Glaxosmithkline Biologicals SA v Novartis AG

On discontinuance, the normal rule is that the discontinuing claimant pays the defendant’s costs, but the court may depart from that order where a good reason is shown. The court must assess the particular circumstances rather than decide the underlying merits or treat discontinuance as an admission of defeat. Relevant considerations include why the proceedings were discontinued, the effect of intervening events, the parties’ responsibility for wasted costs, and the timing of related proceedings. Where both parties contributed to unnecessary costs, the court may make a proportionate order, including costs to a defined date and thereafter each party bearing its own costs.

There were two related patent actions concerning European Patent (UK) No. 1,401,489. Glaxosmithkline Biologicals SA sought revocation, while Novartis AG brought infringement proceedings against GSK companies. After the European Patent Office upheld only substantially narrower claims, Novartis accepted that there was no infringement case and GSK no longer pursued revocation. Both parties sought permission to discontinue, leaving costs as the only issue.

The court therefore had to determine whether the normal costs consequence of discontinuance should be displaced, and how responsibility for costs incurred during the overlapping UK and EPO proceedings should be allocated.

1. Applicable rule. Under Civil Procedure Rules 1998, rule 38.6(1), a claimant who discontinues is ordinarily liable for the defendant’s costs incurred up to discontinuance. The court may make a different order where a good reason is shown. The authorities, including Walker v Walker [2005] EWCA Civ 247 and RBG Resources plc v Rastogi [2005] EWHC 994 (Ch), establish that the court should not determine the merits on a discontinuance application and should not depart from the normal order merely because the claimant considers the litigation commercially unsuccessful.
2. The consequences of the intervening EPO decision and the parties’ conduct were material. GSK’s resistance to a stay contributed to wasted costs, but Novartis also contributed by failing to support expedition of the EPO appeal despite the existence of grounds for expedition. Once expedition was obtained, both parties accepted that a stay was prudent.
3. As to the infringement proceedings, Novartis had chosen to commence them after the stay application had been refused, despite recognising the risk of duplicated costs. The proceedings ultimately failed, and there was no good reason to displace the normal order. Novartis was therefore ordered to pay those costs.
4. As to the revocation proceedings, responsibility for wasted costs was shared. Novartis was ordered to pay GSK’s costs up to the date of its stay application. From that date, each party was ordered to bear its own costs.

The judgment records earlier procedural decisions concerning the same proceedings, including Glaxosmithkline Biologicals SA v Novartis AG [2009] EWHC 931 (Pat) and Novartis AG v Glaxosmithkline Biologicals SA [2009] EWHC 2422 (Pat). This judgment determined the consequential costs issue.