Sterling Drug, Inc v the Boots Company Plc

[1996] APO 31

official notice

decision of a delegate of the commissioner of patents

Application  :          No. 612679 in the name of STERLING DRUG, INC

Title:          A pharmaceutical composition containing S(+) ibuprofen substantially free of its R(-) antipode

Action:          Dismissal of an opposition by THE BOOTS COMPANY PLC to amendments under section 104

Decision:          Issued            .

Abstract:          The amendment of the specification had been withdrawn by the patent applicant.  As a consequence, dismissal of the opposition to the amendment is a formality.

Costs awarded against the applicant as the opponent has effectively “won” the opposition.  The applicant’s behaviour in the opposition considered.

Observed that party and party costs are not equivalent to damages, and the principle of restitutio in integrum does not apply.  The scale of costs can be varied to allow the recovery of costs reasonably and properly incurred, if the scale provides inadequate recompense.

Actual costs were not appropriate as there was no evidence of any unusual expense incurred.  Costs awarded according to Schedule 8.

patents act 1990

decision of a delegate of the commissioner of patents

Re:Patent Application No. 612679 by STERLING DRUG, INC, and dismissal of an opposition by THE BOOTS COMPANY PLC to amendments under section 104 of the Patents Act 1990

background

Patent application 612679 in the name of Sterling Drug, Inc (hereafter referred to as STERLING) was advertised accepted on 18 July 1991.  A notice of opposition to the grant of a patent was lodged by The Boots Company PLC (hereafter referred to as BOOTS) on 15 October 1991.  The service of evidence in support was completed on 13 November 1992.  The service of evidence in answer was completed on 13 August 1993.  The time for service of evidence in reply has not yet expired.

On 12 May 1993 STERLING requested amendment of the specification under section 104 (hereafter referred to as the first amendment). The Commissioner directed that the time for service of evidence in reply to the substantive opposition would be extended to one month after the Commissioner notified the parties of the allowance, refusal or withdrawal of the first amendment. The request was advertised on 19 August 1993. A notice of opposition to the amendments was filed by BOOTS on 18 November 1993. The service of evidence in support was completed on 7 July 1994. No evidence in answer was served (following three extensions of the time for service, which extended the time until 7 July 1995). On 3 August 1995 the Opposition Clerk advised the parties that the provisions of regulation 5.12 would now apply, i.e. the opposition to the first amendment could be set down for a hearing. STERLING withdrew the first amendment on 17 October 1995.

On 6 July 1995 STERLING made another request to amend the specification under section 104 (hereafter referred to as the second amendment). The Commissioner directed that the time for service of evidence in reply to the substantive opposition would be extended to one month after the Commissioner notified the parties of the allowance, refusal or withdrawal of the second amendment. The request was advertised on 8 February 1996.

On 16 January 1996 the Opposition Clerk advised the parties that the Commissioner proposed to dismiss the opposition to the first amendment, and asked whether the parties wished to be heard.  BOOTS indicated that it wished to be heard on the issues of costs, and STERLING indicated that it did not wish to be heard. A hearing was conducted by telephone on 1 May 1996.  BOOTS was represented by Mr J.Slattery, patent attorney of Davies Collision Cave, Melbourne.  A letter from the patent attorney for STERLING was received by facsimile at 8.36 am on the morning of the hearing (the original was filed at the Melbourne sub-office on the same day).  I allowed BOOTS 21 days to comment on these submissions.

DECISION

The present opposition was made under section 104(4) of the Patents Act 1990, and by virtue of regulation 5.1 the proceedings are governed by Chapter 5 of the Patents Regulations.

1. Admissibility of the facsimile letter

The Opposition Clerk advised the parties by letter that they could appear at the hearing or lodge written submissions before the date of the hearing, and that written submissions are considered to constitute an appearance (and thus attract the fee for appearance).  Mr Slattery drew my attention to the fact that the facsimile letter was not lodged before the date of the hearing, and was not accompanied by the hearing fee, and argued that the letter was not admissible.

The requirement in the standard letter sent by the Opposition Clerk appears to be in conflict with the Patents Regulations.  Regulation 22.23 relates to hearings.  This regulation states in part:

“(4)     If a party to a hearing does not intend to appear at a hearing, the party may make a submission in writing to the Commissioner before the hearing begins to which the Commissioner must have regard in reaching his or her decision on the matter being heard as if:
(a)       the party were present or otherwise participating in the hearing;  and

(b)the matter of the submission were presented by the party in the presence of the Commissioner.”

It is clear that there is a difference between an appearance, and the making of a submission.  Fee item 28 is payable “On appearing at a hearing”, and not upon making a submission.  I consider that it is clear that a submission does not attract the hearing fee, and that if a written submission is made before the hearing begins then the Commissioner must have regard to that submission.

I conclude that I must have regard to the contents of the facsimile letter.

1. Dismissal of the opposition

The Commissioner has the power to dismiss an opposition whether or not the applicant has requested dismissal (regulation 5.5(3)).  Due to the withdrawal of the amendment to the specification, the cause of action for the opposition has been removed.  Dismissal of the opposition in this situation is a formality, and accordingly I dismiss the opposition to the first amendment.

1. Costs

BOOTS argued that they should be awarded costs in the opposition, as they had in effect “won” the opposition.  BOOTS further argued that they should be awarded actual costs, rather than costs according to Schedule 8 of the Patents Regulations.  STERLING’s submission was:

“We also advise that The Boots Company PLC has never approached our client for settlement in relation to the costs of the opposition to these amendments.  Given that no approach has ever been made, it is respectfully submitted that Boots should not be entitled to any costs beyond costs in relation to the Notice of Opposition and Evidence-in-Support stages.  If an approach for settlement had been made, it is quite probable that settlement would have been agreed without incurring the costs of the present Hearing.”

