The U.S. Court of Appeals for the Federal Circuit upheld a district court’s award of costs for translation and interpretation services, but vacated and remanded the district court’s award of joint discovery costs for apportionment. In doing so, the Federal Circuit held that settlement agreements that take costs into consideration are subject to the general rule prohibiting double recovery of costs. Ortho-McNeil v. Mylan Labs. Inc., Case No. 08-1600 (Fed. Cir., June 10, 2009) (Dyk, J.).

The plaintiffs, patent-holder Daiichi and licensee Ortho-McNeil, brought a Hatch-Waxman infringement suit against defendant Mylan (the Mylan action), alleging that Mylan infringed Daiichi’s patent. Daiichi/Ortho-McNeil filed a parallel case against Teva Pharmaceuticals USA in a different district court (the Teva action). For Daiichi’s convenience, Daiichi’s witnesses were deposed jointly by Mylan and Teva. Daiichi and Teva settled the Teva action. In the process, Daiichi agreed not to seek to recover its otherwise taxable costs in that case.

Daiichi prevailed in the Mylan action and moved to recover $2.2 million costs for interpretation services and translation services. Daiichi also moved for discovery costs, but did not apportion costs between the Teva and Mylan actions.

With respect to interpretation and translation services, the district court reduced Daiichi's requested costs but did award Daiichi more than $1 million dollars in translation and interpretation costs, based on several factors:

  • Daiichi was entitled to receive its share of the cost of official trial interpreters.
  • Daiichi was not entitled to receive costs for Daiichi’s check interpreters because it was not a necessary expense.
  • Daiichi was entitled to costs incurred for the translation of all of the documents on its trial exhibit list—even if Daiichi did not introduce an exhibit—because the local rules required litigants “to submit certified translations of any document not in the English language to be used as evidence.”
  • Daiichi was entitled to costs incurred for the translation of documents on its privilege log because Mylan did not assert that the documents were irrelevant to the litigation.

The district court also granted Daiichi’s joint discovery costs without apportioning these costs between Teva and Mylan, reasoning that Mylan had “failed to establish that any of the discovery costs sought … related solely to the Teva litigation and, therefore, were unnecessary to this case.”

Mylan appealed. On appeal, the Federal Circuit affirmed the rulings regarding translation costs but vacated the district court’s ruling regarding joint discovery costs and remanded the case for apportionment of the disputed deposition costs.

Finding no governing Fourth Circuit precedent on whether costs must be apportioned, the Federal Circuit looked to “general principles of law enunciated by our sister circuits” to guide its analysis. First, it found that “[a]s a general rule, it is well established that in multiparty proceedings before a single judge … the district court has discretion to apportion payment of jointly incurred costs among the losing parties or to invoke the default rule that the losing parties are jointly and severally liable for costs.” This general rule, however, “is subject to the usual limitation that the prevailing party may receive only one satisfaction of costs” and “cannot recover more than his total entitlement.” While the Federal Circuit conceded that “[t]he governing rules are less clear … where joint discovery is conducted in multiple cases pending in different districts,” it concluded that the prohibition on double recovery still applied. Finally, the Federal Circuit held that the same rules and limitations apply to settlements. Since the taxable costs in the Teva action had been taken into account in the settlement of the Teva action, “Daiichi cannot now recover more than its total entitlement by obtaining those same costs again from Mylan.”

Practice Note: Although the Federal Circuit was interpreting and applying Fourth Circuit law, its analysis and conclusions were based on general principles articulated by its sister circuits and, therefore, may be more generally applied. When negotiating settlement agreements, parties should be aware that litigation cost provisions in the settlement agreement can limit the recovery of joint costs incurred with another case.