This appeal is a dismissal of one of the largest costs awards in patent cases. The decision illustrates that patent infringement litigation is becoming more complex and far costlier.

In this Federal Court of Appeal (“FCA”) decision, the FCA dismissed Nova Chemicals Corporation’s (“Nova”) appeal of the Federal Court’s (“FC”) judgment, which awarded The Dow Chemical Company, Dow Global Technologies Inc. and Dow Chemical Canada ULC (collectively, “Dow”) $6.5 million for costs in their successful action for patent infringement. [1]

Background: Inadequacy of Tariff B Costs

At the FC, the trial was characterized as “an extremely complex patent case” involving a great deal of expert testimony, 22 allegations of invalidity, 33 days of discovery, 32 days of trial and written submissions exceeding 700 pages. [3] Dow requested $2.9 million in legal fees and $3.6 million in disbursements, lump sum costs above the amount provided by Tariff B of the Federal Court Rules. [2] Conversely, Dow asked for a lump sum between $4.7 million and $6.5 million, with the lower end including the amount for disbursements, but the amount for legal fees based on Column V of Tariff B. [2]

The FC found that the legal fees allowable under Column V of Tariff B to be “totally inadequate” as they would only cover about 11% of Dow’s legal costs. [3] These considerations led the FC to conclude that an increased award of costs was justified. [4] Dow insisted that the costs should be fixed as a lump sum, while Nova argued that they ought to be assessed by an assessment officer. The FC held that an assessment would “serve no purpose,” considering the extent of submissions made by both parties, plus the added time and cost of an assessment. [4] The FC concluded that an amount that was 30% of Dow’s actual legal costs and approximately three times what would be obtainable under the Tariff was reasonable. [4]

Nova had submitted that Dow’s disbursements were not “proven” as required by subsection 1(4) of Tariff B, in particular because of a lack of a supporting affidavit. [5] The FC dismissed this, noting that “the solicitor could have stablished the amount of disbursements” without an affidavit. [5] Satisfied with Dow’s Bill of Costs and holding that they had provided “sufficient detail,” the FC awarded Dow the full $3.6 million in disbursements on the basis that they were reasonable. [5]

Issues Under Appeal

Nova asserted two errors said to warrant the FCA’s intervention. [6] Firstly, Nova submitted that costs awards should follow the guidelines established in Tariff B and that departures from the guidelines should only be in exceptional cases. It asserted that the FC did not analyze whether the amount billed by Dow’s lawyers was reasonable or warranted. [7] Secondly, Nova took issue with the sufficiency of evidence before the FC with respect to both fees and disbursements claimed. In particular, Nova argued that the FC should not have found Dow’s legal costs reasonable simply because Nova did not submit its own costs information. [8] Nova further argued that the FC did not have sufficient evidence to conduct a critical examination of the record and that the FC erred by not referring the matter to an assessment. [8]

Appeal Dismissed

The FCA was not persuaded that the FC erred in awarding costs in a lump sum, or in fixing them as a percentage of Dow’s actual expenses. Nor was the FCA persuaded that the FC erred in allowing the disbursement for testing without a supporting affidavit. [9] Following a brief first principles analysis of lump sum awards generally, [10-13] evidentiary considerations [14-20] and application to the current case, [21-26] the appeal was dismissed with costs. [27]

Commentary

This costs award appears to be the largest reported that the FC has ever granted in an action for patent infringement. With a recent rise in pricey cases like Merck & Co, Inc v Apotex Inc, 2013 FC 75, where Merck & Co. was awarded more than $180 million in damages and prejudgment interest for infringement of its Lovastatin patent, it is expected that costs awards will also experience a significant increase. Another commonality between these two cases is that both were categorized by the FC as being incredibly complex and with complex litigation histories. Undoubtedly, this may be the direction patent infringement cases are headed in, with very complex proceedings and much higher damages and costs awards.