I N Newmans Ltd. v Richard T Adlem

In patent litigation, costs should ordinarily reflect the outcome of distinct issues rather than simply follow the overall result. Under Civil Procedure Rules 1998, rule 44.3, the court may apportion costs by reference to the issues and the proportion of time devoted to them. In an exceptional case, an unsuccessful party may recover the costs of an issue on which the generally successful party failed, without proof that the issue was pursued improperly or unreasonably. A party succeeding on validity will not generally recover costs of failed validity objections where those objections were discrete, duplicative or unreasonable. The court may also make specific orders for costs caused by late concessions, irrelevant experiments or unnecessary evidence.

The judgment concerns the costs consequences of an earlier patent validity decision between the Secretary of State for Education and Skills and Frontline Technology Ltd. Claims 1 and 2 had been held invalid for lack of inventive step over Kingshurst, while claim 7 had been held valid. Neither party sought permission to appeal. The court therefore determined how the costs of the action, earlier applications and the costs hearing should be allocated, given that each party had succeeded on significant issues.

The central questions were whether costs should be apportioned issue by issue, how the time spent on overlapping issues should be assessed, and whether particular conduct justified departures from the usual costs order.

1. Issue-based assessment. The court adopted the approach in Apotex Europe Ltd v Smith Kline Beecham [2004] EWCH 964 (Ch). The general rule under rule 44.3 was subject to all the circumstances, including the parties’ conduct and the extent of success. Where costs were assessed by issues, a percentage recovery was the appropriate, necessarily broad, method.
2. Exceptional recovery by an unsuccessful party. Following Summit Property Ltd v Pitmans [2001] EWCA Civ 2020, the court held that, in a suitably exceptional case, a generally unsuccessful party could recover the costs of an issue on which the successful party had failed. It was unnecessary to establish improper or unreasonable conduct.
3. Application to the issues. The claimant recovered costs for the successful Kingshurst attack on claims 1 and 2. The claimant paid the defendant’s costs of the unsuccessful SIMS, documentary prior art and intervening-use issues, subject to specific adjustments. No order was made on the SYMBOL and common-general-knowledge issues. The extensive grounds of attack, duplication between Kingshurst and SIMS, and irrelevant or unsuccessful evidence supported a substantial departure from a simple event-based order.
4. Reserved costs and evidence. The defendant was ordered to pay specified proportions of the claimant’s costs of the January applications and the costs relating to the late, unhelpful network-traffic experiment. The court rejected the contention that Mr Wright’s evidence was duplicative, finding that his educational expertise materially differed from that of the other expert.
5. Order. The claimant was ordered to pay the defendant 8 per cent of the defendant’s reasonable costs, subject to the deductions and additional payments specified in paragraph 12, with costs to be taxed if not agreed. No order was made for the costs of the costs hearing.