FEDERAL COURT OF AUSTRALIA

Gilead Sciences Pty Ltd v Idenix Pharmaceuticals LLC (No 2) [2016] FCA 406

ORDERS

THE COURT DECLARES THAT:

1.    Claims 7 to 41 (inclusive) of Australian Patent No. 2003247084 (the Patent) are and at all material times have been invalid.

THE COURT ORDERS THAT:

2.    Subject to Order 3 below, claims 7 to 41 (inclusive) of the Patent be revoked.

3.    Upon the undertakings referred to in paragraph 9 below, Order 2 above be stayed:

(a)    initially for a period of 21 days from the date on which these Orders are pronounced; and

(b)    if an appeal is lodged within that period, until the final determination of that appeal or further order.

4.    Paragraphs 1 and 2 of the Amended Notice of Cross-Claim dated 26 June 2013 be dismissed.

5.    Subject to any costs orders previously made by the Court in this proceeding and order 6 and 8 below, the respondents/cross-claimants pay 80% of the applicant’s costs of the Application as agreed or taxed.

6.    The costs of the application referred to in order 5 above shall not include the applicant’s costs in relation to:

(a)    the applicant’s abandoned claims for lack of entitlement set out in particulars b and c to paragraph 1 of the Amended Particulars of Invalidity dated 9 August 2013;

(b)    the affidavit of Janet Lucille Werner affirmed 4 June 2014;

(c)    the affidavit of Shaun Daniel McVicar sworn 4 June 2014; and

(d)    the applicant’s interlocutory application dated 21 July 2014.

7.    Subject to order 8 below, the applicant pay the respondents/cross-claimants’ costs:

(a)    thrown away as a result of the applicant’s abandoned claims for lack of entitlement set out in particulars b and c to paragraph 1 of the Amended Particulars of Invalidity dated 9 August 2013; and

(b)    in relation to the applicant’s interlocutory application dated 21 July 2014.

8.    Upon the undertakings referred to in paragraph 9 below, all costs orders made by the Court in this proceeding (including order 5 and 7 above) be stayed:

(a)    initially for a period of 21 days from the date on which these orders are pronounced; and

(b)    if an appeal is lodged within that period, until the final determination of that appeal or further order.

THE COURT NOTES THAT:

9.    The respondent/cross-claimants undertake to the Court:

(a)    to prosecute any appeal expeditiously; and

(b)    unless an appeal is filed by the respondents/cross-claimants against these orders, forthwith upon the expiry of 21 days after the date of these orders, to serve on the Commissioner of Patents a copy of these orders pursuant to s 140 of the Patents Act 1990 (Cth) with a request that particulars of orders 1 and 2 be registered in accordance with s 187 of that Act;

(c)    during the period of the stay not to threaten any person with proceedings for infringement of claims 7 to 41 of the Patent (for the avoidance of doubt, the respondents/cross-claimants do not undertake not to seek relief in respect of infringements occurring during that period of the stay should these claims ultimately be held to be valid); and

(d)    during the period of the stay not to seek to amend any claims of the Patent otherwise than in the course of or in connection with these proceedings,

however for the avoidance of doubt, these undertakings shall not prevent the respondents/cross-claimants from:

(e)    giving notice of any person of these orders; or

(f)    giving notice to any person of the filing of any appeal against these orders, the time for hearing of that appeal and the outcome on appeal.

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

REASONS FOR JUDGMENT

JAGOT J:

1    The only issue remaining following publication of my principal reasons for judgment in Gilead Sciences Pty Ltd v Idenix Pharmaceuticals LLC [2016] FCA 169 is the orders that should be made as a consequence. The orders are agreed between the parties, other than certain issues in respect of costs.

2    Whether there should be a proportional reduction of the costs to be paid to the successful applicant, in my view, warrants the giving of these reasons explaining why I have reached the view that there should be such a proportional reduction.

3    The first issue concerns the costs of the cross-claim by which Idenix asserted infringement of the patent. The inevitable consequence of my principal reasons, which determined that the patent was invalid, is that Idenix was bound to fail on the claim for infringement. Gilead seeks an order for costs, excluding only the costs of a certain affidavit which it is not necessary to identify.

4    The only reason that Idenix failed in respect of the infringement claim was that I determined that the patent was invalid. From early on in the proceedings, Gilead conceded that if the patent was valid, there would be infringement of claim 8. In these circumstances, as seems to be fairly accepted by Gilead, it is difficult to see not only that there could have been any costs incurred, but, more importantly, why it would be appropriate for an order for costs to be made, given the essential compensatory purpose of a costs order.

5    For these reasons, it is not appropriate to do anything other than dismiss the relevant cross-claim asserting infringement.

6    The next and, in my view, important issue concerns Idenix’s proposal that the costs in Gilead’s favour for the application for revocation of the patent be reduced, so that Idenix is liable to pay only 80 per cent of Gilead’s costs.

