Date:
20090731
Docket: T-89-05
Citation: 2009 FC 797
BETWEEN:
ELI
LILLY AND COMPANY
Applicant
and
NOVOPHARM LIMITED and
REGISTRAR OF
TRADE-MARKS
Respondents
ASSESSMENT OF
COSTS – REASONS
Charles
E. Stinson
Assessment Officer
[1]
On
June 30, 2006, the Court dismissed (the Decision) this appeal of the decision
of the Registrar of Trade-Marks regarding the Statement of Opposition by the
Respondent, Novopharm Limited (Novopharm), to the registration by the Applicant
of a trade-mark for a pharmaceutical (20 mg capsule dosage of Prozac) used
for the treatment of depression and invited written submissions if the parties
could not agree on costs.
[2]
The
Court’s Endorsement and Order dated April 23, 2007 (the Costs Decision), read:
…. [4] The parties’ positions can be
briefly stated. The Applicant proposes that costs for the Respondent should be
assessed in the usual way in accordance with Tariff B, with no costs awarded
with respect to the supplemental evidence submitted by the Respondent relating
to the issue of the date of distinctiveness, since the Court accepted the
Registrar’s determination on that point. Alternatively, the Applicant submits
that costs should be assessed in favour of the Respondent in a lump sum in the
amount of $14,400.00.
[5] For its part, the Respondent
is seeking increased costs. It seeks directions that it be awarded costs
for second counsel, that costs be assessed at the maximum units of Column 5 of
the Tariff for items relating to the oral hearing, that the remaining
items not subject to Column 5 be assessed at the maximum units of Column 4 and
that costs be assessed with respect to the four expert affidavits filed by the
Respondent, under the heading of Item 27 of the Tariff. The Respondent
resists the Applicant’s arguments that costs should be assessed on a lump sum
basis.
[6] Both parties acknowledge that
the award of costs is in the complete discretion of the Court, pursuant to Rule
400 of the Federal Courts Rules, SOR/98-106 (the “Rules”). Rule 400(1)
sets forth the general principle concerning the award of costs, as follows:
|
400.(1)
The Court shall have full discretionary
power over the amount and allocation of costs and the determination of by
whom they are to be paid.
|
400.(1)
La Cour a le pouvoir discrétionnaire de déterminer le montant des dépens, de
les répartir et de désigner les personnes qui doivent les payer.
|
[7] Rule
400(3) sets out various factors which can be considered in determining an award
of costs. This list is not exhaustive. In this case, I refer to Rule 400(3)(i)
and (o) as follows:
|
400.(3)
In exercising its discretion
under subsection (1), the Court may consider
…
(i) any
conduct of a party that tended to shorten or unnecessarily lengthen the
duration of the proceeding;
(o) any other
matter that it considers relevant.
|
400.(3)
Dans l’exercice de son pouvoir discrétionnaire en application du paragraphe
(1), la Cour peut tenir compte de l’un ou l’autre des facteurs
suivants :
…
i)
la conduite d’une partie qui a eu pour effet d’abréger ou de prolonger
inutilement la durée de l’instance;
(o)
toute autre question qu’elle juge pertinente.
|
[8] The
main reason upon which the Respondent bases its request and submissions in
support of an award of increased costs is the fact that the Applicant introduced
new arguments at the hearing that were not raised in its Notice of Application
or Memorandum of Argument. These submissions related to the admissibility of
the Affidavit of Dr. Pye, the significance of the U.S. registration of the trade mark and the application of
section 14 of the Trade Marks Act, R.S.C. 1985, c. T-13 and an alleged
error by the Registrar in excluding the evidence of certain patients.
[9] The
Respondent argues that it was required to respond to all these new issues
in the course of the oral hearing and that its response required work and
participation by second counsel, including research and preparation on the
night of the first day of the hearing. The Respondent also notes that
these new issues that were introduced by the Applicant were rejected by the
Court in its disposition of the appeal.
[10] I
agree with the Respondent that the conduct of the Applicant, in introducing new
issues and new arguments without notice to the Respondent and at a late stage,
is a matter to be taken into account in assessing the award of costs. I agree
with the Respondent that this is a case that merits an award of costs for
second counsel, having regard to the nature of the arguments raised by the
Applicant and the work that was required in order to respond to them. I further
agree with the Respondent that this is not a case where a lump sum order of
costs is appropriate.
