Pharmacia Corporation & Ors v Merck & Co Inc & Anor

Costs in complex patent litigation are governed by the court’s wide discretion under CPR 44.3 and the overriding objective. The successful-party principle remains the starting point, but the court may depart from it and make issue-based orders. A party who succeeds overall may be denied the costs of an issue on which the opposing party succeeded, particularly where that issue was reasonably arguable and difficult to resolve. In expensive litigation, parties must consider the costs consequences of pursuing every available point.

The appellants challenged the costs order made by Pumfrey J in patent proceedings. The action and appeal were technically complex and expensive. The appellants succeeded on a construction issue, although the respondents succeeded overall in the action and on the appeal.

The Court of Appeal considered whether the respondents should recover all their costs, including the costs of the construction issue, and the extent to which the first-instance costs order should be adjusted.

1. Appeal dismissed. The appellants were ordered to pay 90 per cent of the respondents’ costs in the Court of Appeal. The judge’s costs order was reduced by 10 per cent, with an interim costs order of £100,000.
2. The court has a wide discretion on costs. That discretion must be exercised in the light of CPR 44.3 and the overriding objective, namely to do justice in the circumstances of the case.
3. The general rule that the successful party will normally receive its costs remains an important starting point. It is not an inflexible rule. The court may make separate orders reflecting the outcome of different issues.
4. In a costly patent action, a party should not assume that it can pursue every arguable point without financial risk. The costs discretion must discourage unnecessary expansion of the issues.
5. The appellants had succeeded on a construction issue which both Pumfrey J and the Court of Appeal found difficult to resolve. It was therefore not improper for the respondents to have argued it. Nevertheless, the respondents should not recover all of the costs attributable to that issue, and should make a contribution towards them.
6. The court considered the decision in McGhan Medical UK Ltd v Nagor Ltd and Biosil Ltd, but Lord Justice Aldous stated that he could not endorse all the principles there set out. The conclusion reached in that case was nevertheless regarded as fair on its facts.

• Court of Appeal (Civil Division): Appeal from the costs order of Pumfrey J in the Patents Court. Appeal dismissed; the costs order was reduced by 10 per cent and permission to appeal to the House of Lords was refused.