Federal Court of Appeal allows $6.5 million lump sum cost consequence

In a recent appeal (2017 FCA 25) relating to the issue of costs following a patent infringement trial, the Federal Court of Appeal commented that lump sum awards have found increasing favour with courts, and for good reason as they save the parties time and money. Lump sum costs awards further the objective of the Federal Courts Rules of securing “the just, most expeditious and least expensive determination” of proceedings (Rule 3). When a court can award costs on a lump sum basis, granular analyses are avoided and the costs hearing does not become an exercise in accounting. Furthermore, this case demonstrates that there are circumstances in which costs generated even at the high end of Column V of Tariff B bear little relationship to the objective of making a reasonable contribution to the costs of litigation. As a note of caution, however, the Court states that an increased costs award cannot be justified solely on the basis that a successful party’s actual fees are significantly higher than the Tariff amount. As a matter of good practice, the Federal Court of Appeal notes that requests for lump sum awards should generally be accompanied by a Bill of Costs and an affidavit in respect of disbursements that are outside the knowledge of the solicitor.

Accordingly, the Federal Court of Appeal dismissed the appeal of a $6.5 million for lump sum cost consequence to the patentee’s success in an action for patent infringement (2014 FC 844, affirmed 2016 FCA 216). At trial (2016 FC 91), the patentee (Dow) asked for costs above the amounts provided by Tariff B of the Federal Courts Rules. It sought a lump sum award of $6.5 million: $2.9 million in legal fees (which represented 30% of its actual legal fees of $9.6 million) plus $3.6 million in disbursements. In the alternative, Dow asked for a lump sum between $4.7 million and $6.5 million, the former amount including the same disbursements, but with the amount for legal fees based on Column V of Tariff B. In awarding the $6.5 million lump sum, the trial judge described the infringement trial as “an extremely complex patent case involving much expert testimony,” noting 22 allegations of invalidity, 33 days of discovery, 32 days of trial, written submission exceeding 700 pages, and the closing argument lasting three days. Based on these considerations, the trial judge concluded that an increased award of costs was justified, and awarded legal fees under Column V of Tariff B, noting that the information provided by Dow (specifically the Bill of Costs and the attached schedules) was sufficient to allow him to determine the reasonableness of the amount.

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