[11] In
my opinion, costs should be assessed on a higher basis than Column 3. That
means the costs in this matter should be assessed by reference to Columns 4 and
5 of the Tariff. However, I decline to direct the assessment officer to
rely only on Column 5 for certain matters, as urged by the Respondent. I
leave it wholly in the discretion of the assessment officer as to how costs are
assessed by reference to Columns 4 and 5 of the Tariff.
[12] The
Applicant urges that no costs should be awarded with respect to the
preparation of the expert affidavits filed by the Respondent since these
affidavits were not specifically relied upon by the Court in disposing of the
appeal.
[13] I
note that an appeal pursuant to the Trade Marks Act can proceed as
a trial de novo. In that case, each party can submit new evidence. It is
then up to the Court to assess the value of that evidence. In the circumstances
of this case, I decline to give directions to the assessment officer with
respect to the costs claimed by the Respondent relative to the preparation of
the expert affidavit. That is a matter that can be addressed by the parties
before the assessment officer.
[14] Accordingly,
the costs in this matter will be assessed by the assessment officer on a basis
higher than Column 3, the costs will be awarded with respect to second counsel
and all other matters will be determined by the assessment officer having
regard to Columns 4 and 5 of the Tariff.
ORDER
THIS COURT ORDERS that the costs of the Respondent shall be
assessed by reference to Columns 4 and 5 of the Tariff and costs shall be
awarded for second counsel. Otherwise, costs shall be assessed in the
discretion of the assessment officer.
[3]
Consistent
with my approach outlined in paragraph 2 of Halford v. Seed Hawk Inc.,
[2006] F.C.J. No. 629 (A.O.) [Halford], my account in these reasons of
the respective positions of the parties is at times somewhat summary in nature.
It is detailed enough for an understanding of the notion of issues between the
parties, but should be read keeping in mind that there are nuances and details
of the issues in the record, all of which I have read and considered. My
findings in Halford above, Biovail Corp. v. Canada (Minister of
National Health and Welfare) (2007), 61 C.P.R. (4th) 33,
[2007] F.C.J. No. 1018 (A.O.), aff’d [2008] F.C.J. No. 342 (F.C.) [Biovail]
and Abbott Laboratories v. Canada (Minister of Health) (2008), 66 C.P.R. (4th)
301, [2008] F.C.J. No. 870 (A.O.) [Abbott] (under appeal) set out my
views on threshold of proof for categories of costs and approach to their
assessment. Paragraphs 68 to 72 inclusive of Abbott above summarize the
subjective elements and the notion of rough justice in assessments of costs. In
paragraphs 38 – 40 of Aventis Pharma Inc. v. Apotex Inc., [2009]
F.C.J. No. 56 (A.O.), I reinforced my view that an assessment of costs should
reflect the reality of the demands of litigation.
[4]
Novopharm’s
bill of costs set out parallel counsel fee claims for maximum values under
Columns IV and V respectively. Before me, the parties agreed that the fee item
2 (preparation of Respondent’s record) claimed for each of first and second
counsel for the Notice of Appearance would be collapsed into a single fee item
27 (such other services as the Assessment Officer may allow) to be allowed at 1
unit ($120 per unit). They agreed that the remaining nine fee item 2 claims
(preparation of the record, book of authorities and several additional
affidavits) would be collapsed into a single fee item 2 claim leaving as issues
what Column (IV or V / available ranges 5 – 9 units and 7 – 13 units
respectively) and how much to allow, and whether a second counsel claim would
be allowed. They agreed that those outstanding issues applied as well to fee
items 13(a) (preparation for first day of hearing), 13(b) (preparation for
second day of hearing) and 15 (written submissions on res judicata
permitted by the Decision) with the additional issue of whether second counsel
was assessable. The Applicant conceded second counsel for fee item 14
(appearance at hearing) leaving as issues what Column (IV or V) and amount to
be allowed. The parties agreed on the claimed disbursement amounts of $362.25
(two expert affidavits of Cathy Conroy), $2,341.14 (travel costs for first and
second counsel to attend the hearing) and $656.61 (long distance, computer
research, facsimiles, postage and couriers), and on GST on any allowed in-house
photocopies and facsimiles, leaving as issues the amounts for in-house
photocopies and outside colour photocopies claimed at $11,736.50 and $2,108.57
respectively.