7    In the circumstances, I have reached the view that this order is appropriate. I accept of course the observation in Firebird Global Master Fund II v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53, that there are good reasons not to encourage applications regarding costs on an issue by issue basis and the principles described by the Full Court in Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27 at [297] – [305].

8    I have reached the conclusion that Gilead should not be awarded the entirety of its costs despite its overall success.

9    As with all matters of this kind, the grounds of invalidity were discrete. It is not of particular concern to me that Gilead was unsuccessful in relation to the discrete issues of false suggestion and manner of manufacture, and was successful only in one limited respect in its claims about lack of utility. If that were all, I doubt whether it would be appropriate to make any proportional costs order.

10    In the present case, however, Gilead was also unsuccessful in relation to the discrete issues of lack of novelty and lack of internal fair basis. In the principal judgment, I identified concerns about the expert evidence which had been adduced relating to these issues. I made the following observations:

[146] Many of the experts gave extensive evidence in affidavits about their interpretation of the Idenix patent and the 350 application. While parts of that evidence involved opinions not necessarily based on the specialised knowledge and experience of the expert it was not possible to exclude that material as inadmissible lay opinion for three reasons. First, given the complexity of the subject being considered, it was not always possible to identify when expert opinion stopped and lay opinion started. Second, the strands of evidence were intertwined so that excision of inadmissible lay opinion may have undermined the meaning of the remaining evidence. Third, some of the affidavits were very long documents, making it undesirable to use the hearing time available for the purpose of a detailed examination of admissibility of evidence for possibly little meaningful outcome.

…

[303] Insofar as much expert evidence dealt with the issue of what was disclosed in the 350 application, Idenix submitted the evidence was irrelevant.

…

[315] I do accept, however, that the expert evidence is largely immaterial to the issues at hand. In particular, I accept Idenix’s submission that “Professor Meier’s evidence as to how he would have discerned a particular embodiment from the disclosure is not material to disclosure”. For this reason I make little reference to the expert evidence in reaching my conclusions about this issue.

…

[386] I accept that the expert evidence is largely immaterial to this issue. To the extent more needs to be said I make the following observations.

…

[391] Otherwise the question whether claim 7 is fairly based on matter disclosed in the 350 application is not answered by Professor Meier’s evidence of how he would have gone about selecting target compounds by reference to that application. Professor Meier’s mind is not determinative of any issue about the matter disclosed in the 350 application other than to the extent that he could explain terms of art and cast light on what would have been the common general knowledge of the skilled addressee at the relevant time. The same can be said about each of the other experts.

11    What these paragraphs show is that I considered a large volume of expert evidence was irrelevant to the issues which they purported to address. Moreover, the way the evidence had been prepared made it impossible to untangle the admissible from the inadmissible. While it is true that there was evidence of this character on behalf of both parties, it is fair to say that Gilead, the party asserting invalidity on this basis, started the ball rolling with the evidence it adduced in relation to these issues. I consider that it is difficult for a party in the position of Idenix to do other than respond in kind once such evidence has been put into play.

12    Given that the purpose of a costs order is compensatory, I consider it unreasonable for Idenix to have to compensate Gilead for the preparation of evidence in relation to issues on which Gilead failed in circumstances where the issues were both discrete and substantial, and where the evidence was of the dubious character identified.

13    It is also relevant that there were two large issues in this hearing. One was sufficiency, on which Gilead succeeded. The other was lack of novelty, and related to that, lack of internal fair basis, on which Gilead failed. While there was extensive evidence on sufficiency, all of that evidence was relevant and admissible. For the reasons given, the same cannot be said of the evidence that went to the issues of lack of novelty and internal fair basis. As a result, I consider it inappropriate that Gilead be compensated for the preparation of that evidence.

14    I accept that the 80 per cent figure is well within the bounds of what might be reasonable, having regard to the extent of the evidence, and the time which it consumed not only at the hearing but no doubt also in preparation.

15    Another issue is the costs order sought by Idenix which relates to certain aspects of the lack of entitlement claims. It seems to me that these claims are insufficiently related to the actions that Idenix took to rectify the Register, and there is no reason why Gilead should be rewarded with a compensatory costs order having made claims and then abandoned them, even though this occurred early in the proceedings. Equally, there is no reason why Gilead should not pay Idenix’s costs thrown away as a result of the abandoned claims.

16    The final issue relates to the interlocutory application, specifically Idenix’s claim that Gilead should pay its costs of the interlocutory application.

17    Leaving aside the grant of leave to Gilead to file and serve further amended particulars of invalidity, each of the other paragraphs in the interlocutory application was either dismissed or withdrawn. Again, I can see no reason why Idenix should not, in the ordinary course, be compensated for the costs involved in that regard.

18    In addition, I am satisfied that all of the costs orders should be stayed for a period of 21 days, and if an appeal is lodged within that period, until the final determination of that appeal or further order.

Associate:

Dated:    21 April 2016

SCHEDULE OF PARTIES