Affymetrix Inc & Anor v Multilyte Ltd

Indemnity costs require conduct by the paying party that is improper or unreasonable in a material sense. A party is entitled to take a reasonable period to negotiate the termination of proceedings, even where it has largely decided to withdraw. The court should also consider whether the costs in question would substantially be recoverable on the standard basis and whether there is sufficient justification for departing from the normal costs order.

The claimants sought revocation of the defendant’s United Kingdom patents and declarations of non-infringement. The defendant defended the claim and counterclaimed for infringement, but subsequently withdrew from the proceedings. The court revoked the patents and dismissed the counterclaim, with the ordinary consequence that the defendant paid the claimants’ costs.

The remaining issue was whether the claimants should receive indemnity costs for work undertaken between 4 and 18 August, while the defendant negotiated withdrawal and did not notify the claimants of its decision to cease defending the action.

1. Indemnity costs. Indemnity costs are awarded only where the cost-paying party’s behaviour has been improper or unreasonable in a material sense.
2. Conduct in this case. It was reasonable for the defendant to seek to negotiate a termination of the proceedings. Taking two weeks to do so was not excessive. The circumstances did not show conduct sufficiently improper or unreasonable to justify indemnity costs.
3. Extent of recoverable costs. Most, if not all, of the claimants’ costs during the relevant period would be recoverable on the standard basis. This further reduced the justification for a special order.
4. The application for indemnity costs for the period from 4 to 18 August was refused. The defendant remained liable for the claimants’ costs on the ordinary basis following revocation of the patents and dismissal of the infringement counterclaim.