I. Novopharm’s Position
[5]
Novopharm
noted that the record before the lower tribunal consisted of 9 volumes and
14 affidavits for the Applicant and 13 volumes and 6 affidavits for
Novopharm. The Decision indicated that this matter could be addressed on a de
novo basis meaning that all of the numerous and diverse issues considered
below could have and were generally considered by the Court. This meant in
turn considerable work and time for Novopharm to prepare for a possible de
novo hearing here. Novopharm also had to address the Applicant’s argument
for a de novo hearing further to alleged errors of law below. Novopharm
advanced fresh evidence to support its request, refused by the Court, for a de
novo hearing further to certain concerns raised below about lack of
evidence of intention to begin sale of the generic pharmaceutical on September
24, 1996, and about the appropriate date for assessing distinctness.
[6]
Novopharm
noted paragraph 10 of the Costs Decision which indicated that the Applicant’s
conduct should be a factor in this assessment of costs. As well, it is relevant
that Novopharm was entirely successful on the main issues, i.e. whether there
would be a de novo hearing, the test for distinctiveness and whether the
Applicant’s mark was distinctive. The importance and complexity of this
litigation is demonstrated by the length (four days) of the hearing below,
which the Court and the tribunal both characterized as unusual, the length (40
pages) of the decision below, the need for a two-day hearing here and the
length (36 pages) of the Decision despite little new evidence and no new
cross-examinations.
[7]
The
hearing here addressed a wide range of legal issues. The Court in Novopharm
Ltd. v. Bayer Inc. (1999), 3 C.P.R. (4th) 305 (F.C.T.D.) at
pages 331 – 333, aff’d (2000) 9 C.P.R. (4th) 304 (F.C.A.) held that
pharmaceutical issues in intellectual property are of importance for public
health matters in Canada. The Applicant’s drug
Prozac was well known in the market and its success in this matter would have
had serious consequences for the generic industry.
[8]
Novopharm
argued that Starlight v. Canada, [2001] F.C.J. No. 1376 (A.O.) [Starlight]
and Nature’s Path Foods Inc. v. Country Fresh Enterprises Inc.,
[2007] F.C.J. No. 151 (A.O.) [Nature’s Path Foods] are not relevant
because of the absence of directions permitting a higher Column and
consideration of improper conduct relative to costs. The Costs Decision permitted
maximum costs under Columns IV or V for all fee items and not just those
associated with the hearing itself. Although it permits the assessment officer
to, for example, allow second counsel throughout or fee item 24 (travel time of
counsel), it does not permit the assessment officer to exercise the discretion
reserved to the Court in Rule 420 to deny Novopharm’s access to its doubling
provision for costs further to an offer to settle. The Applicant did not ask
for instructions on double costs prior to the Costs Decision and therefore
cannot now object to my discretion to permit them.
[9]
The
offer to settle dated May 13, 2005 comprised two parts. The first part expired
on May 25, 2005 (the deadline for the Applicant’s Record). It called for
discontinuance by the Applicant and for Novopharm to not seek costs. The second
part ran from May 26, 2005 to expire upon judgment. It called for
discontinuance by the Applicant and for Novopharm to secure its costs further
to Rule 402 excluding fee item 14 (attendance at hearing) costs. Novopharm
argued that this offer to settle contained the requisite element of compromise
because the approximate Column III costs associated with the second part would
have been about $2,280 plus disbursements and taxes in contrast to Column
IV or V costs of about $87,000 to $111,000 (the latter including fee item 14
costs of $12,600. As well, the Applicant’s own costs would have been much less
because it would have avoided preparation of its Record, the two-day hearing
and this assessment of costs. The Applicants might have saved $200,000 or
more. The capitulation issue in Biovail is not a factor here.
