Sony Communications International AB v SSH Communications Security Corporation
| Jurisdiction | England & Wales |
| Judge | Roger Wyand |
| Judgment Date | 24 November 2016 |
| Neutral Citation | [2016] EWHC 2985 (Pat) |
| Court | Chancery Division (Patents Court) |
| Date | 24 November 2016 |
| Docket Number | Case No: HP-2015-000037 |
[2016] EWHC 2985 (Pat)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENTS COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Mr Roger Wyand QC sitting as a Deputy High Court Judge
Case No: HP-2015-000037
James Abrahams QC (instructed by POWELL GILBERT LLP) for the Claimant and Part 20 Defendants
Ain Purvis QC and Brian Nicholson (instructed by GOWLING WLG (UK) LLP) for the Defendant and Part 20 Claimant
Hearing date: 16 November 2016
Judgment Approved
Roger Wyand QC, Deputy High Court Judge:
This is a judgment on the determination of the order for costs to be made following the trial of an action for the revocation of EP(UK) 2 254 311, the 'Patent', brought by Sony against the patentee SSH and a Part 20 claim for infringement of the Patent brought by SSH against three other Sony companies. In this judgment I shall refer to the Part 20 claim as the counterclaim and I shall not distinguish between the various Sony companies.
Although the counterclaim was endorsed with a value in excess of £10 million, and was therefore outside the automatic cost budgeting requirement of CPR 3.12, SSH applied for an order applying section II of Part 3 CPR and Practice Direction 3E to the case. This was opposed by Sony but was ordered by Arnold J on 13 th November 2015. In rejecting Sony's opposition and granting the order sought Arnold J commented:
"But even on the assumption that Sony is proposing to spend only a proportionate amount on its costs, it seems to me that the cost management discipline has value to the opposing party (SSH) in enabling the party to understand what it being done and what it is going to cost. Furthermore, it seems to me that it is of value to the court when it comes to questions of costs, most particularly, obviously, at the stage of detailed assessment, but it can also be of utility prior to that point."
Cost budgets were accordingly prepared, exchanged, agreed in writing and approved by the Court by a Costs Management Order dated 21 st December 2015.
The counterclaim identified three distinct allegations of infringement, the PlayStation 4, WiFi Calling/VoLTE enabled Xperia devices, and SIP Internet calling enabled Xperia devices. After Product and Process Descriptions (PPDs) had been prepared and served, SSH served a notice of discontinuance in respect of the counterclaim for the PlayStation 4 devices. A dispute arose as to the accuracy/completeness of the PPD in respect of the WiFi Calling/VoLTE functionality and the counterclaim in respect of that was stayed pending judgment in the action and remaining counterclaim. In the light of my judgment finding the Patent invalid disposal of that counterclaim has been agreed between the parties, subject to a successful appeal against my judgment.
Sony originally pleaded six items of prior art against the Patent. Four of these were dropped before the trial came on for hearing. No formal notice of discontinuance was served in respect of the case pleaded on the basis of these items of prior art.
I gave judgment in the action and counterclaim on 10 th October 2016. I held that the Patent was invalid but would have been infringed by the Xperia product range if it had been valid.
The parties have agreed that as the Cost Budgets were drawn up and accepted on the basis that the costs identified therein were reasonable and proportionate, there is no need for a detailed assessment and they have asked me to make a summary assessment on the basis of the relevant Cost Budget.
It is accepted by SSH that Sony is the commercial winner and is entitled to its costs subject to a deduction in respect of the issues on which Sony lost. Rather than seeking to identify the issues on a micro scale, the parties are agreed that a fair result can be achieved by identifying the issues at a high level and accordingly treating Sony as having lost on infringement in general and not trying to identify individual arguments on which they were successful. Equally, there are validity arguments on which Sony failed but the parties do not ask me to identify the costs associated with those issues. I believe that this is a sensible approach. Any more detailed assessment would not be practical as part of a summary assessment.
