Tuesday, April 12, 2022

Elevated Costs and Refusal to Bifurcate

Paid Search Engine Tools, LLC v Google Canada Corporation 2022 FC 519 McDonald J

2,415,167 / Paid Search Engine Bid Management

This is the costs decision following on 2021 FC 1435 (blogged here and here), in which McDonald J held that that the 167 patent asserted by Paid Search (PSET) against Google was invalid and not infringed.

McDonald J awarded costs at an elevated level (the upper range of Column of IV—Google did not seek a lump sum[10]), in light of several considerations. The main point of general interest is that PSET had refused to bifurcate and Google argued the consequent increase in litigation costs weighed in favour of elevated costs [23]. In response, PSET relied on Seedlings 2020 FC 505 [25], in which Grammond J noted parties are not required to seek bifurcation, and further noting, as McDonald J put it, “that the unsuccessful party would already face the consequences of failing to bifurcate as the costs award would include the fees that the successful party spent on the damages portion of the claim.”

McDonald J was not persuaded by this argument:

[25] In my view, this is a case that should have been bifurcated. The trial on construction, infringement and validity could have been conducted in half the time with significantly fewer experts. Although I acknowledge that, as in Seedlings, PSET will be responsible for Google’s damage experts’ fees, this was, nonetheless, a case that would have benefited [] from the liability portion of the claim [] proceeding in advance of the damages portion of the claim.

[26] Here, despite there being 59 claims that required construction, there is no doubt that the damages portion of the case took the majority of time and was the focus of most of the expert evidence. Damage and remedy-related evidence focused on reasonable royalty, accounting of profits, apportionment and non-infringing alternatives.

[27] This proceeding would have been more efficient as a bifurcated matter. The failure of PSET to agree to bifurcate is a factor which weighs in favour of higher fees.

This seems to be something of a difference of principle (albeit one that is within the discretion of the judge awarding costs). PSET v Google was perhaps more complex than Seedlings — McDonald J described this case as being “above average” in complexity [19], while Grammond J said Seedlings was “[not] overly complex” [p24], but I don’t read McDonald J as relying on this to distinguish Seedlings.

Moreover, I don’t see as the complexity of the case makes any difference. The question is whether the naturally elevated costs faced by an unsuccessful party who refused to bifurcate is a sufficient disincentive, or whether some additional sanction in the form of elevated costs is appropriate. Either way, the additional costs will increase proportionately with the complexity of the case, so I don’t think the complexity affects the principle. Similarly, some cases may benefit more from bifurcation if the damages portion is particularly time consuming relative to the liability portion, but again costs will increase proportionately under either approach.

The question of how to deploy costs awards to encourage just yet efficient resolution of a dispute is always tricky—there is no academic consensus even on the basis issue of the Amercian rule v the English rule for fee shifting—and I have no opinion as to which approach is preferable. I note that this case did not raise the problem of access to justice by small or unsophisticated parties: McDonald J observed that “PSET is neither an inexperienced nor an unsophisticated litigant. Accordingly, I do not accept that the access to justice rights of smaller patent holders is a factor that needs to be considered in setting the quantum of costs in this case” [15].

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