FEDERAL COURT OF AUSTRALIA

Davies v Lazer Safe Pty Ltd (No 2) [2019] FCAFC 118

ORDERS

THE COURT ORDERS THAT:

1.    The appellants pay the costs of the appeal.

2.    The cross-appellant pay the costs of the cross-appeal.

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

REASONS FOR JUDGMENT

THE COURT:

1    On 26 April 2019 the Court delivered judgment in Davies v Lazer Safe Pty Ltd [2019] FCAFC 65, ordering that the appeal and cross-appeal be dismissed. The parties were given the opportunity to provide submissions as to costs, and they have done so. We now address the question of costs in the appeal and the cross-appeal. These reasons assume familiarity with the substantive judgment and adopt the defined terms used therein.

2    By way of summary, the substantive proceedings concerned the construction of certain integers of the Patent, which relates to a safety system for use with machinery. The appellants challenged the primary judge’s construction of integers (1.5) and (1.6) of claim 1 of the Patent on the basis that it was too narrow. They contended that the primary judge erred in finding that the impugned Lazer Safe Systems had not infringed the asserted claims. Lazer Safe filed a cross-appeal on the basis that if the broader construction advanced by the appellants on appeal was accepted, then the breadth of the claims would be such that they were invalid for lack of novelty, lack of inventive step, lack of fair basis and lack of clarity. Although we disagreed with aspects of the primary judge’s findings on the construction issue, we found that there was no error in the ultimate conclusion reached as to the construction of claim 1, and that the breadth of the asserted claims was not such that the Lazer Safe Systems fell within their scope. Accordingly, the non-infringement finding was upheld and the appeal dismissed. Since the cross-appeal was contingent on the primary judge’s decision being overturned, which did not arise, it was also dismissed.

3    The appellants advance three alternative submissions on costs:

(1)    The respondent pay 50% of the appellants’ costs of the appeal and 100% of the costs of the cross-appeal on a party-party basis; or

(2)    The parties each bear their own costs of the appeal and cross-appeal; or

(3)    The appellants pay the respondent’s costs of the appeal and the respondent pay the appellants’ costs of the cross-appeal, both on a party-party basis.

4    The appellants contend that they had some success in the appeal, and that accordingly either of the permutations (1) and (2) are preferable to (3). The respondent submits that the appellants should pay the costs of the appeal and that there should be no order as to costs on the cross-appeal. It submits that the cross-appeal was a defensive measure and that it would not have pursued an invalidity challenge but for the appellant’s infringement claim. The respondent points out that at the hearing of the appeal, it noted the conditional nature of its cross-appeal and accepted that it was relied upon only if the Court rejected the non-infringement finding of the trial judge. The respondent maintains that it adopted this position throughout the hearing.

5    It is well established that the Court has a broad discretion in awarding costs. In Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 (Nicholas, Beach and Burley JJ), the Full Court said:

[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]).

6    Some general principles as to awarding costs, and as to when the Court may award costs on an issues basis, were set out in Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61 (Bennett, Besanko and Beach JJ):

[297]    There are two general approaches to the award of costs that have general application and have been the subject of numerous decisions:

(1)     The successful party is generally entitled to its costs. That is, costs usually follow the event.

(2)     It is also the case that a successful party may be awarded less than its costs, or there may be an order apportioning costs, on the basis of success on the issues.

…

[301]    On the other hand, Courts have been increasingly concerned, generally, to use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. This has led to decisions whereby the successful party does not recover all of its costs where it has been unsuccessful on a discrete issue or in what is decided to be an unmeritorious objection. While it is acknowledged that, ordinarily, costs follow the event, the wide discretion in awarding costs has led to circumstances where a successful party who has failed on certain issues may be ordered to pay the other party’s costs of them (as discussed in Hughes v Western Cricket Association (Inc) [1986] ATPR 40-748 per Toohey J), although warnings have been stated that care should be taken in such a course and consideration be given to whether the issues on which the successful party failed are clearly dominant or separable (Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330 to 331 per Mahoney JA) and to whether the issues involved different factual enquiries in the one proceeding or multiple causes of action, even if based on a common substratum of fact.

7    A claim for patent infringement and a cross-claim for patent invalidity are typically treated as separate events upon which the ordinary rule applies to costs: GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100 at [8] (Middleton, Nicholas and Burley JJ), citing PAC Mining Pty Ltd v Esco Corporation (No 2) [2009] FCAFC 52 (Sundberg, Jessup and Middleton JJ) and Damorgold Pty Ltd v Blindware Pty Ltd (No 2) [2018] FCA 364 (Middleton J).

8    We see no reason to depart from the view expressed in GlaxoSmithKline. In the present case, the outcome of the appeal was unsuccessful for the appellants. They sought to overturn the primary judge’s findings of non-infringement, but failed to do so. The fact that aspects of the reasoning of the learned primary judge were not upheld does not lead to a conclusion that the appellants were ultimately successful or partially successful. Accordingly, the appropriate order is that the appellants pay the respondent’s costs of the appeal.

9    The position of the respondent in relation to the cross-appeal is not substantively different. The respondent elected to file and rely upon a cross-appeal in the event that the Court below, or the Court on appeal, took a different view on the breadth of the claims in suit. The purpose of doing so was to provide a second string to the bow, in the event that the broader construction of the claims for which the appellants contended was found to be correct. The respondent filed written submissions in the cross-appeal, which obliged the appellants as cross-respondents to incur costs in answering them. Ultimately, the protection potentially afforded by the second string was not required. The broader construction of the claims was rejected, and the cross-appeal not only had no work to do, but in the result was also bound to fail.

10    The respondent does not dispute that its cross-appeal could not succeed in the light of the construction adopted by the Court. Rather, it submits that it was the ‘real winner’ in the litigation in the sense that it has not been found to infringe the claims. It contends that consideration should be given to the fact that the cross-claim was advanced before the primary judge as a purely defensive measure, as was the cross-appeal. However, having regard to the fact that we consider that the cross-claim ought to be seen as a separate event to that of the claim, we do not consider the respondent’s approach applies. We accept the respondent’s submission that it was not unreasonable for it to bring a defensive-cross claim. However, the award of costs is not for the purpose of penalising a party, but to ensure that costs are apportioned fairly and reasonably, which may reflect the success of the parties on discrete issues; Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] (Finkelstein and Gordon JJ). We consider that in the present case, the appropriate result is that the cross-appellant pay the costs of the cross-appeal.

11    Accordingly, the orders will be:

(1)    The appellants pay the costs of the appeal;

(2)    The cross-appellant pay the costs of the cross-appeal.

Associate:

Dated:    12 July 2019