Omnipharm Ltd v Merial

In an appellate costs ruling, the successful party is identified by the substantive and commercial result, not by counting every issue. A respondent may recover costs where the appellant’s principal challenge fails and the respondent’s arguments on other issues were contingent or fell away. Security-related costs should be separately assessed where they are substantial and genuinely disputed, rather than reduced by an arbitrary percentage. The court may order a payment on account subject to repayment if a further appeal changes the order. Security need not be maintained pending a permission application where concurrent findings, a reliable undertaking to re-provide security, and prejudice caused by withholding funds make continuation inappropriate.

This was a further ruling on consequential matters following the Court of Appeal’s main judgment in the patent dispute, reported at [2013] EWCA Civ 2. Merial’s appeal against the finding that the 564 patent was insufficient had failed. Omnipharm’s obviousness arguments were contingent on that appeal succeeding, so the related obviousness issues fell away. The parties could not agree the resulting orders concerning costs, security for costs, payment on account, permission to appeal to the Supreme Court and the wording of the order. The court was therefore required to determine the appropriate ancillary orders.

The appeal had originated in the Patents Court before Floyd J, whose decision is reported at [2011] EWHC 3393 (Pat).

Lord Justice Kitchin gave the judgment of the court.

1. Costs of the respondent’s notice and cross-appeal. Omnipharm was properly treated as the winner because it achieved its commercial aim and Merial’s challenge to insufficiency failed. The fact that Omnipharm lost on systemic administration did not alter that conclusion. Its obviousness contentions were contingent on the insufficiency finding being overturned, and the obviousness issues therefore fell away once the principal appeal failed.
2. Security-related costs. The costs of applications for maintenance of security after 8 February 2012 were to be assessed and set off against any costs Merial was required to pay. The issues were self-contained, the costs were substantial, and there was a real question whether a proposed 7.5 per cent deduction would compensate Merial.
3. Payment on account. Omnipharm was entitled to its appeal costs, including the costs of the cross-appeal and respondent’s notice. The court ordered payment on account of £100,000, approximately 50 per cent of the estimated appeal costs, subject to Omnipharm’s undertaking to repay the sum if the order were varied on further appeal.
4. Maintenance of security pending a Supreme Court application. The existing security of £699,650 need not be maintained. The court relied on concurrent findings, Omnipharm’s compliance with earlier security orders, its undertaking to provide such security as the Supreme Court might require if permission were granted, and the prejudice caused by continued denial of the use of the money.
5. Other matters. The word conditionally was not to be added to the recital concerning the appeal. The court declined to determine costs associated with extending the undertaking to repay an interim payment because that issue had not been raised before it. The proposed interest wording was rejected because there was no realistic prospect that Omnipharm would be the net payer.
6. Permission for Merial to appeal to the Supreme Court was refused. The court considered that the judge had made no error of principle.

1. Court of Appeal (Civil Division): In the main appeal, the court dismissed Merial’s challenge to the insufficiency finding and ruled that the contingent obviousness issues fell away, in the judgment reported at [2013] EWCA Civ 2. This further ruling determined consequential costs, payment-on-account and security matters, and refused permission for a further appeal.
2. High Court of Justice, Chancery Division (Patents Court): Floyd J gave the decision under appeal, reported at [2011] EWHC 3393 (Pat), including the finding that the 564 patent was insufficient.