Improver Corporation and Another v. Raymond Industrial Ltd and Another

CACV000193A/1991

BETWEEN

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Coram: Hon. Fuad, V.-P., Clough & Penlington JJ.A.

Date of Hearing: 18 December 1991

Date of order: 18 December 1991

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DECISION ON COSTS

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Fuad, V.-P. :

1. The plaintiffs brought an action in the High Court claiming, inter alia, an injunction and damages, or at their option an account of profits, for the infringement of their patent. The defendants raised the issue of the validity of the patent by way of counterclaim. On 4th September 1989, the hearing of the action began before Mayo, J. On 2nd October he gave judgment, and his judgment is now reported at [1990] 1 HKLR 330. He found the patent to be valid, but that it had not been infringed by the article made by the defendants.

2. The plaintiffs appealed against his finding that there had been no infringement to this Court and the defendants, by their respondents' notice, cross-appealed against the finding of validity. After an 8 day hearing, this Court, as presently constituted, dismissed the appeal and the cross-appeal. We handed down our judgment on 7th September 1990. As regards the infringement issue, we decided the matter on different grounds to those incorporated in the judge's decision.

3. When we handed down our judgment, we indicated that if the parties were unable to agree on the question of costs, we would be pleased to hear Counsel on a date to be fixed. We are somewhat surprised that it took so long to bring the matter back before us. Nevertheless, today we have heard helpful and elaborate arguments on the appropriate order that we should make to reflect our decision on the appeal.

4. Mr Garland, who represents the plaintiffs, has drawn our attention to the practice which is well settled in patent cases of making, in appropriate cases, an order for the apportionment of costs. He cited a number of authorities to us (or rather I would call them examples) where this type of discretion had been exercised. The point arises, of course, because here (as quite often happens) the defendants have succeeded on the issue of infringement, but have failed on the issue they raised of validity, and the cases show that the court often takes such matters into account when deciding what order to make as to costs.

5. There is a helpful passage in Terrell on the Law of Patents, 13th edn., which begins at p.443 and continues on the next two pages, under the heading "Apportionment of costs". I will read a short passage from the judgment of Bowen L.J. in Badische Anilin and Soda Fabrik v. Levinstein (1885) 29 Ch.D. 366 at p.418, the passage cited by the authors of Terrell on p.444 :-

"I am of the opinion in this case that the plaintiffs should have the costs occasioned by the issues raised by the particulars of breaches, and that in respect of all the other costs the costs in the action should follow the usual result and be awarded to the successful party. It seems to me that without laying down any hard-and-fast line, or trying to fetter our discretion at a future period, in any other case, we are acting on a sensible and sound principle, namely, the principle that the parties ought not, even if right in the action, to add to the expenses of an action by fighting issues in which they are in the wrong. It may be very reasonable with regard to their own interest, and may help them in the conduct of the action, that they should raise issues in which, in the end, they are defeated, but the defendant who does so does it in his own interest, and I think he ought to do it at his own expense. The order, therefore, I think, ought to be as I have stated."

Bowen, L.J. was making an order in a case where the defendant had succeeded on the issue of infringement, but had failed on that of validity, as happened in our case.

6. Mr Garland's submission in relation to the nature of the apportionment we should order is founded on the fact that (if I may so call them) the three Catnic questions were answered by Mayo, J. and by this Court differently, although we agreed with the judge that infringement had not been established. The three Catnic questions are usefully set out in the judgment of Penlington, J.A. who delivered the judgment of the Court in the appeal with which we are concerned. That judgment is now reported at [1991] 1 HKLR 251. The three questions (as formulated and summarised by Hoffmann, J. in Improver Corporation and Others v. Remington Consumer Products Ltd. & Others [1990] FSR 181, at p.189) are set out by Penlington, J.A. at p.260. I will not read them out.

