Fresenius Kabi Deutschland Gmbh and Others v Carefusion 303, Inc.
| Jurisdiction | England & Wales |
| Judge | Lord Justice Lewison |
| Judgment Date | 08 November 2011 |
| Neutral Citation | [2011] EWCA Civ 1288 |
| Date | 08 November 2011 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: 2011/2642, 2011/2654 & 2011/2669 |
[2011] EWCA civ 1288
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE CHANCERY DIVISION
PATENTS COURT
Mr Justice Norris & Mr Justice Arnold
HC11C00026
Royal Courts of Justice
Strand, London, WC2A 2LL
The Master Of The Rolls
Lord Justice Aikens
and
Lord Justice Lewison
Case No: 2011/2642, 2011/2654 & 2011/2669
MR MICHAEL TAPPIN QC & Mr JOE DELANEY (instructed by Powell Gilbert LLP) for the Appellants
MR JOHN BALDWIN QC (instructed by DLA Piper UK LLP) for the Respondent
Hearing date : 1 November 2011
This is the judgment of the court.
If you tell a commercial litigator who is not steeped in the law of patents that a patentee can sue for infringement and then discontinue his claim against the alleged infringer and consent to the revocation of his patent, yet require the alleged infringer to pay a substantial proportion of his costs, his reaction would be one of bafflement. If you went on to explain that this situation came about because the alleged infringer had amended his defence and counterclaim to plead a new piece of prior art he would be none the wiser. This is the practice of the Patents Court in making a See v Scott-Paine order ( See v Scott-Paine (1933) 50 RPC 56) previously more robustly known as an Earth Closet order ( Baird v Moule's Patent Earth Closet Co Ltd 3 February 1876). Such an order enables the patentee to discontinue his claim and consent to the revocation of his patent on terms that he pays the costs of the action up to the date of service of the original defence; but that the alleged infringer pays the costs of the action from that date down to the date of discontinuance.
Why, the commercial litigator would ask, do you assume that but for the amendment the patentee would have won his case; because that is the unspoken assumption on which such an order rests? And why do you assume that it was the fact of the amendment that caused the patentee to abandon his claim? You might then explain that patent litigation is governed by special rules, more particularly those contained in CPR Part 6On looking at that Part the commercial litigator would discover that certain other rules of the CPR had been modified or disapplied. But he would also see that CPR Part 63 does not modify or disapply CPR Part 38.6 which says that unless the court orders otherwise a claimant who discontinues is liable to pay the defendant's costs. So why are patent cases different?
The patentee may refer him to the well-known words of Lord Esher MR in Ungar v Sugg (1892) 9 RPC 113, 117:
"a man had better have his patent infringed, or have anything happen to him in this world, short of losing all his family by influenza, than have a dispute about a patent. His patent is swallowed up, and he is ruined. Whose fault is it? It is really not the fault of the law; it is the fault of the mode of conducting the law in a patent case. That is what causes all this mischief."
But, the commercial litigator would reply, we all know that litigation is expensive. Big commercial cases also cost huge amounts of money to fight; and it is by no means uncommon in contested probate cases for the costs to exceed the value of the estate. Is there a better reason?
The patentee might say (in the words of Slade LJ in Williamson v Moldline Ltd [1986] RPC 556, 564):
"If, at the time when the defendant served his original particulars of objections, I had known that he was going to rely on the new point now sought to be raised, I might well have discontinued my action. If, however, after further investigation of the legal and factual position in the light of this new point, I now find that there is a valid objection to my patent and accordingly I, sensibly, decide to discontinue my action, it is only fair that the defendant should be ordered to pay the unnecessarily wasted costs which I have incurred since service of the original particulars of objection."
The commercial litigator is unlikely to find that a sufficient justification. He might also say that if that is the justification it would be equally applicable to all sorts of litigation in which an amendment to the statements of case casts a new light on the case. It does not amount to a reason special to patent cases. He might also say that to make this order at the time of allowing the amendment to the pleadings assumes in the patentee's favour that it is the amendment that is causative of the discontinuance, whereas in reality the patentee might simply have got cold feet about his original case. He might also point out that to make an Earth Closet order at the point at which an amendment is allowed may operate to deprive the defendant of any protection to which he might be entitled by virtue of having made a Part 36 offer.
