Date: 20071206
Docket: A-607-06
Citation: 2007 FCA 384
CORAM: NADON
J.A.
SHARLOW
J.A.
RYER
J.A.
BETWEEN:
NOVOPHARM LIMITED
Appellant
and
SANOFI-AVENTIS CANADA INC.,
SANOFI-AVENTIS DEUTSCHLAND GmbH and
THE MINISTER OF HEALTH
Respondents
REASONS FOR ORDER
NADON J.A.
[1]
On April
24, 2007, we heard an appeal from a decision of the Federal Court, Sanofi-Aventis
Canada Inc. v. Novopharm Ltd., 2006 FC 1547, dated December 21, 2006
dismissing the motion of the appellant (“Novopharm”) under paragraph 6(5)(b)
of the Patented Medicines (Notice of Compliance) Regulations, SOR/93-133
(the “NOC Regulations”).
[2]
By its
motion, Novopharm sought the dismissal of the application of the respondents
(“Sanofi-Aventis”) for an Order prohibiting the Minister of Health (the
“Minister”) from issuing a Notice of Compliance (“NOC”) to Novopharm until
after the expiry of Canadian Patent Nos. 2,023,089 (the “089 patent”),
2,055,948 (the “948 patent”), 2,382,549 (the “549 patent”) and 2,382,387 (the
“387 patent”).
[3]
Because
Novopharm’s Notice of Allegation (“NOA”) was directed at the four
aforementioned patents, Sanofi-Aventis sought an order of prohibition from the
Federal Court until the expiry of those patents. However, during the course of
its arguments before the Federal Court on the motion to dismiss, Novopharm
advised the Court that it was abandoning its allegations in respect of the 549
and 387 patents.
[4]
As I have
just indicated, Novopharm’s motion was brought under paragraph 6(5)(b)
of the NOC Regulations, which allows the Federal Court to dismiss a prohibition
application which is “redundant, scandalous, frivolous or vexatious, or is
otherwise an abuse of process”. Thus, the question before the Federal Court was
whether Sanofi-Aventis’ application could be so characterized in relation to
the 089 and the 948 patent. The Federal Court found that it could not.
[5]
This Court
disagreed and concluded that the prohibition application would inevitably fail.
On April 27, 2007 (2007 FCA 167), we allowed Novopharm’s appeal with costs in
this Court and in the Federal Court, we set aside the Order of the Federal
Court and we dismissed Sanofi-Aventis’ application for an order of prohibition.
More particularly, we concluded that the case was governed by our decisions in Pharmascience
Inc. v. Sanofi-Aventis Canada Inc., 2006 FCA 299, leave to appeal to the
Supreme Court of Canada refused, 2007 SCCA 362 (Q.L.) and in Sanofi-Aventis
Canada Inc. v. Apotex Inc., 2006 FCA 357, leave to appeal to the Supreme
Court of Canada refused, 2007 SCCA 5 (Q.L.), which stand for the proposition
“that an allegation of non-infringement of a claim for the use of the medicine
is justified if the generic manufacturer is seeking a NOC only for a use that
is not within the new use claim and the evidence fails to establish that the
generic drug producer will infringe the new use claim by inducing others to
prescribe or use the generic product for that new use” (paragraph 9 of our
Reasons).
[6]
On June 7,
2007, we dismissed a motion brought by the respondent Minister, for
reconsideration of our Judgment dated April 27, 2007. In making that Order, we
made it clear that the appeal “… was argued on the basis that the only patents
in issue in the appeal were Canadian patents 2,023,089 and 2,055,948” and that “the status of the other
two patents [the 549 and the 387 patents] was not addressed in argument in the
appeal or in the judgment of this Court”. With respect to costs on the
Minister’s motion, we ordered that as between Novopharm and Sanofi-Aventis, the
costs were to be borne by Novopharm.
[7]
As a
result of its successful appeal, Novopharm now brings before us a motion for
increased costs under Rule 403 of the Federal Court Rules. In the
alternative, it seeks an order directing the Assessment Officer to tax its
costs, in the appeal and in the proceedings before the Federal Court, at the
high end of Column IV of Tariff B, to include:
(a) two
counsel for the appearance on motions;
(b) counsel
fee, for at least three counsel, for the preparation of affidavit evidence
calculated at 10 units per counsel per affidavit;
(c) two
counsel for preparation and attendance at cross-examinations, where two counsel
were present;
(d) travel
time and disbursements for two counsel attending cross-examinations; and
(e) two
counsel for the preparation of the Notice of Appeal, the Memorandum of Fact and
Law and appearance at the hearing of the appeal.