7. Mayo, J. answered "yes" to the first question, to which we answered "no". He answered "no" to the second question (if he turned out, he said, to be wrong on the first) but we answered "yes". He regarded it unnecessary to answer the third question, and we answered "yes" to that question. I hope that that is a fair account of the effect of the different judgments on the Catnic questions.

8. Mr Garland points out that, in effect, on the first two questions, these were findings in the plaintiffs' favour. He submits, therefore, that the costs' order that we make ought to reflect the fact that on two of the issues the defendants failed, although they won on the ultimate issue of infringement.

9. Miss Tam, for the defendants, submitted that the matter should not be approached in the way Mr Garland suggested - the Catnic questions could not be separated. She argued that there was no reason why the Court should not order that the plaintiffs pay the defendants the costs of the appeal, without any apportionment. She is content that the costs' order made by Mayo, J. should be left intact. I may mention here that he had ordered that the plaintiffs should pay 80% of the defendants' costs of the action and counterclaim.

10. I have found most helpful the general remarks on costs made by Lloyd-Jacob, J. in Vaisey v. Toddlers Footwear (1954) Ltd., [1957] RPC 90. His decision on costs begins at p.103 - that was also a case in which the defendants failed on the issue of validity but succeeded on the issue on infringement. He said :-

"It seems to me quite clear  that if a defendant succeeds in resisting a claim made by a plaintiff in a patent action, he is no less entitled to an award of costs properly incurred in so doing than is a defendant in any other action. In a patent action the plaintiff appreciates that he must establish that there has been infringement of a valid patent, and the statement of claim in a patent action clearly acknowledges that by pleading both the fact of infringement and an assertion of validity. The defendant, in contesting both issues, is using perfectly proper shields which are open to him in defending the claim. The inclusion of a counterclaim for revocation in such circumstances involves no substantial additional costs over and above the defensive costs, save merely the cost of the pleading, and that I understand is purely nominal.

It is the fact that the Court possesses power, so as to do justice between the parties, to direct apportionment of the general costs incurred in an action. That is plainly a valuable sanction if in the result the Court thinks it right to hold that any party has introduced irrelevant material or has unduly expended time upon matters which are not really relevant to the issue. But apportionment, save in the form of a rough and ready estimation on a fractional basis, undoubtedly must introduce a complicated and expensive taxation which the Court of Appeal has indicated should be avoided if possible."

11. In that case, on the facts, Lloyd-Jacob, J. decided that although he could not say that the defence made against the assertion of validity was, in all the circumstances, other than reasonable, he would order that the plaintiffs should pay only five-sixths of the defendants' taxed costs.

12. The order Mr Garland suggests to be appropriate on the facts of our case is (so far as the appeal is concerned) that the plaintiffs be ordered to pay 60% of the defendants' costs of the appeal. He also submits that it would be appropriate for this Court to vary the judge's order to the same degree, so that the plaintiffs would pay only 60% of the defendants' costs of the action and counterclaim.

13. It is not easy to be sure one is doing justice in a matter of this kind. I have been persuaded that it would not be right simply to make the order I was originally minded to make (that the defendants should be given the costs of the appeal save insofar as they were increased by reason of the cross-appeal) but rather, in an attempt to save expense and to simplify the task of the taxing master, to order that the costs (to be taxed if not agreed) be divided between the parties in definite proportions. The order I propose is that the plaintiffs should pay 90% of the costs of the appeal. I would further propose that the order relating to costs made by Mayo, J. be left undisturbed.

14. I would explain that I have reached the figure of 90% on the basis that while it was perfectly understandable, particularly in the light of the decision of the European Patent Office, that the validity point should continue to be pursued before us by the defendants, nevertheless, I think the fact that it was persisted in beyond the first instance court, should be reflected in the amount of costs that the defendants will ultimately receive.

Clough, J.A. :

15. I agree.

Penlington, J.A. :

16. I also agree.

Representation:

Mr Peter Garland (Denton Hall Burgin & warrens) for Plaintiffs/Appellants

Miss Winnie Tam (Robin Bridge & John Liu) for Defendants/Respondents