[10]
Novopharm
asserted that it reasonably expected this offer to resolve this litigation as
it had been able to settle its appeal (Federal Court file T-91-05) of the
decision of the Registrar of Trade-Marks rejecting its opposition to the
trade-mark application for Prozac (10 mg dosage capsule). The Applicant’s
probability for success here was low given little chance of a de novo
review as it did not lead new evidence. Other than the colour of the generic
pill, the Applicant had little to gain as there had already been generic
products in the market for several years and the patent had expired.
[11]
Novopharm
noted the comment in the Costs Decision that the Applicant’s introduction at a late
stage of new issues and arguments should be a factor in the assessment of
costs. Therefore, maximum Column V costs and second counsel fees throughout are
justified. The several fee item 2 claims collapsed into a single claim
represents considerable work justifying an allowance for second counsel.
Although fee item 14 requires a 50 percent reduction for second counsel,
fee item 13 does not and therefore second counsel should be allowed at the
same amount for first counsel as both were fully engaged in hearing
preparation. A similar argument applies to fee item 15. Novopharm argued that
the Costs Decision permits assessment of fee item 27 (such other services as
the assessment officer may allow) in addition to fee item 15. Novopharm
advanced a separate fee item 27 claim for each of the submissions in chief
and rebuttal submissions on res judicata permitted after the hearing. An
additional fee item 26 claim is assessable as well for the costs submissions
invited by paragraph 102 of the Decision.
[12]
Novopharm’s
solicitor of record accepts the principle precluding profit by costs. Prior to
June 1, 2006, it charged $0.25 per page for the first 400 photocopies and $0.20
per page beyond those. From June 1, 2006 forward, it charged $0.25 per page for
the first thousand photocopies, $0.20 for the next thousand, $0.15 per page for
the next thousand and $0.10 per page for anything beyond three thousand
photocopies. The bill of costs reflects this discounting. Paragraph 7 of Canadian
Union of Public Employees, Local 4004 v. Air Canada, [1999] F.C.J. No. 464
(A.O.) held that $0.25 per page may be allowed in the absence off
exhaustive proof. Paragraph 26 of Carlile v. Canada (M.N.R.) (1997), 97
D.T.C. 5284 (T.O.) held that a successful litigant should not be penalized
when it is apparent that real costs were incurred. Novopharm based its claim of
$11,736.50 on six copies of given documents, i.e. three for the Court, one for
each of the Registrar of Trade-Marks as a required party and for the Applicant,
and a copy for Novopharm. Additional copies for the second counsel permitted by
the Court and draft and working copies of materials were also made. This
is less than the entitlement, i.e. three copies for a successful party beyond
the three copies for the Court and necessary service copies, set in paragraph
71 of Pfizer Canada Inc. v. Canada (Minister of Health), [2008] F.C.J.
No. 3 (F.C.). Issues concerning the colour, shape and size of the pills
justified the charge of $2,108.57 for colour photocopies at a commercial
outlet.
[13]
Novopharm
argued further to Morin v. Canada, [2002] F.C.J. No. 1175 (A.O.) that
interest on assessed costs should run from the date of the Decision as opposed
to the date of the assessment of costs and be calculated per the Courts of
Justice Act, R.S.O. 1990, c. C-43, s. 129.
II. The Applicant’s Position
[14]
The
Applicant argued generally that paragraph 11 of the Costs Decision did not
require assessment of maximum values throughout and did not preclude minimum
values from the available ranges. The Costs Decision did not contemplate as a
punitive measure a second counsel allowance for each assessable service such as
fee item 2 because its work occurred before the Applicant tried to advance late
materials. The same rationale applies to the book of authorities claimed under
fee item 2. Although several fee item 2 claims were collapsed into a single
claim, maximum Column IV or V costs are not warranted because, for example, one
of the new affiants introduced for this matter was simply a law clerk and not
an expert. The various fee item 27 claims for meeting with affiants and
preparing their affidavits should be disallowed as their work is already
subsumed in fee item 2.
[15]
The
Applicant argued that a total allowance of 7 units for item 13(a) (available
range 3 – 9 units in Column IV) would be appropriate. The Applicant conceded
the maximum 6 units claimed under Column IV for item 13(b) for first counsel
and argued, although conceding it difficult to sever consideration of the
first and second days of hearing in this matter, that the 6 units claimed for
second counsel should be reduced by 50 percent or eliminated. The Court would
have specified the high end of Column V if that was its intention. The same
rationale applies to fee item 15 with the added consideration that it was
Novopharm who sought to add written submissions on res judicata and not
the Court who initially invited them. Similar considerations apply to fee item
14, second counsel having been conceded.
