Lump Sum Costs and Experts Who Do Not Testify

Apotex Inc v. Shire LLC 2018 FC 1106 Fothergill J
            2,527,646 / lisdexamfetamine [LDX] / VYVANSE

This costs decision is consequent on 2018 FC 637 (see here), in which Fothergill J held Shire’s 646 patent to be valid and infringed. Fothergill J’s decision is interesting on two points: the award of lump sum costs, and recovery of fees for experts who provide litigation assistance without appearing as a witness.

Costs
Fothergill J awarded lump sum costs in favour of Shire, reinforcing the apparent trend to lump sum costs in complex patent cases.

While Shire requested 50% of actual fees plus all reasonable disbursements, Fothergill J remarked that this request “is a departure from the usual partial indemnity rate of one-third,” citing Philip Morris Products SA v Marlboro Canada Limited, 2015 FCA 9 [6]. This contrasts with the 50% awarded by Phelan J in Hospira v Kennedy Trust 2018 FC 1067 (discussed here). In Philip Morris, the FCA notes as follows (my emphasis):

[6] The appellants also argue that if a departure from Tariff B was appropriate, the lump sum awarded was excessive in view of prior jurisprudence of this Court on lump sum costs in intellectual property disputes. The cited case law does not set boundaries that limit the costs award the judge was entitled to make under the circumstances of this case. In fact, the judge's award is consistent with the percentage of actual costs requested by the appellants when they made representations in respect of the amount of costs that they should be awarded back in 2011. At that time, presumably, the appellants had examined the case law and were satisfied that they could request about one third of their actual cost. The judge was prepared to grant that percentage (paragraph 39 of the 2011 costs decision). The only reason he reduced it slightly was that appellants failed to explain why their legal fees were so much higher than their opponents'. As the saying goes: what is sauce for the goose is sauce for the gander.

I don’t read that as a statement that there is a usual partial indemnity rate of one-third. This decision of FCA was a review of the costs award of the trial judge. A trial judge has broad discretion regarding costs, as Fothergill J noted at [18], and the FCA in Philip Morris noted that “[t]he cited case law does not set boundaries that limit the costs award the judge was entitled to make.” The reference to an award of one-third was not based on the FCA’s own assessment of what the case law said, but only on an inference as to what the appellants might have concluded from the case law; it was really only meant to buttress the conclusion that the award of one-third was within the discretion of the judge.

Of course, that is not to say that Fothergill J was wrong to exercise his discretion to limit the award to one-third (in fact 29%, in the end), or even there isn’t a general practice of awarding a lump sum of one-third of actual costs, but only that Philip Morris itself is not strong authority for the view that one-third of actual costs is the usual rate for a lump sum.

[UPDATE: It is my policy not to substantively revise my posts, but in this case I feel compelled to add that the contrast between Fothergill J's award of 30% in this case, and Phelan J's award of 50% in Hospira v Kennedy Trust is not as sharp as my post above may suggest. One of the factors that may be taken into account in assessing costs is the conduct of the parties, and Phelan J was very critical of the conduct of Hospira / Celltrion [6], [20]-[22], while Fothergill J made no particular criticism of Apotex's conduct. With that said, Phelan J considered the matter holistically, and it is impossible to say what he would have awarded had Hospira acted more reasonably.]

Experts providing litigation assistance
Fothergill J also considered issues related to recovery of expenses for experts. In particular, Apotex relied on the decision of Hughes J in Janssen-Ortho 2006 FC 1333 [25], for the proposition that the expenses of an expert who did not appear as a witness but assisted in other capacities should be borne by the client [19]. Notwithstanding the view of Hughes J, after reviewing other relevant case-law, Fothergill J was generally not persuaded by this point [20]-[25]. Fothergill J noted that “Fees for scientific experts who assist counsel in reviewing and understanding other experts’ reports, preparing for cross-examination of opposing experts and, where applicable, assisting in preparation for discoveries, may be recoverable on an assessment of costs” [22], and his decision suggests that such expenses should normally be recoverable unless “clearly superfluous” [25].