FEDERAL COURT OF AUSTRALIA

Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 5) [2012] FCA 112

THE COURT ORDERS THAT:

1.    Subject to order 2 below, the respondent pay the applicants’ costs of the proceedings as agreed or assessed save and except for the period between 29 July 2011 and 18 November 2011 in respect of which the respondent is to pay 80% of the applicants’ costs incurred within that period as agreed or assessed.

2.    The applicants pay the respondent’s costs of the notice of motion dated 6 March 2009 as agreed or assessed.

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

REASONS FOR JUDGMENT

1    The only issue remaining in this matter is costs.

2    The applicants (referred to as Sanofi-Aventis) seek orders that the respondent (referred to as Apotex) pay their costs on a party-party basis up to 25 January 2011 and on an indemnity basis thereafter. Apotex seeks an order that it pay Sanofi-Aventis’s costs on a party-party basis until 29 July 2011 excluding the costs of Sanofi-Aventis’s notice of motion dated 6 March 2009 and orders that Sanofi-Aventis pay Apotex’s costs of that notice of motion and of the proceeding generally on and from 30 July 2011 on a party-party basis.

EARLIER JUDGMENTS

3    There are two sets of reasons for judgment relevant to the resolution of the issue of costs. The first, the principal judgment, is Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 3) (2011) 92 IPR 320; [2011] FCA 846. The second, a consequential judgment, is Sanofi-Aventis Australia Pty Ltd v Apotex Pty Ltd (No 4) [2011] FCA 1307. In the principal judgment Sanofi-Aventis succeeded in its case of threatened patent infringement and Apotex failed in its case of patent invalidity. In the consequential judgment I gave reasons for resolving the terms of the declarations and orders which should be made by reason of the conclusions in the principal judgment. The parties enjoyed mixed success and failure on their competing arguments. As a matter of impression, borne out by the reasons for judgment, the competing arguments involved one matter of real substance (described as the copyright issue) which had to be resolved in order to determine Sanofi-Aventis’s claim for an ongoing injunction in respect of the breaches of copyright which I had found in the principal judgment. Apotex succeeded on this issue.

COMPETING POSITIONS OF THE PARTIES

4    As Sanofi-Aventis succeeded in the principal judgment and obtained declarations and orders in its favour as set out in the consequential judgment it, unsurprisingly, claims that the usual order as to costs should apply to the whole of the matter (namely, that costs follow the event and thus Sanofi-Aventis has a prima facie entitlement to an order for costs in its favour for the whole matter). Sanofi-Aventis then claims that it should be awarded indemnity costs from 25 January 2011 onwards by reason of a Calderbank offer (Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333) to compromise the matter made on 17 January 2011 which Apotex, according to Sanofi-Aventis, unreasonably declined.

5    Apotex claims that it should not be liable to pay Sanofi-Aventis’s costs of the notice of motion dated 6 March 2009 in which Sanofi-Aventis, with Apotex’s consent, sought leave of the court to amend the patent. As Apotex put it, irrespective of its consent, Sanofi-Aventis had to come to the court to obtain leave to amend and, in so doing, had to satisfy the court on evidence that such leave should be granted. Apotex contends it should not be liable for its costs in so doing. To the contrary, according to Apotex, Sanofi-Aventis should pay Apotex’s costs of that motion. Apotex also contends that it succeeded on the bulk of the issues dealt with in the consequential judgment, particularly the copyright issue, and thus should not be liable to pay Sanofi-Aventis’s costs after 30 July 2011 (the principal judgment having been delivered on 29 July 2011). Rather, according to Apotex, Sanofi-Aventis should pay Apotex’s costs on and from that date.

DISCUSSION

6    The principles relevant to the judicial discretion on costs, including indemnity costs by reason of refusal to accept a Calderbank offer, are well-known and were not in dispute.

7    The first question is the notice of motion. It is true that when leave to amend was granted costs were reserved. It is also true that more than two years have passed without Apotex having claimed its costs of the motion. Equally, I have little information about the motion other than that Sanofi-Aventis sought leave by it to amend the patent by reducing the patent claims to a single claim (the basis of the principal judgment) and Apotex consented to the patent being amended. In my view, however, that is sufficient. As Apotex said, Sanofi-Aventis had to approach the court for the order it required and, for that purpose, had to satisfy the court the order was appropriate. The amendment no doubt did save time and cost thereafter. Presumably, that is the reason why Apotex raised no objection to the motion. But the usual principle that costs follow the event has no role to pay on such a motion. It is Sanofi-Aventis’s patent and, when sought to be enforced and challenged, Sanofi-Aventis chose to seek to amend it. Apotex should not have to pay Sanofi-Aventis’s costs on that account. Rather, Sanofi-Aventis should pay Apotex’s costs of the motion.

