Contributions from Intellectual Property Consultant Anna McKay

Under English law, successful litigants usually recover a sizeable proportion of their costs. Not necessarily so in the case of patent litigation!  This is a matter of particular concern since SkB v Apotex[1]: a generic company must be proactive or it is likely to be injuncted.

In order to maximise profits, generic companies have to be quick onto the market following patent expiry.  A company which is able to sell products before its competitors has a market advantage.

Generic Companies Have To Be Proactive

In the past, generic companies wanting to market a product which was covered by patents they believed to be invalid could sell, informing the patentee of their plans or not, as they wished, and risk injunctive proceedings, which were determined on the basis of convenience (economic) arguments.  Now, a generic company must seek confirmation from the patentee that it does not infringe any valid claims, and if it does not get this, it must consider revoking the blocking patent, or apply for a declaration of non infringement.  It cannot rely on any other company concluding an action which will be to its benefit.  In the interests of saving costs, speed, or certainty, parties may settle with the patentee, take a licence or enter into a supply agreement.

High Costs

Costs are a major factor for generic companies.  Potential gains are far smaller than the potential loss of the originator.  Even relatively simple actions are expensive.  By way of example, in Cipla, & Ors v Glaxo[2], a fairly simple case involving arguments of obviousness relating to Glaxo's Seretide combination product in which there were neither costly experiments nor inspection, the claimants costs ranged from £218,000 to £787,000 and the patentee's costs were £1.7million

English civil courts have discretion as to whether costs are payable by one party to another, and the amount of those costs. The general rule is that the unsuccessful party pays the costs of the successful party, but the court may make a different order.

BMS v Baker Norton[3]

Two cases are particularly interesting.  In BMS v Baker Norton and Napro  BMS' patent was revoked and issues arose as to how costs might be paid to the two defendants. Napro and Baker Norton were potential competitors in the market and had, upto the trial, different arguments on infringement.  Each briefed junior council, and separate firms of solicitors, and jointly briefed Leading Counsel.

At first instance Jacob J. ordered that the defendants were entitled to certain separate costs (preparation of expert evidence, preparation of pleadings), and that otherwise, they should recover only one set of costs between them, "to be taxed as if only one firm of solicitors were acting for both parties, and the parties were represented by one leading and one junior council, and that how that one set of costs is split between the first and second defendants is a matter for them".

In the Court of Appeal, Aldous L.J stated, " a losing claimant should only be required to pay the costs reasonably incurred by the parties that it takes proceedings against.  What costs are reasonably incurred by one or more defendants should be ascertained by the costs judge who carries out the assessment. [For the trial judge] to decide what costs were reasonably incurred by defendants in considering what a losing claimant should pay, amounts to pre-judging the results of a detailed assessment without considering the facts…."

CIPLA v Glaxo

In the case of Cipla and Ors v Glaxo Group Limited several parties took action against Glaxo to revoke a patent on its leading product, Seretide.  Each company wished to launch the product and for the kind of commercial reasons alluded to above each wanted to be involved in the litigation.  There were four actions which were never consolidated, although there were orders and agreements that the actions should be heard together, and that evidence in any one of the actions should stand as evidence in the others.  The claimants were commercial competitors and their solicitors possessed confidential marketing information which they did not want to share.

Glaxo argued that it was unnecessary for there to be four sets of proceedings, that there was unnecessary duplication, that there should be just one set of costs available to the claimants, and that these should be awarded solely to Cipla, or distributed amongst the claimants in the proportion which they the claimants costs bore to each other.

Pumphrey J., giving a judgement on costs, stated that ' the fairest way of approach ..[was to direct] the costs judge that he or she is free to consider the four actions as if they had been consolidated.. to have regard to the reasonableness of the claimant maintaining separate  representation and separate expert witnesses'  He accepted that this would not be easy and said "an order for one set of costs. [is]. too coarse a manner of disposing of the problem".

Separate Representation?

So when will it be reasonable for commercial competitors to have separate representation?

It presents professional difficulties for one firm of solicitors to act for two clients who are commercial competitors with a common purpose.  Each client will have information in relation to its marketing which it will wish its solicitors to keep secret. Under the Guide to Professional Conduct of Solicitors principle 16.01 a firm of solicitors owes a duty of confidentiality to its clients.  Under 16.06 it has a duty of disclosure to pass on all information which is relevant to its retainer to each client regardless of the source of that information.  Accordingly, acting for two clients, there is a conflict between the duty of disclosure to one and the duty of confidentiality owed to another.  The costs judge should take this into account when considering the reasonableness of separate representation. In certain circumstances difficulties might be overcome if there is consent to disclose but there will always be an issue where parties have confidential information which they do not want to disclose.  In patent actions generally, it would be hard for a client to keep information it did not want disclosed away from its solicitors, and in any action involving a potential injunction, surely impossible, since balance of convenience is determined on the basis of economic arguments.  These matters are of enormous importance to generic companies whose strategy on launch can make all the difference to their success in a highly competitive market. 

The decision of the costs judge in Cipla v Glaxo will affect parties' decisions as to whether to attack blocking patents and may lead to some generic companies having to delay their entry to the market.  It makes sense for all parties to litigation to seek to minimise their costs, working together wherever possible and agreeing, by contract, to provisions which reduce the danger of prejudice should one party settle.  And it is interesting to note that in Cipla v Glaxo, Glaxo's costs exceeded those of all the claimants put together.

[1]SmithKline Beecham plc v Apotex Europe Limited [2003] WL 933395 (HC) [2003] WL 1202563 (CA) see also SmithKline Beecham plc v Generics UK Limited [2002] 25(1) I.P.D. 25005 [2001] EWCA Civ 414 (CA)
[2]Cipla Limited ors v Glaxo Group Limited [2004] EWHC 819(Pat)
[3]Bristol-Myers Squibb Co v Baker Norton Pharmaceuticals Inc and Napro Biotherapeutics Inc [1999] RPC 253 (HC)