Date:
20061010
Docket: A-268-06
Citation: 2006 FCA 324
CORAM: LINDEN J.A.
SEXTON
J.A.
MALONE
J.A.
BETWEEN:
Apotex Inc.
Appellant
and
Merck & Co., Inc., Merck
Frosst Canada & Co., Merck Frosst Canada Ltd., Syngenta Limited,
AstraZeneca UK Limited and AstraZeneca Canada Inc.
Respondents
REASONS FOR JUDGMENT
MALONE J.A.
[1]
This
appeal and cross-appeal relate to a costs order made by Hughes J. dated May 23,
2006 and reported as 2006 FC 631 (the Costs Order).
[2]
The Costs
Order followed lengthy litigation concerning Canadian Patent 1,275,350 (the
’350 Patent) owned by Merck & Co. Inc. and its two Canadian affiliates
(collectively Merck). The ’350 Patent was licenced to Syngenta Limited, AstraZeneca
UK Limited and AstraZeneca Canada Inc. (collectively Astra). Apotex Inc.
(Apotex) is a generic manufacturer of pharmaceutical products in Canada. In a judgment dated April
23, 2006, Hughes J. concluded that the ’350 Patent had been infringed by Apotex
subject to certain statutory and common law exemptions.
[3]
Following
written submissions, Hughes J. held that Merck and Astra were to be permitted
only one set of costs as between them taxed at the upper end of Column IV.
Subject to any set off otherwise due to Apotex, Merck and Astra were awarded
90% of their pre-trial taxed costs and disbursements and 80% of their trial and
post trial costs and disbursements. In fulsome written reasons that
accompanied the Costs Order, Hughes J. detailed the history of the litigation
commenced in 1996, the conduct of the parties before and during trial, and
their attempts to effect settlement. It is abundantly clear that much thought
went into the Costs Order, a discretionary decision under Rule 400 of the Federal
Court Rules, SOR/98-106 (the Rules),
which will only be overturned where the trial judge failed to give sufficient
weight to all relevant considerations, erred in law or misapprehended the facts
(Monsanto Canada Inc. v. Schmeiser, 2002 FCA 449 at paragraph 2).
[4]
In a
recent decision, Chief Justice Richard of this Court neatly summarized the
principles as follows:
An appellate
court is not at liberty merely to substitute its own exercise of discretion for
the discretion already exercised by the trial judge. However, if the decision
was based on an error of law or if the appellate court reaches the clear
conclusion that there has been a wrongful exercise of discretion in that no
weight or no sufficient weight, has been given to relevant considerations or
that the trial judge considered irrelevant factors or failed to consider
relevant factors, then an appellate court is entitled to exercise its own
discretion (see Elders Grain Co. v. M/V Ralph Misener (The), [2005] 3
F.C.R. 367 (C.A.) at paragraph 13).
[5]
Having
reviewed the Costs Order and the submissions of all parties, in my analysis, the
appeal and cross-appeal should be allowed in part and the Costs Order varied as
follows:
I. Existence of a Binding Agreement
[6]
This
action was commenced by Merck and Astra by statement of claim dated December
19, 1996. The claim, as amended from time to time, sought various forms of
relief in respect of the alleged infringement by Apotex.
[7]
By its
statement of defence and counterclaim, Apotex defended the action, asserting
that the making, using and selling of its lisinopril formulations was
non-infringing, and counterclaimed, asserting that the ’350 Patent was invalid
on various grounds. A further amended statement of defence and counterclaim
was filed during the course of trial.
[8]
Following
a lengthy discovery and pre-trial process, the parties ultimately reached a negotiated,
without costs settlement, filed with Hughes J. on January 9, 2006 at the
opening of the trial. Apotex agreed not to pursue certain withdrawn
allegations, namely sound prediction, inutility, insufficient disclosure, and obviousness
(the Withdrawn Allegations). The Withdrawn Allegations were withdrawn with
each party bearing its own costs.
[9]
On April
26, 2006, following a lengthy trial, Hughes J. issued his reasons for holding
that the ’350 Patent was valid and had been infringed by Apotex. In these
reasons, Hughes J. requested that the parties provide written submissions in
respect of the costs to be awarded.
[10]
In its costs
submission, Apotex sought directions from Hughes J. as to the award of costs
excluding those costs, fees and disbursements in respect of the Withdrawn Allegations
and urged that the further resolution of such excluded costs ought to be by
agreement of the parties or be determined by the assessment officer. Merck and
Astra conceded in their submissions, that the assessment of costs should
exclude costs and disbursements related to the Withdrawn Allegations.
[11]
The
reasons and the Costs Order made no reference to the fact that the parties had
entered a binding agreement to bear their own costs in respect of the Withdrawn
Allegations. In the maze of issues, it appears that Hughes J. overlooked the
fact that the parties had agreed, by way of a negotiated agreement, to bear
their own costs in respect of the Withdrawn Allegations.
[12]
Left
unvaried, the Costs Order will make Apotex accountable for costs that Merck and
Astra agreed to bear themselves, in exchange for Apotex’s negotiated withdrawal
of the Withdrawn Allegations. Such a result would clearly be unjust.
II.
Prior Interlocutory Cost Orders
[13]
At paragraph 24 of
his reasons for the Order, Hughes J. gave the following directions:
As earlier indicated,
there were a vast number of motions, appeals and case management appearances in
the file. To the extent that an Order or other disposition of any such matter
specifically directed itself to costs, that specific direction will prevail.
To the extent that such order or other disposition was silent as to costs,
there is no order as to costs, thus no party gets costs. Where a successful
party has been awarded costs and such costs have not been taxed, they are to be
taxed and paid at the upper end of Column IV.