8    The second question is the costs of the matter after publication of the principal judgment on 29 July 2011. Although there is considerable weight to Sanofi-Aventis’s submission that the events after this date simply involved the working out of the form of the orders that should be made and thus formed part of the event (being Sanofi-Aventis’s overall success in the matter), one factor is a distinguishing feature. Sanofi-Aventis raised the copyright issue which, although relevant to the orders that should be made, raised a discrete and substantive issue of construction. That issue involved the bulk of the hearing time after 29 July 2011; a fact that is reflected in the consequential judgment which is 54 paragraphs, 38 of which deal exclusively with the copyright issue. Although I did not accept all of Apotex’s arguments I accepted Apotex’s overall position and rejected that of Sanofi-Aventis about this issue. I am unable to identify any fair basis on which Sanofi-Aventis should receive its costs of that issue which, as I have said, was discrete and substantive and took up most of the hearing time after 29 July 2011. The compensation to Sanofi-Aventis which costs represent should not extend to this copyright issue. Should Apotex have its costs of this issue? An order to that effect, in my view, is likely to engender further disputes between the parties when costs come to be agreed or assessed. Given that Sanofi-Aventis is entitled to at least an order for costs in its favour on a party-party basis for the bulk of the proceedings, it makes no sense to make a cross-order for costs when those costs will not readily be able to be isolated (in contrast to the notice of motion where a separate costs order is appropriate). Rather, the appropriate order would be to reduce Sanofi-Aventis’s overall costs entitlement in a manner that fairly takes into account the course of the proceedings after 29 July 2011.

9    The third question is indemnity costs. I am not persuaded that an order for indemnity costs in Sanofi-Aventis’s favour is justified. Sanofi-Aventis did make an offer to settle and Apotex did decline to accept that offer. However, it is impossible to say that the result of the proceedings was more favourable to Sanofi-Aventis than acceptance of the offer would have been. Indeed, the offer and the outcome of the proceedings cannot meaningfully be compared. The offer was for Sanofi-Aventis to grant to Apotex a licence to sell its product for all indications after 1 December 2012 in exchange for royalty payments of 10% for the term of the patent. Royalties were payable under the offer on all sales. By reason of the proceedings Apotex cannot sell its product for the indication of psoriatic arthritis (PSA) but can do so for rheumatoid arthritis (RA). On the evidence RA is far more common than PSA and thus, presumably, would represent most of the sales in Australia. Apotex has also already launched its product, before the 1 December 2012 date in the offer. I am not satisfied that Sanofi-Aventis achieved a better result than the offer. I am also not satisfied that Apotex’s refusal of the offer was unreasonable for the same reasons. It is true that the reasonableness of the offer and unreasonableness of any refusal to accept it is to be assessed in the circumstances prevailing at the time the offer is made. It is also true that the letter in response to the offer makes no reference to the royalties as a specific reason making the offer commercially untenable (which was Apotex’s position). Nevertheless, the response refers to the whole of the offer including the royalty regime and the timing issue (that is, the licence commencing only on 1 December 2012). More importantly, the response states that Roger Millichamp, Apotex’s Managing Director, would contact Jean Monin, Sanofi-Aventis’s Managing Director, to explore a “commercial resolution to this matter”, noting that this would be best done in direct discussions between the two Managing Directors. Evidence indicates that Mr Millichamp thereafter made a series of attempts to contact Mr Monin to which he received no response. Given the commercial nature of the offer, and Apotex’s apparent willingness to explore a commercial resolution, it cannot be concluded that Apotex unreasonably refused the offer. Accordingly, no order for indemnity costs should be made in Sanofi-Aventis’s favour.

10    The remaining question is the consequence of my conclusion about the copyright issue. Although that issue involved the bulk of the hearing time after 29 July 2011 it was not the only issue that had to be resolved. The parties had to articulate their competing positions and be heard on the appropriate declarations and orders irrespective of the copyright issue. Other than the copyright issue, as Sanofi-Aventis said, all of those disputes were merely part and parcel of working out the consequences of its success overall. None of those issues should be the subject of separate consideration (they were not discrete substantive issues) and none should diminish Sanofi-Aventis’s compensation by way of a costs order irrespective of the outcome on any particular issue. Viewed in this context, it is apparent that any deduction from Sanofi-Aventis’s overall entitlement to costs to account for Apotex’s success on this issue must be limited to the period after 29 July 2011 and until 18 November 2011 (the date on which the consequential judgment was published) and must be of a relatively small order for that period despite the hearing time the copyright issue involved. I consider that there should be a reduction of costs of 20% for that period to reflect the fact that Apotex succeeded on the copyright issue, and make orders accordingly.

Associate:

Dated:    24 February 2012