Sony Communications International AB v SSH Communications Security Corporation

An approved costs budget is not an absolute cap, but it provides a prima facie limit on recoverable costs. The court may depart from it only where there is good reason, considering all the circumstances. Each phase must normally be assessed separately. Relevant factors include whether the costs remain reasonable and proportionate, whether significant developments warranted revision of the budget, and whether the paying party would be taken by surprise. A party’s failure to update its budget does not remove the court’s power to depart from it, although it is relevant to the exercise of discretion.

This was a costs judgment following a patent revocation claim and related infringement counterclaim. The Patent had been held invalid, although it would have been infringed by the relevant products if valid. Sony was accepted to be the commercial winner and was entitled to its costs, subject to deductions for issues on which it lost.

The court was required to determine whether to depart from Sony’s approved costs budget, how to treat costs relating to a discontinued infringement allegation, and how to apportion costs between validity and infringement issues.

1. Departure from budgets. The court adopted the principles drawn from Henry v News Group Newspapers Ltd [2013] EWCA Civ 19. A budget is a guideline rather than a cap, but the court must consider each phase separately and may depart only for good reason. The parties must revise budgets where significant developments warrant revision. The court retains power to depart even where no revision was sought. All the circumstances are relevant, including proportionality, reasonableness, compliance with the updating duty, and whether the increase would surprise the paying party.
2. There was good reason to increase Sony’s budget for expert reports. The case required scrutiny of more documents than anticipated, and SSH’s budget for the same phase provided the best available indication of reasonable and proportionate expenditure. The budget was increased to £323,270.
3. Trial preparation and trial could not be combined merely because the division between them was to some extent arbitrary. Trial preparation remained subject to the approved budget. The trial budget was increased because substantial and unforeseen post-trial costs arose. Those costs were reduced to £70,000 before the budget was increased.
4. The discontinued PlayStation 4 claim did not justify recovery of its product and process description costs. The parties had agreed to assess costs at the broader level of validity and infringement, and those costs related to infringement.
5. The apportionment figures in the budget were not binding where they were demonstrably wrong. The court could make its own assessment. It allowed 100% of case-management costs to validity and infringement generally, 100% of the relevant witness-statement costs to validity, 80% of expert-report costs to validity, and 75% of trial-preparation and trial costs to validity.
6. SSH was ordered to pay Sony £876,347.28 in costs, with interest at 1% above base rate on qualifying payments, subject to agreement or determination of the interest calculation.

Not stated in the judgment.