Friday, February 5, 2016

$2.9 Million Award Is 30% of Actual Legal Fees

Dow Chemical Co v NOVA Chemicals Corp 2016 FC 91 O'Keefe J here
            2,160,705 / film-grade polymers / ELITE SURPASS

I don’t normally blog on procedural issues, but I’ve made a partial exception for costs because of the interesting disparity between the Federal Court tariff and the actual costs of patent litigation. Awards for fees in the range of 10% of actual fees, which is not uncommon if the tariff is applied, are effectively a hybrid between the English rule (substantial costs in the cause) and the American rule (each party bears their own costs), which strikes me as the worst of both worlds: big enough to fight over (thus increasing costs), but not big enough to make any difference to litigation strategy. We have seen the courts gradually move from Column III of the tariff to Column IV or V in complex patent cases (see here for a review of the trends), but even that is often not enough to make a real difference: in this case fees assessed under Column V would amount to only 11% of actual legal fees. Even if “an award of costs represents a compromise between compensating a successful party and not unduly burdening an unsuccessful party” [10, quoting 2011 FC 1113 [11]], 11% is a distraction rather than a compromise.

O’Keefe J held that costs awarded pursuant to Column V of the tariff “would be totally inadequate as an amount of costs for the plaintiffs in this case. To only recoup 11% of your costs in such a complex case is not acceptable” [26]. Accordingly he exercised his discretion to depart from the tariff and award lump sum costs for legal fees in the amount of $2.9 million, which is
approximately 30% of the actual legal fees [29], for a total award, including disbursements, of $6.5 million [36].

It seems to me that this award of 30% of fees is entering the range where it is reasonable to view the award as actually being a compromise between the English and American rules. I don’t have an opinion as to whether such a compromise is better than the applying a pure version of either of the alternatives, but at least it is a substantive alternative, as opposed to the fee structure of the tariffs, which increasingly appears to reflect no principle other than historical accident. It will be very interesting to see what emerges from the discussion paper on costs that was issued by the Rules Committee.

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