Litigation Strategy Defines Large Cost Award In Pharma Patent Infringement Case

• Published date: 15 March 2021
• Subject Matter: Intellectual Property, Patent
• Law Firm: Bereskin & Parr LLP
• Author: Mr Andrew McIntosh and Martin Brandsma

Despite usually being deferred until after trial, cost considerations should seldom be an afterthought. Each party's litigation strategy from the start of the case will often dictate the costs ultimately awarded. Potential cost consequences should therefore be a relevant consideration of each strategic decision. This is particularly true in the context of pharmaceutical litigation where stakes can be high. A recent decision of the Chief Justice of the Federal Court of Canada emphasizes this point. In Allergan Inc. v. Sandoz Canada Inc., 2021 FC 186 ('Rapaflo'), the Court's $384,505.69 cost order against Allergan for its unsuccessful patent infringement claim, was ultimately defined by each party's chosen course of action in the underlying proceeding.

In Rapaflo, the Chief Justice was tasked with determining costs claimed in relation to a prior patent infringement action filed by the Allergan under Canada's Patented Medicines (Notice of Compliance) Regulations ('PM(NOC) Regulations'). That action related to Sandoz's generic silodosin product, used to treat benign prostatic hyperplasia. As we previously reported, Sandoz ultimately prevailed, with the Court finding no infringement of the patent at issue, despite dismissing Sandoz's counterclaim with respect to obviousness. The subsequent costs decision in Rapaflo is of particular interest to pharmaceutical litigants as it sets out a baseline for lump sum cost awards at 37.5% of fees, rejects a claim for set-off based on divided success, and illustrates the cost consequences of refusing an offer to settle.

Lump Sum Baseline: 37.5% of Fees

Lump sum cost awards have become increasingly common in IP disputes in the Federal Court. These awards are often well in excess of the amounts otherwise available under the applicable tariff. The Court in Rapaflo reaffirmed this trend, recognizing the unique attributes of IP proceedings that support these increased awards, including greater than average complexity, sophisticated litigants, and legal bills that far exceed those amounts contemplated by the tariff.

After finding a lump sum award appropriate, the Court in Rapaflo addressed recent caselaw that suggests lump sum awards should be based starting at the lower end of 25%-50% of fees. However, the Court determined that in complex proceedings under the PM(NOC) Regulations, a more appropriate starting point was the mid-point of the range (specifically 37.5%). The Court reasoned that the mid-point provides 'a better...