[8]
I begin my
discussion by referring to this Court’s decision in Consorzio Del Prosciutto
Di Parma v. Maple Leaf Meats, [2002] F.C.J. No. 1504 (Q.L.). In that case,
the respondent sought increased costs pursuant to Rule 403. In disposing of the
motion, Rothstein J.A. (as he then was), writing for the majority, enunciated
the principles applicable to a motion for increased costs. At paragraphs 6 to
11 of his Reasons, he stated:
[6] I am satisfied
in the circumstances of this case, that the respondent should be awarded
increased costs. This is an intellectual property matter involving
sophisticated clients. Where, as here, numerous issues are raised on
appeal and the issues involve complex facts and expert evidence, the amount of
work required of respondents' counsel justifies increased costs. To the
argument that the complexity of this case was no greater than that of most
intellectual property cases that come before this Court, I would say that such
cases frequently present complex facts and give rise to difficult issues.
[7] The
increased costs to be awarded are party-party costs. They do not indemnify the
successful party for its solicitor-client costs and they are not intended to
punish the unsuccessful party for inappropriate conduct.
[8] An
award of party-party costs is not an exercise in exact science. It is
only an estimate of the amount the Court considers appropriate as a
contribution towards the successful party's solicitor-client costs (or, in
unusual circumstances, the unsuccessful party's solicitor-client costs). Under
rule 407, where the parties do not seek increased costs, costs will be assessed
in accordance with Column III of the table to Tariff B. Even where
increased costs are sought, the Court, in its discretion, may find that costs
according to Column III provide appropriate party-party compensation.
[9] However,
the objective is to award an appropriate contribution towards solicitor-client
costs, not rigid adherence to Column III of the table to Tariff B which
is, itself, arbitrary. Rule 400(1) makes it clear that the first principle in
the adjudication of costs is that the Court has "full discretionary
power" as to the amount of costs. In exercising its discretion, the Court
may fix the costs by reference to Tariff B or may depart from it. Column III of
Tariff B is a default provision. It is only when the Court does not make a
specific order otherwise that costs will be assessed in accordance with Column
III of Tariff B.
[10] The Court,
therefore, does have discretion to depart from the Tariff, especially where it
considers an award of costs according to the Tariff to be unsatisfactory.
Further, the amount of solicitor-client costs, while not determinative of an
appropriate party-party contribution, may be taken into account when the Court
considers it appropriate to do so. Discretion should be prudently exercised.
However, it must be borne in mind that the award of costs is a matter of
judgment as to what is appropriate and not an accounting exercise.
[11] I think this
approach is consistent in today's context with the observations of Nadon J. (as
he then was) in Hamilton Marine and Engineering Ltd. v. CSC Group Inc.
(1995), 99 F.T.R. 285 at paragraph 22:
I indicated
to counsel during the hearing that there was no doubt that, in most cases, the
fees provided in Tariff B were not sufficient to fully compensate a successful
party. I also indicated to counsel during the hearing that, in my view, the
Tariff necessarily had to remain the rule and that an increase of tariff fee
was the exception. By that I mean that the discretion given to the Court to
increase the tariff amounts pursuant to rule 344(1) and (6) of the Federal
Court Rules was not to be exercised lightly. Put another way, the fact that the
successful party's legal costs were far superior to the amounts to which that
party was entitled under the Tariff, was not in itself a factor for allowing an
increase in those fees.
[Emphasis
added]
[9]
As
Rothstein J.A. correctly points out, the Court has full discretion in respect
of the amount and the allocation of costs. In exercising that discretion, the
Court may consider those factors which are set out at Rule 400(3). Among those
factors are, inter alia, the result of the proceedings, the amounts
claimed and the amounts recovered, the importance and complexity of the issues,
the apportionment of liability, the conduct of the parties and whether steps
taken in the proceedings were improper, vexatious or unnecessary.
[10]
Further,
Rule 400(4) provides that the Court may fix costs by reference to Tariff B and
may award a lump sum in lieu of, or in addition to, any assessed costs.
Finally, under Rule 400(6), the Court may, inter alia, award costs on a
solicitor and client basis.
NOVOPHARM’S POSITION
[11]
Specifically,
Novopharm seeks an order for costs on a solicitor and client basis in the sum
of $359,196.16 plus disbursements in the sum of $64,696.08, or a lump sum payment
for a lesser amount, or, in the alternative, directions to the Assessment
Officer to tax its costs at the high end of Column IV of Tariff B. With its
motion, Novopharm submitted a Bill of Costs under the high end of Column IV which
claims disbursements in the sum of $64,696.08 and fees in the amount of
$59,097.12.
[12]
Novopharm
argues that in the light of our decisions in Pharmascience, supra, and Sanofi-Aventis
Canada, supra, and the fact that Sanofi-Aventis brought no evidence to show
that it was seeking approval to market its product for any of the “new uses”
claimed in the 089 and 948 patents, and that it brought no evidence to show
that Novopharm would induce others to use its product for any of the “new
uses”, its application for an order of prohibition was doomed from the outset.
Thus, in those circumstances, Novopharm says that it is clear that
Sanofi-Aventis used the NOC Regulations for the sole purpose of delaying the
market entry of its product and that, as a result, it was forced to spend a
considerable sum of money to defend Sanofi-Aventis’ application.