[16]
The
Applicant argued that as the Costs Decision did not mention a fee item 24, I
cannot presume the jurisdiction reserved to the Court to allow it. Nothing
should be allowed for second counsel under fee item 25 (services after
judgment). Nothing should be allowed for fee item 27 (submissions on res judicata)
as fee items 2 and 15 already account for the work addressed. Nothing should
be allowed for fee item 26, or the Applicants should be given costs of the
assessment to be set off against any allowed costs of Novopharm, given the
gross deficiencies and exaggerations in the bill of costs.
[17]
The
Applicant noted that Novopharm did not raise doubling of costs with the Court
and cannot now argue that the Assessment Officer is without discretion to deny
them. The first part of the settlement offer expired before the hearing
and was therefore precluded by Rule 420(3)(b) from triggering double costs.
The settlement offer was essentially a call to capitulate thereby disqualifying
it as a trigger for double costs. There was no element of compromise as it
called upon the Applicant to abandon what was a serious and novel legal
issue requiring almost nine months for the Court to decide and Novopharm to
retain all rights to costs except for hearing fee item 14. The Applicant
was successful on the issues of res judicata and relevant date for
determining distinctiveness.
[18]
The
Applicant argued that $4,000 inclusive of all photocopies would be a more
reasonable allowance given the lack of sufficient evidence of necessity and
reasonableness.
[19]
The
Applicant asserted that the Court did not address or permit post-judgment
interest, but if allowed, it should run from the date of the Costs Decision
(April 23, 2007) and not the date of the Decision (June 30, 2006).
Novopharm delayed serving a bill of costs until September 11, 2007.
The circumstances here of the Court deferring the matter of costs pending
submissions differs from the circumstances mentioned in CCH Canada Ltd. v.
Law Society of Upper Canada, [2004] F.C.J. No. 2161 (F.C.) [CCH] of
a delay in access to costs further to a series of appeals and a taxation of
costs.
III. Assessment
[20]
The
first two sentences of paragraph 11 of the Costs Decision permitted me to
assess Column IV or V costs, but did not provide the additional discretion
needed from the Court for second counsel under fee item 14, for fee item 24 or for
costs beyond the practice for fee item 27 contemplated in Mitchell v. Canada
(Minister of National Revenue – M.N.R.), [2003] F.C.J. No. 1530 (A.O.) [Mitchell].
The last two sentences of paragraph 11 simply confirmed that I may
allocate values from within the full range of Columns IV and V, but did not
confer the “additional discretion” noted above. Paragraphs 12 and 13 of the Costs
Decision refused the Applicant’s request for directions to the assessment
officer concerning costs of Novopharm’s experts. That also did not equate to
the “additional discretion” noted above.
[21]
Paragraph
14 and the Order in the Costs Decision then confirmed that Columns IV and V
shall apply and that second counsel costs “shall be awarded.” The latter
provision did not restrict itself to categories such as fee item 14(b) in which
second counsel is specifically mentioned, but rather permitted or required me
to allow second counsel throughout the bill of costs. As well, it did not
restrict me to the 50 percent limit in fee item 14(b). These directions however
were not the exercise of “the discretion of the Court” as that phrase is
used in fee item 24 as a condition permitting assessment of that cost.
[22]
The
work collapsed into a single fee item 2 was considerable. I allow maximum
Column V costs (13 units) for first counsel resulting in $1,560 which I doubt
represents a significant fraction of the actual fee billed to Novopharm.
Novopharm claimed second counsel under fee item 2 at 50 percent for
preparation of the Record and in full for the various affidavits. I allow 9
units which is a maximum Column IV value and in the middle range of Column V
values.
[23]
This
was not the most complex of matters, but there were difficult elements in the hearing
preparation. I allow for first counsel fee item 13(a) at 9 units (maximum
Column IV) from the upper middle range of Column V, and fee item 13(b) at
7 units (maximum 8 units available) under Column V. I allow second counsel for
fee items 13(a) and (b) at 6 and 6 units respectively under Column V. I allow
fee items 14(a) and (b) (second counsel at the 50 percent rate set by the
Tariff) as claimed at maximum values under Column V.
