DSM IP Assets B.v v. Algal Omega 3 Ltd

Hearing date: 11 th June 2025

APPROVED JUDGMENT

This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be released for publication on the National Archives and other websites. The date and time for hand-down is deemed to be Monday 18 June 2025 at 4pm.

THE HON Mr Justice Mellor

This is my Judgment from the Form of Order hearing which took a full day of argument on 11 June 2025. I decided to reserve my judgment because the arguments on costs extended beyond those discussed in the skeleton arguments, I wanted to review certain of the materials to which reference had been made and because the costs involved are substantial.

The backdrop is my judgment from the trial on liability in this action on 20 March 2025: [2025] EWHC 675 Pat (my ‘Main Judgment’). DSM sued for infringement of 3 patents and Mara counterclaimed alleging invalidity. I summarised the overall outcome at [892] namely:

i) EP155 was valid and infringed, albeit it expired in May 2023.

ii) EP740 was invalid on several bases: (1) the proposed amendments were not permissible as not being clear and concise and because they would have added matter; (2) even if the proposed amendments had been allowed, claim 1B would have been invalid for obviousness over Fabritius; and (3) whether amended or not, EP740 was plainly invalid for breadth of claim insufficiency.

iii) EP801 was invalid for obviousness over Kobzeff.

Shortly before this hearing, the First Defendant (‘AO3’) was placed into administration on 27 May 2025. Its current status appeared to be common ground: AO3 is a Northern Irish company, so its administration is governed by the Insolvency (Northern Ireland) Order 1989. By para 44 of Schedule B1 of the Order, there is an automatic moratorium on proceedings against AO3. The administrators have not consented to DSM continuing these proceedings against AO3. DSM say they are considering making an application to the High Court of Justice in Northern Ireland for permission, but in the meantime, both sides accepted I am only able to make orders as between DSM and the second defendant, MRC. However, on liability, it is unnecessary to distinguish between the two companies because joint liability was admitted. Subject to all of that, it is convenient to refer generally to the defendants as Mara.

At this hearing the following issues arose for decision:

i) The costs of the liability trial, and interim payment.

ii) The scope of Island Records Disclosure

iii) Permission to Appeal: Mara seeks PTA on EP155. DSM seeks to appeal on EP801.

iv) DSM also sought permission to apply for a dissemination Order, if it proves necessary to do so.

v) The costs incurred since the end of the liability trial.

COSTS

The dispute in outline.

DSM's total estimated costs were £4.386m. Mara's total estimated costs were £3.135m.

So, DSM's costs were 40% higher than Mara's. Both sides produced a schedule yielding their respective totals which indicate some reasons for the disparity:

i) First, the hourly rates charged to DSM were consistently higher – at partner level by as much as 30%, and at other grades by 15% (senior associate), 18% (associate) and 10% (trainee/paralegal). Mr Whitfield sought to justify the rates by reference to hourly rates indicated in recent costs schedules from other firms engaged in substantial patent litigation, but this rather misses the point. The fact that certain firms charge high rates and certain clients are prepared to pay them does not mean that the entirety of the resulting costs are recoverable.

ii) Second, the chargeable hours spent in the litigation. The schedules analysed costs in terms of hours spent on communications (e.g. with the court, the opposing party, with clients, experts, internally) and then a category identified as ‘Plan, Prepare, Draft, Review’ i.e. all the work done on documents. DSM's solicitors spent more hours on that category (4653) than the total hours spent by Mara's solicitors in the entire case (4142). DSM's solicitors spent a total of 7932 hours in the entire case.

DSM already have costs orders in their favour relating to (a) the Licence Defence; (b) Dennis 1 and (c) CL020, said to total £228k. As I understand the position, DSM included these costs in their analysis, but Mara excluded them because they are not costs I have to determine.