[14]
There were a total of
34 interlocutory orders that awarded costs to a party (i.e. costs in the
cause), without any stipulation as to scale or quantum.
[15]
By virtue of Rule
407, an award of costs, without stipulation as to scale or quantum, is to be
assessed in accordance with Column III. Awards such as ‘costs in the cause,’
while leaving the matter of the recipient of costs to be determined by the ultimate
result of the case, do not defer to a trial judge the decision as to their
scale. Once a motion judge issues an order for costs or costs in the cause
without a modifier varying the general default parameters of Column III, the
issue of scale is res judicata, subject to a motion brought pursuant to
Rule 403 to vary the scale (see Consorzio del Prosciutto di Parma v. Maple
Leaf Meats Inc., 2002
FCA 417 at paragraphs 8 and 9 (F.C.A.); AB
Hassle v. Genpharm Inc., 2004 FC 892 (T.D.) at paragraph 8; Aird Country
Park Village Properties (Mainland) Ltd., 2005 FC 1170 at paragraph 10).
[16]
Hughes J. was never
seized of a motion under Rule 403 to vary any of the 34 interlocutory orders of
costs to be assessed at Column III and he had no jurisdiction to elevate any of
the interlocutory awards of costs, including awards of ‘costs in favour of
Merck,’ ‘costs in the cause’ and ‘appeal is dismissed with costs,’ to the upper
end of Column IV.
[17]
In short, Hughes J.
failed to take into account all relevant factors when he ordered that where a
successful party has been awarded costs and such costs have not been taxed,
they are to be taxed and paid at the upper end of Column IV. Accordingly, the
Costs Order should be varied to provide that all costs awarded to Merck and
Astra in interlocutory awards without stipulation as to quantum or scale,
including awards of costs in the cause, shall be assessed in accordance with
Column III of the Tariff.
III.
One Set of Costs to Each of Merck and Astra
[18]
By way of
cross-appeal, Merck and Astra seek to vary the Costs Order wherein Hughes J.
denied them the rights to their respective costs associated with representation
by their own counsel.
[19]
Pursuant to
subsection 55(2) of the Patent Act, R.S.C. 1985, c. P-4 as amended, a
patentee must be a party in an action for patent infringement. This
requirement is mirrored in subsection 6(4) of the Patented Medicines (Notice
of Compliance) Regulations, S.O.R./93-133.
[20]
As a result of the
requirement that the patentee be a party in infringement proceedings, our
courts have recognized the right of a patentee to be represented by counsel of
its choice. As noted by Noël J. in Pfizer Canada Inc. et al. v. Apotex Inc.
et al. (1997), 72 C.P.R. (3d) 379 (T.D.):
In seeking to preserve
its rights as the owner of the patent in issue, the patentee is obviously
entitled to be represented by counsel of its choice and I can see no basis for
an order that would have the effect of taking away that right.
[21]
In the present case,
by order dated August 26, 1999, Desjardins J.A. of this Court allowed Merck and
Astra to have separate counsel on the basis that Merck as owner of the patent
is entitled to the counsel of its choice. Both counsel had undertaken to
conduct their respective representations so as to avoid duplicity.
[22]
Indeed, there may be
many commercial reasons why a patentee may have a distinct interest in
defending the validity of certain claims of a patent that may be of lesser
importance to a licensee (Aventis Pharma Inc. v. Apotex Inc., 2004 FC
570 (T.D.)). In this present case, Merck’s interests do not directly overlap
with Astra. Astra had no interest in the Canadian Patent No. 1,275,349 (the ’349 Patent) raised in
Apotex’s improper divisional allegation, a point acknowledged at trial by
Astra’s counsel. Astra and Merck are also commercial competitors in Canada in regards to their
respective lisinopril products.
[23]
This Court has
already decided, that despite raising overlapping issues, applicants in the
same proceedings should not be required to share a single costs award (see 3430901
Canada Inc. v. Canada (Minister of Industry) (1999), 177 F.T.R. 161, aff’d [2002] 1 F.C. 421(F.C.A.).).
[24]
In summary, in my
view, in the face of this Court’s order of August 26, 1999 allowing separate
counsel, Hughes J. failed to consider a relevant factor when he denied these
parties their costs for separate counsel.
Conclusion
[25]
In summary, the
appeal should be allowed in part and the Costs Order of May 23, 2006 should be
varied to provide as follows:
(a)
Merck and Astra shall
have no costs including fees or disbursements directly relating to the
allegations of invalidity at paragraphs 19(f), (g), (l), (m), (n), (o) and (p)
of the Amended Fresh as Amended Statement of Defence and Counterclaim dated May
25, 2005; and
(b)
Costs awarded to
Merck and Astra in interlocutory orders, without further qualification, shall
be taxed and paid in accordance with mid-level Column III of the Rules.
[26]
The cross-appeals
should be allowed in part and the Costs Order of May 23, 2006 should be varied
to provide as follows:
(a)
Merck
& Co., Inc., Merck Frosst Canada & Co., Merck Frosst Canada Ltd. on the
one hand, and Syngenta Limited, AstraZeneca UK Limited and AstraZeneca Canada
Inc. on the other hand shall each be entitled to claim their respective costs
in the proceeding to be taxed at the upper level of Column IV for one senior
and one junior counsel each.
[27]
Due to the divided
success, there should be no costs ordered on the appeal or cross-appeals.
"B.
Malone"
“I agree.
A.M. Linden
J.A.”
“I agree.
J. Edgar
Sexton J.A.”
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