Smithkline Beecham Plc & Anor v Apotex Europe Ltd & Ors

A certificate of contested patent validity engages the special costs regime in section 65(2) of the Patents Act 1977 in subsequent first-instance proceedings, but not on an appeal in those proceedings. The appellate court may nevertheless award indemnity costs under its general powers.

Section 63(2) applies only where the court determines a dispute and finds a patent partially valid. A concession followed by amendment is not such a finding. Patent costs should be approached issue by issue where reasonably practicable. Where precise allocation is impossible, the court should make a realistic percentage order reflecting the issues won, the parties’ conduct and the overall justice of the case.

Following a patent trial before Pumfrey J, the Court of Appeal held in its main judgment, [2004] EWCA Civ 1568, that the patent was valid but not infringed. It upheld the finding of non-infringement but reversed findings of invalidity based on particular prior art. Several further issues had been prepared or argued but did not require decision.

The parties returned to the Court of Appeal to determine costs. Apotex sought a substantial proportion of its trial and appellate costs. Smithkline Beecham sought costs in its favour, partly on the indemnity basis, relying on a prior certificate of contested validity and Apotex’s unsuccessful validity attacks. The principal questions concerned sections 63 and 65 of the Patents Act 1977, the general costs jurisdiction under the Civil Procedure Rules, and the fair allocation of extensive costs across overlapping issues.

1. Disposition. The appeal was allowed for costs purposes. Apotex was awarded 16% of its costs below on the standard basis. Smithkline Beecham was awarded 25% of its appeal costs on the standard basis. Jacob LJ gave the principal judgment. Arden and Ward LJJ agreed with the proposed order.

2. Section 65(2) of the Patents Act 1977 excludes the costs of an appeal in the subsequent proceedings from its special indemnity-costs rule. “Subsequent proceedings” means the later proceedings in which the party relies on the certified validity. The statutory exclusion does not prevent an appellate court from awarding indemnity costs under the Civil Procedure Rules. Arden LJ treated the exclusion as a permissible legislative choice rather than an irrational result. Ward LJ agreed that it was the provision’s literal effect.

3. A certificate relating to one patent claim does not automatically extend the special rule to an unrelated uncertified claim. It may, however, cover costs concerning an uncertified claim where the certified and uncertified claims involve essentially the same fight and generate no distinct costs. The validity attacks at trial therefore fell within section 65.

4. Section 63(2) applies only where the court has made a finding that a patent is partially valid. Such a finding requires judicial determination of a dispute. A patentee’s concession of invalidity, followed by amendment or abandonment of claims, is not a finding for this purpose. The alternative contention that validity had been raised only in revocation proceedings was also rejected because invalidity had been pleaded and relied upon as a defence to infringement.

5. The Civil Procedure Rules apply generally to patent proceedings. Costs should be addressed issue by issue so far as reasonably possible, but that approach is not exclusive. The reasonableness of raising or contesting an issue remains relevant. Exact allocation is often impossible, particularly in complex patent litigation, so the court must make a necessarily broad estimate. Arden LJ emphasised that a percentage order will often be fairer and less costly to assess than an issue-based order.

6. The prior certificate did not govern appeal costs directly. Indemnity costs were nevertheless justified for the repeated prior-art attack because Apotex had deliberately waited while another party litigated substantially the same attack and then pursued it after that challenge failed. The commercial benefit obtained through the interim injunction was irrelevant to allocating the ultimate costs because obtaining such an injunction did not make the applicant a wrongdoer.

1. Court of Appeal (costs judgment): In [2004] EWCA Civ 1703, the court awarded Apotex 16% of its costs below and Smithkline Beecham 25% of its appeal costs.

2. Court of Appeal (main judgment): In [2004] EWCA Civ 1568, the court upheld Pumfrey J’s finding of non-infringement but reversed his findings of invalidity based on anticipation and obviousness over the identified prior art.

3. Patents Court: Pumfrey J found the patent not infringed and invalid on certain grounds. He awarded Apotex 76% of its costs. No citation for that judgment is stated.