DSM contended they were the overall winners. Based on that foundation, DSM contended that Mara should pay 65% of DSM's costs, amounting to £2.876m (a sum which included £228k from the costs orders in DSM's favour), with a 65% interim payment of £1.853m. Before descending into the detail of DSM's arguments, this is a surprising outcome when DSM lost on 2 of the 3 patents in issue, and the issues on those 2 patents were more involved than the patent on which they won.

Mara contended they were the overall winners, but accepted they should pay the costs of EP155 and another substantial deduction in respect of the EP801 infringement costs. Their suggested overall result was that they should recover 25.4% of their costs, amounting to some £800k, with a 65% interim payment at £520k.

Applicable principles

The applicable principles were not in dispute, although DSM sought to deploy a sub-paragraph from Pigot in an unusual way.

Mara's starting point was CPR44.2(1) (the Court's discretion), 44.2(2) (the general rule) and the supplements to the general rule in 44.2(4) & (5), and they relied on this summary from Terrell on Patents (20 ^th Edition) at [23–233]:

‘The Court has a discretion as to whether costs are payable by one party to another, the amount of those costs, and when they are paid but the general presumption is that the loser pays the winner's costs to an extent which reflects the extent to which the winner has been successful.’

Mara also relied on the following pertinent passages from the authorities.

First, the following statement of Arnold LJ in Conversant v Huawei [2019] EWHC 3130 (Pat) at [14]:

As has often been pointed out, the whole point of the new costs regime under the Civil Procedure Rules is to get away from the winner-takes-all approach under the RSC, and instead to adopt an approach where the incidence of costs reflects the degree of success of the parties on the issues that were raised. That was established as long ago as the decision of the Court of Appeal in Phonographic Performance Ltd v AEI Rediffusion Music Ltd [1999] 1 WLR 1507. Nothing has happened since then to change that basic approach.

Second, the formulation of the familiar three questions set out by Arnold J. (as he then was) in Hospira v Novartis [2013] EWHC 886 (Pat) at [2], line breaks added):

‘first, who has won;

secondly, has the winning party lost on an issue which is suitably circumscribed so as to deprive that party of the costs of that issue; and

thirdly, are the circumstances (as it is sometimes put) suitably exceptional to justify the making of a costs order on that issue against the party that has won overall.’

As to the second question and what is meant by “an issue” in this context, in Unwired Planet v Huawei [2016] EWHC 410 (Pat) at [5] Birss J. (as he then was) made some comments in the context of patent liability trials but which nonetheless illustrated that an “issue” may be considered at any suitable level of generality / granularity:

‘One issue is: what is a suitably circumscribed issue? Or in other words, at what level of generality or granularity is that matter to be decided? Plainly it will vary from case to case. Often in patent cases one kind of suitably circumscribed issue and appropriate level of granularity is taking things at the level of individual cited items of prior art, but that is not a hard and fast rule. It is possible for a suitably circumscribed issue to arise within a broader category. An example of this was the Court of Appeal in ConvaTec Technologies Inc v Smith & Nephew plc [2015] EWCA 803 (Civ). Here, instead of dealing with the costs at the level of the issue of infringement as a whole, the court made a special order relating to experiments which formed part of the infringement case.’

In relation to the third question, there is no specific requirement of exceptionality. The question is whether it is appropriate in all the circumstances of the individual case not merely to deprive the winning party of its costs on an issue in relation to which it has lost, but also to require it to pay the other side's costs (see Arnold J. in Hospira v Novartis at [4]). In Unwired Planet Birss J. explained:

The second issue is the role of reasonableness and culpability. Clearly if the winning party has behaved unreasonably or is culpable in relation to an issue on which it lost, then that is a factor which can be relevant to the question of whether to deprive the winner of its costs or award those costs to their opponent. But the law is clear that even if the overall winner was reasonable to pursue an issue on which it lost, it does not follow that one should not deprive the winner of those costs nor does it follow that one should not award those costs to the opponent, merely because the overall winner behaved reasonably in relation to that issue.

After referring inter alia to Arnold J. in Novartis...