There is one dispute relating to this approach and that is the costs of the PPD for the discontinued counterclaim in respect of the PlayStation 4 device. I shall deal with this separately below.
The first stage of the assessment is to assess Sony's costs against its cost budget. The budget is divided into the various phases of the action as identified in Precedent H. It is necessary to look at the budget for each phase and to compare that with Sony's actual expenditure for that phase. Sony is entitled to the lower of the two figures.
Whilst this approach is agreed, Sony seeks to be allowed to increase the budget figure for some of the phases in respect of which it has exceeded the budget by a relatively large margin. SSH opposes this.
SSH refers specifically to the following provisions of the CPR:
i) CPR 3.15(3) provides that:
If a costs management order has been made, the court will thereafter control the parties' budgets in respect of recoverable costs
ii) CPR 3PDE 7.6 provides that Sony was under an obligation to keep its budget up to date:
Each party shall revise its budget in respect of future costs upwards or downwards, if significant developments in the litigation warrant such revisions. Such amended budgets shall be submitted to the other parties for agreement. In default of agreement, the amended budgets shall be submitted to the court together with a note of (a) the changes made and the reasons for those changes and (b) the objections of any other party. The court may approve, vary or disapprove the revisions, having regard to any significant developments which have occurred since the date when the previous budget was approved or agreed.
iii) When assessing costs for a cost managed case, CPR 3.18 provides:
In any case where a costs management order has been made, when assessing costs on the standard basis, the court will –
(a) have regard to the receiving party's last approved or agreed budget for each phase of the proceedings; and
(b) not depart from such approved or agreed budget unless satisfied that there is good reason to do so. …
The only case to which I was referred which considered the court's power to depart from the budget is Henry v News Group Newspapers Ltd [2013] EWCA Civ 19 where Moore-Bick LJ said:
24 I would accept that costs estimates fall at one end of a scale that runs through costs budgets to cost caps. Clearly the very fact that the court has responsibility for approving budgets as a means of managing costs is an indication that budgets are intended to provide some constraint. On the other hand, the budget is not intended to act as a cap, since the court may depart from it when there is good reason to do so. The question in the present case is whether there was indeed good reason to depart from the approved budget. In my view it is open to a costs judge when answering that question to take into account all the circumstances of the case. However, it will rarely, if ever, be appropriate to depart from the budget if to do so would undermine the essential object of the scheme. As I have already pointed out, the failure of the appellant's solicitors to comply with paragraph 5.5 of the practice direction or to apply for a costs management conference with a view to obtaining the court's approval of a revised budget did not lead to an inequality of arms. Moreover, it is strongly arguable that it did not result in the appellant's incurring costs that were disproportionate to what was at stake in the proceedings. Accordingly, it was open to the costs judge to find that the essential objects of the scheme had not been frustrated. In those circumstances he was obliged to consider all the circumstances of the case, including the extent to which the parties and the court had exercised their respective responsibilities under the scheme, the way in which the proceedings had developed, the response of the appellant's solicitors to the demands imposed by the way in which the respondent's case developed and the respondent's agreement to pay the appellant's costs as part of the compromise of the claim.
25 In the rather unusual circumstances of this case the preliminary issue should in my view be answered in the affirmative for several inter-related reasons. First, because unless the court departs from the budget the appellant will not be able to recover the costs of the action. That alone would not be enough; if it were the scheme would be otiose, but it is an important factor to the extent that on examination the court is persuaded that the costs actually incurred were reasonable and, most importantly, proportionate to what was at stake in the litigation. Allied to that is the fact that the failure of the appellant's solicitors to observe the requirements of the practice direction did not put the respondent at a significant disadvantage in terms of its ability to defend the claim, nor does it seem likely that it led to the incurring of costs that were unreasonable or disproportionate in amount. In other words, the objects which the practice direction sought to achieve were not undermined. In those circumstances a refusal to depart from the budget simply because the appellant had not complied with the practice direction would achieve...
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