Actavis UK Ltd & Ors v Eli Lilly & Company

In determining consequential costs after an appeal, the overall winner’s recovery is only a starting point. The court may require that party to pay the costs of distinct issues on which it lost, particularly where those issues were separately argued. Where the parties’ estimates differ substantially, issue-based assessment and percentage recovery may be appropriate. Interim payments on account of costs should be cautious where the final outcome remains uncertain, and repayment may be ordered to reduce the payment to a sensible level. Permission to appeal should be refused where the proposed ground raises no arguable point of law. The distinction between direct infringement involving an unpredictable variant and indirect infringement involving the claimed material itself may defeat an alleged anomaly.

Actavis UK Ltd and others appealed to the Court of Appeal from a judgment of Mr Justice Arnold in the Patents Court, reported at [2014] EWHC 1511 (Pat). The Court of Appeal had handed down its substantive judgments on 25 June 2015, but the parties disagreed about the consequential order.

The court therefore considered the costs of the trial and appeal, the treatment of an interim payment made on account of costs, whether a contractual undertaking should be recited in the order, and whether permission to appeal to the Supreme Court should be granted. Lilly was the overall winner, although it had lost on the Rome II issue, related DNI factual issues, and the direct infringement limb of the patent issues.

The court resolved the outstanding consequential matters as follows.

1. Trial costs. Lilly was the overall winner because Actavis had failed to obtain the declarations sought. That was only the starting point. Lilly had lost the discrete Rome II issue and the DNI factual issues flowing from it. Since those issues had been separately argued, Lilly was ordered to pay Actavis’s costs of them, subject to issue-based assessment.
2. Lilly also failed on the direct infringement limb. In view of the limited dispute concerning indirect infringement, direct infringement was responsible for the greater part of the remaining costs. Lilly was therefore to recover 25% of its assessed trial costs after deduction of the Rome II and DNI factual costs, with the parties’ liabilities balanced accordingly.
3. Appeal costs. A similar approach was considered appropriate, but the parties’ estimates concerning the DNI factual issues were sufficiently close to avoid a separate assessment. After allowing for the costs of those issues, the court considered that overall justice required no order as to the costs of the appeal.
4. Interim payment. The High Court had ordered Lilly to pay £1,839,632.30 on account of Actavis’s trial costs. Because the adjusted costs outcome was uncertain and the payment might exceed Actavis’s eventual recovery, the court varied the sum to £350,000 and ordered repayment of the balance necessary to reduce the payment to that amount.
5. Other consequential matters. The court declined to include in the order a recital of the contractual undertaking because it served no purpose. Permission to appeal was refused: the prosecution-history point was irrelevant to the basis of the decision, and the proposed appeal concerning direct and indirect infringement raised no arguable point of law. The parties were directed to submit a draft order within seven days.

• Court of Appeal (Civil Division): following substantive judgments handed down on 25 June 2015, the court issued this supplementary judgment on 30 June 2015 concerning costs, interim payment, the form of order and permission to appeal.
• High Court of Justice, Chancery Division, Patents Court: judgment of Mr Justice Arnold, [2014] EWHC 1511 (Pat), from which Actavis appealed.