rule and costs may be determined “on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like” (at [6]).

9    Idenix further refers to White J in Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127 at [88], who stated:

... courts are now more ready to apportion the costs awarded to a party who succeeds in only some of the claims he or she brings. This may reflect the increasing factual and legal complexity of modern litigation and the multiplicity of factual and legal issues it entails, and the tendency of applicants to pursue multiple claims involving different factual enquiries in the one proceeding.

10    Idenix says that an adjustment in the costs awarded to the successful party in an appeal may take into account lack of success on some bases including on notices of contention (AstraZeneca AB v Apotex Pty Ltd (2014) 226 FCR 324 at [446] per Besanko, Foster, Nicholas and Yates JJ; Garford Pty Ltd v Dywidag Systems International Pty Ltd (2015) 110 IPR 30; [2015] FCAFC 6 at [144] per Dowsett, McKerracher and Nicholas JJ; Regency Media Pty Ltd v MPEG LA, LLC (2014) 231 FCR 588 at [38] per Bennett and Pagone JJ).

11    Consequently, Idenix contends that while Gilead should be awarded costs, the amount should be reduced in the order of 30% to reflect the time and costs related to the notice of contention. It says that this approach is supported by the following. First, to the extent that the notice of contention alleged that the primary judge should have found that claims 7 to 41 of the Patent:

(a)    did not derive priority from the 949 application (ground 1(b));

(b)    were not fairly based on the matter described in the specification based on the disclosure of the 949 application and its incorporation by reference into the specification of the Patent (grounds 2(b) and (c)); and

(c)    were not fairly based on the matter described in the specification as, contrary to the primary judge’s finding, “the embodiments on p 100 of the Patent did not, when read in the context of the specification as a whole, provide a real and reasonably clear disclosure of the compounds of claim 7 as the invention” (ground 2(a)),

those were discrete matters that were not raised by the notice of appeal and were rejected.

12    Second, Idenix says that Gilead was unsuccessful in its contention that the claims 7 to 41 did not derive priority from the 350 application for reasons additional to those of the primary judge (ground 1(a)). It says that although ground 9 of the notice of appeal challenged the primary judge’s conclusion that claim 7 (and dependent claims) of the Patent was not fairly based on the 350 application, we noted at [240] that this was done to protect its position in the event that Gilead’s contention regarding the findings of fair basis on the 949 application was successful. Had Gilead not sought to overturn the primary judge's finding on fair basis in relation to the 949 application, Idenix submits that no challenge as to fair basis in relation to the 350 application would have been necessary. In any event, says Idenix, to the extent that there is considered to be any overlap between the notice of appeal and the notice of contention in relation to the 350 application, this can be addressed by a reduction in global costs, rather than separate costs orders in respect of each.

13    Third, Idenix submits that in fact significant time and effort was involved in dealing with Gilead’s notice of contention. It says that it was the subject of 25 pages of separate written submissions in chief, in answer and in reply (as opposed to 40.5 pages of submissions in relation to the appeal, being approximately 38%). Further, it says that a substantial 65 paragraphs of the appeal reasons were devoted to addressing the issues raised in the notice of contention (approximately 33% after excluding paragraphs regarding background science, the Patent specification and earlier applications).

14    Idenix submits that the appeal could have been conducted more economically if the grounds in the notice of contention had not been raised. It says that this is very different from Sandvik Intellectual Property AB, where no adjustment was made for costs of a rejected notice of contention when it “occupied only a limited amount of time at the hearing of the appeal, and, it may be inferred, did not occasion significant costs” (at [12]).

15    We are of the view that Gilead should substantially have its costs, but there is some force in Idenix’s submissions that some time was spent dealing with the notice of contention points.

16    In all the circumstances, we consider that there should be a small reduction of 10% in the costs we would otherwise order in Gilead’s favour. We do not consider that a 30% reduction is warranted, notwithstanding Idenix’s arithmetic concerning written submissions. The length and complexity of the appeal was generated principally by Idenix, with the notice of contention in reality reactive thereto. We consider that a 10% reduction more fairly represents the relative significance of the notice of contention points in relation to the hearing time and the like.

Associate:

Dated:    2 February 2018

SCHEDULE OF PARTIES