In GEC Alsthom Limited's Patent [1996] FSR 451 Laddie J pointed out a number of injustices that could be produced by the making of an Earth Closet order. They included:
i) Such an order was a disincentive to a defendant to plead his best case, particularly since prior art from all over the world may be used to attack the validity of a patent (whereas only art published in the UK could be relied on when the Earth Closet order was invented);
ii) This disincentive might mean that the court was required to pronounce on the validity of a monopoly on the basis of a second best case. Put bluntly this would be against the public interest;
iii) Earth Closet orders are seen as a gift from heaven by patentees with a weak case which enables them to take the benefit of a costs order when the amendment was not really the cause of the discontinuance. In addition they will have had the commercial benefit of reliance on a monopoly which, with hindsight, can be seen to have been invalid;
iv) There is also a danger that the making of such orders will front load the costs onto defendants who will have to undertake exhaustive searches of prior art at a very early stage in the litigation.
All those factors are, in our judgment, cogent reasons why an Earth Closet order should not be made. There is no case decided under the CPR which binds this court to continue the practice of making Earth Closet orders. It is, however, right to say that in CIL International Ltd v Vitrashop Ltd [2002] FSR 67 Pumfrey J, sitting at first instance, held that an Earth Closet order was not incompatible with the CPR. His reason was that such an order was not incompatible with the overriding objective. He said (§ 42):
"That being the existing state of the law prior to the Civil Procedure Rules it may be seen immediately that it is consistent with the overriding objective of the Civil Procedure Rules, particularly since it can be properly viewed as a means of imposing a sanction in relation to waste caused by lack of diligence by the defendant."
However, Pumfrey J did not consider how such an order fitted the philosophy underlying CPR Part 38.6, and whether it was incompatible with that part of the new procedural code.
Except in certain cases (e.g. where the court has granted an interim injunction) a claimant may discontinue his claim at any time: CPR Part 38.1. He does so by filing a notice of discontinuance and serving it on every other party: CPR Part 38.2. Notice is to be given on Form N279. Discontinuance takes effect from the date of service: CPR Part 38.5. Unless the court orders otherwise a claimant is liable for the costs of the defendant against whom he discontinues: CPR Part 38.6. The same procedure applies to a party who discontinues a counterclaim: CPR Part 20.2 (2)(b).
Thus in all forms of litigation if a claimant (or counterclaimant) discontinues he must apply under CPR Part 38.6 if he wishes to avoid the usual costs consequences of discontinuance. The burden will be on him to justify a departure from the default rule. In Brookes v HSBC Bank plc [2011] EWCA Civ 354 HH Judge Waksman QC formulated the following principles which were approved by this court (§ 6):
"(1) when a claimant discontinues the proceedings, there is a presumption by reason of CPR 38.6 that the defendant should recover his costs; the burden is on the claimant to show a good reason for departing from that position;
(2) the fact that the claimant would or might well have succeeded at trial is not itself a sufficient reason for doing so;
(3) however, if it is plain that the claim would have failed, that is an additional factor in favour of applying the presumption;
(4) the mere fact that the claimant's decision to discontinue may have been motivated by practical, pragmatic or financial reasons as opposed to a lack of confidence in the merits of the case will not suffice to displace the presumption;
(5) if the claimant is to succeed in displacing the presumption he will usually need to show a change of circumstances to which he has not himself contributed;
(6) however, no change in circumstances is likely to suffice unless it has been brought about by some form of unreasonable conduct on the part of the defendant which in all the circumstances provides a good reason for departing from the rule."
Moore-B ick LJ added (§ 10):
"It is clear, therefore, from the terms of the rule itself and from the authorities that a claimant who seeks to persuade the court to depart from the normal position must provide cogent reasons for doing so and is unlikely to satisfy that requirement save in unusual...
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