[24]
I
have read the respective materials on res judicata submitted to the
Court. I allow 9 units for fee item 15 under Column V (available range = 5 – 11
units) for first counsel. I allow the minimum 5 units for second counsel. I
allow fee item 25 for first counsel only at the one unit available in each of
Columns I to V. In place of fee item 26 claimed for the submissions on costs
invited by paragraph 102 of the Decision, I allow fee item 15 at 10 units under
Column V for first counsel only.
[25]
As I
did in paragraph 3 of Abbott, I disallow the fee item 24 claims. I think
further to Mitchell that I cannot allow fee item 27 (legal research and
submissions on res judicata) for work already addressed under fee items
2, 13 or 15 and I therefore disallow those fee item 27 claims. Novopharm had
claimed a fee item 27 for each of the initial (dated December 12, 2005) and
rebuttal (dated December 30, 2005) submissions, but only a single fee item
15. I think that my fee item 15 allowance above is adequate in the
circumstances. I disallow the fee item 27 claims for preparation of experts. As
for fee item 26 (assessment of costs), I allow maximum costs (10 units) under
Column V for first counsel and 6 units under Column IV (available range = 3 – 7
units) for second counsel which is also the maximum Column III value.
[26]
The
bill of costs details what was copied. I have generally allowed second counsel
throughout and I think it reasonable to have provided them with working copies.
I allow the two claims of $11,736.50 and $2,108.57 as presented as I find them
reasonable in the circumstances of this litigation.
[27]
I
doubt that the potential costs available to Novopharm further to Rule 420
doubling were an incentive for the Applicant to seriously consider the
settlement offer. As in Biovail, I find that the settlement offer meets
the technical parameters of Rule 420(2)(b) and I therefore allow the doubling
of assessed fee items 13(a) and (b) and 14(a) and (b). As the work for fee
items 15 (submissions on costs invited by paragraph 102 of the Decision), 25
and 26 occurred after the date of judgment, double costs cannot be claimed for
them. However, doubling of fees does apply to fee item 15 (submissions on res
judicata). Novopharm inadvertently claimed GST on the doubled portion of
fees. As costs are an indemnity and Novopharm would not have been out of pocket
for GST on the doubled portion of fees added per Rule 420(2)(b), it cannot
claim GST on said fees because costs are not a windfall or source of profit.
[28]
The Federal
Courts Act, s. 37(1) provides that the “laws relating to interest on
judgments in causes of action…that are in force in a province apply to
judgments of…the Federal Court.” The Courts of Justice Act, R.S.O.
1990, c. C-43, s. 129(1), provides that money “owing under an order, including
costs to be assessed…bears interest at the post-judgment interest rate,
calculated from the date of the order.” Ordinarily, that would mean that
interest runs from the date of the judgment, i.e. here, June 30, 2006 being the
date of the Decision. Although paragraphs 100 and 101 did not indicate that
Novopharm was to get costs, their sense was that the likely exercise of
discretion reserved to the Court under Rule 400(1) would likely favour Novopharm
in accord with the usual principle that costs follow the event, the only added
consideration being whether Novopharm should have increased costs. Paragraph
102 in the Decision inviting submissions on costs was not such a Rule 400(1)
exercise of discretion for costs, which could have favoured the Applicant or
denied Novopharm. That exercise of discretion did not occur until the Costs Decision
on April 23, 2007, which I find is the applicable date further to section
129(1) of the Ontario statute. I do not think
that my conclusion offends the finding in CCH because the circumstances
there were different, i.e. the date of the award of costs coincided with the
date of judgment, unlike here.
[29]
Novopharm’s
revised bill of costs, presented at $82,912.48 and $104,727.28 under Columns IV
and V respectively, is assessed and allowed at $60,611.68 with interest from
April 23, 2007, pursuant to the Courts of Justice Act, R.S.O. 1990, c.
C-43, s. 129(1).
“Charles
E. Stinson”
Vancouver,
BC
July
31, 2009
Email this Content