This submission inherently accepts that BOOTS is entitled to costs, and merely disputes the amount.  In considering an award of costs, I must take into account all relevant matters (American National Can Company v W.R. Grace & Co.-Conn. (1994) AIPC 91-063, 30 IPR 292), and the fact that the amendment has been withdrawn does not automatically entitle BOOTS to an award of costs (note Continental White Cap, Inc. v W.R. Grace & Co.-Conn. (1992) AIPC 90-882, 24 IPR 410). This consideration can include the behaviour of the parties (Miller v Australian Telecommunications Commission (1985) 7 ALN N280).  The facts that are significant are:

i)the withdrawal is likely to prolong rather than resolve the matter, due to the reintroduction of the first amendment in the second amendment (note Deuar v Northern Riverina City Council, Patent Office decision, patent application number 629841, 13 November 1995, unreported);

ii)the withdrawal of the amendment did not occur until 15 months after the completion of evidence in support, an extremely long delay which has not been explained;

iii)the withdrawal of the amendment did not occur until 3 months after the period for serving evidence in answer had expired, a delay that needs explanation;  and

iv)the reasons for requesting an extension of the time for serving evidence in answer never referred to the possibility of withdrawing the amendments, indicating that the reasons were not full and frank.

I consider that it is appropriate to award costs against STERLING.  Moreover, the cost of the appearance of BOOTS at the hearing are to be included in the costs as there is no requirement for a party to attempt settlement before seeking costs (although settlement should be encouraged).  The more difficult question is whether those costs should be the actual costs.  Regulation 22.8(1) specifies that:

“22.8   (1)       The Commissioner must not award costs in proceedings to which this Division applies, other than costs specified in Schedule 8, unless each party to the proceedings has had the reasonable opportunity to make a submission on the matter of the award of those costs.”

I did not advise STERLING of the request to vary the scale of costs as I am of the opinion that BOOTS have not made out a prima facie case for variation.  The arguments on behalf of BOOTS on the point are that the behaviour of STERLING, viewed as a whole, had been to delay the substantive opposition (and this delay could be extended through further amendments), and that costs according to the schedule would not fully recompense BOOTS.

In considering costs, I recognise that there are party and party costs, and solicitor and client costs.  As solicitor and client costs are awarded when costs are payable out of a common fund (for instance, see B.C.Cairns Australian Civil Procedure, third edition, page 494), they are not applicable to most matters before the Commissioner.  It is important to remember that party and party costs are not equivalent to damages, and the principle of restitutio in integrum does not apply (see Smith v Buller (1875) LR 19 Eq 473 at 475). There are a small number of curial decisions on variation of a statutory scale of party and party costs. Although the rules of court in these cases are not identical to regulation 22.8, I believe I can apply the principles relevant to the exercise of discretion by the courts. The cases establish that:

a)the scale can be varied if the case is of “unusual complexity or importance”, and the scale is inadequate (Willison v Van Ryswyk [1961] WAR 87 at 91, note also Schmidt v Gilmour [1988] WAR 219);

b)it is relevant to have regard to “whether additional work was done, whether that work was necessarily or reasonably done, whether the fees proposed to be charged for such work are reasonable, whether an inadequacy exists, and the principle that an order for costs should enable the successful party to recover costs which have been reasonably and properly incurred” (Collins v Westralian Sands Ltd (1993) 9 WAR 56 at 67);

c)costs on a higher scale are to be allowed in cases where there has been “an extraordinary amount of work and labour” in the preparation and conduct of the case, and should not be imposed as a penalty on the other party for the manner in which they have conducted their case (Nicholson v Colonial Mutual Insurance Co (1887) 13 VLR 58 at 65); and

d)when considering the use of more than one counsel, the scale can be varied if a reasonable and prudent, but not overcautious man, in all the circumstances, would seek the services of two counsel, notwithstanding the expense (Stanley v Phillips (1966) 115 CLR 470, Peile v Nobel (Australasia) [1966] VR 433).

I conclude that the scale of costs can be varied to allow the recovery of costs reasonably and properly incurred, if the scale provides inadequate recompense.

BOOTS’ concerns focussed on the behaviour of STERLING, in causing substantial delay to the opposition to the first amendment (and thus to the substantive opposition), and the assertion that BOOTS would be out of pocket if costs according to the Schedule were awarded.  The evidence presented above, while circumstantial, suggests that STERLING have deliberately delayed the opposition to the first amendment, and may have delayed the substantive opposition.  While such conduct is undesirable, it is not relevant to the quantum of costs.  The only relevant matter is the reasonableness of any unusual expenses incurred by BOOTS.  There is no evidence that BOOTS incurred any unusual expense in the course of the opposition, so I will not order a variation of the scale.

conclusion

I dismiss the opposition to the amendment filed on 12 May 1993.  I award costs in the opposition to the amendment filed on 12 May 1993 against Sterling Drug, Inc.  Costs shall be in accordance with Schedule 8, and shall include the hearing fee.

Dr S.D.Barker

Delegate of the Commissioner of Patents

Patent attorneys for the patent applicant  :  Watermark, Melbourne

Patent attorneys for the opponent   :  Davies Collison Cave, Melbourne