[13]
Consequently,
Novopharm argues that this Court should discourage patentees from behaving in
the way that Sanofi-Aventis did and that it should be fully compensated for its
expenses in defending these proceedings. It submits that to do otherwise would
be unfair. In the alternative, it submits that it should at least be
compensated at the high end of Column IV of Tariff B.
SANOFI-AVENTIS’ POSITION
[14]
Sanofi-Aventis
opposes Novopharm’s application and puts forward an entirely different
perspective on the events which led to our decision.
[15]
With
respect to solicitor and client costs, Sanofi-Aventis submits that until April
19, 2007, i.e. when the Supreme Court of Canada refused to grant leave in Pharmascience,
supra, and in Sanofi-Aventis, supra (8 days before our decision of
April 27, 2007), the jurisprudence on the issue before this Court was
unsettled. It further submits that, in any event, its conduct was not such as
to attract solicitor and client costs.
[16]
With
respect to the appropriate Column of the Tariff, Sanofi-Aventis argues that
there is no reason in this case to depart from the usual rule that costs should
be awarded at the mid-range of Column IV. Sanofi-Aventis then focuses its
attention on Novopharm’s Bill of Costs, in regard to which it submits that a
number of items therefrom should either be discounted or assessed at a lower
amount than that requested. For example, it submits that travel fees for
counsel’s attendance at cross-examinations are not generally awarded, absent
compelling circumstances not present here. It also submits that although second
counsel’s attendance at cross-examinations may be justified, they are not
justified in the present matter. Finally, it submits that as there are no
particulars regarding the experts’ bills, i.e. hours or time cost rates, the
costs sought in regard thereto should not be allowed.
[17]
Sanofi-Aventis
concludes by saying that we should direct the Assessing Officer to tax Novopharm’s
costs at the mid range of Column IV of Tariff B in relation only to the 089 and
948 patents which were the subject of both the decision below and our decision
on appeal.
[18]
In making
its submission that it is entitled to solicitor-client costs, Novopharm argues
that, in any event, this Court should make a lump sum award in its favour and
that the starting point thereof should be the amount of solicitor-client costs.
[19]
In reply
to Novopharm’s submission, Sanofi-Aventis submits that this Court should
decline to make such an order. First, it says that a lump sum should not be
awarded where the Bill of Costs and, in particular, the disbursements are
contentious. Second, it says that since Novopharm withdrew its allegations with
respect to two [the 549 and 387 patents] of the four patents initially raised
in its Notice of Allegation, each party should bear its costs in relation to
these patents. Third, Sanofi-Aventis says that it was awarded costs on the
Minister’s unsuccessful reconsideration motion (our Order of June 7, 2007).
Finally, it submits that Novopharm’s evidence with regard to its disbursements
is incomplete and insufficient.
[20]
I have
carefully considered both sides’ arguments and have come to the following
conclusions. First, I agree with Sanofi-Aventis that costs on a solicitor-client
basis are not justified in the present matter. In my view, it cannot be said
that in commencing its application for prohibition, Sanofi-Aventis’ application
was doomed, considering that leave applications to the Supreme Court were
pending in both Pharmascience and Sanofi-Aventis.
[21]
However, I
am of the view that an award of increased costs is justified in the present
matter. Novopharm succeeded on its appeal and, as a result, we dismissed
Sanofi-Aventis’ prohibition application because it stood no chance of
succeeding. There can be no doubt that considerable effort was required by
counsel for Novopharm with respect to the preparation of the Notice of
Allegation and the Response to the prohibition application. By the time we
heard the appeal on April 24, 2007, all that had to be done in preparation for
the hearing on the merits, which had been set down for June 25, 2007, had been
done. Nine affidavits were filed by both Novopharm (1,106 pages of evidence)
and by Sanofi-Aventis (671 pages of evidence). Needless to say, lengthy
cross-examinations of the deponents of the affidavits followed and were
conducted between January 11 and February 19, 2007.
[22]
As
Rothstein J.A. made clear in his Reasons in Consorzio Del Prosciutto Di
Parma, supra, determining party-party costs can never be an exercise in
exact science and, as a result, the Court must determine on a case by case
basis what is the proper award. As I indicated earlier, Novopharm is claiming
disbursements totalling $64,696.08, of which $42,191.07 represents the fees
paid to six experts. I also note that counsel invoiced Novopharm for legal fees
and disbursements totalling $423,892.24, of which $359,196.16 represents
counsel’s fees.
DISPOSITION
[23]
Considering
the result of the proceedings, the importance and complexity of the issues, and
the amount of work, I conclude that in the circumstances of this case, an
appropriate award of party-party costs is a sum of $189,696.08, inclusive of
fees, disbursements, GST and the costs of this motion. I would therefore direct
the Assessment Officer to assess Novopharm’s costs accordingly.
“M. Nadon”
“I
agree.
Karen
Sharlow J.A.”
“I
agree.
C. Michael Ryer J.A.”
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