After dismissing interim and interlocutory injunction motions, the Federal Court awarded costs to the successful defendant at a quantum higher than stipulated in Column III of Tariff B of the Federal Courts Rules. The tariff was "woefully inadequate" in the circumstances.
In The Regents of the University of California et al v I-Med
Pharma Inc, Justice Manson of the Federal Court dismissed the
plaintiffs' interim injunction motion1 and
interlocutory injunction motion2 for failing to
demonstrate irreparable harm. Our IP Monitor discussing the
judgment refusing the interlocutory injunction can be
found here.
The court awarded approximately $140,000 in costs to the successful
defendant. This was much higher than the amount stipulated in
Column III of Tariff B. The judge determined costs stipulated by
the tariff were "woefully inadequate in this case," for
they covered only about 10% of the defendant's actual incurred
fees.
Litigation history
The plaintiff and moving party, TearLab Corporation, is an
exclusive licensee of Canadian Patent No. 2,494,540 (the
'540 Patent), which is owned by the other
plaintiff in this case, the Regents of the University of California
(University). The '540 Patent generally
relates to diagnostic devices, systems, and methods for measuring
the osmolarity of tears, said to be useful for diagnosing and
treating dry eye disease.
TearLab filed an interlocutory injunction motion to prevent the
defendant I-MED Pharma Inc. from selling its ophthalmic medical
device pending determination at trial of patent infringement and
validity. TearLab further filed a motion for an interim injunction
to prevent I-MED from selling its device before the interlocutory
injunction motion was heard. The Federal Court dismissed both
injunction motions.
I-MED moved for, and was awarded, $100,000 as security for costs
through discovery as neither TearLab nor the University is
ordinarily resident in Canada.
The parties' positions
TearLab argued that costs should be awarded pursuant to the
middle of Column III of Tariff B of the Federal Courts
Rules as the issues in both injunction motions were not
complex. In the alternative, if the court were to award a lump sum,
TearLab argued that fees for I-MED's expert should be
reasonably capped and I-MED's disbursements should be assessed
for reasonableness.
I-MED argued that costs should be awarded at two-thirds of its
actual legal fees for two reasons. First, I-MED was successful in
dismissing both injunction motions. Second, the quantum of costs
stipulated by Column III of Tariff B would only reimburse I-MED for
about 10% of its actual fees incurred for the injunction motions
and its motion for security for costs.
I-MED further sought to be reimbursed for all of its disbursements,
which it submitted was reasonable, given its reliance on a single
expert and reasonable use of counsel leading to the injunction
hearings.
The court's analysis
Justice Manson acknowledged that TearLab's injunction
motions were reasonably brought, that there was a serious issue at
play in both motions, and that there was some overlap in
preparation for and arguments made with respect to expert and fact
evidence used in both motions.
However, in awarding costs to I-MED at a quantum higher than
stipulated in Column III of Tariff B, Justice Manson recognized the
fundamental purposes that modern costs rules should foster, which
include: (i) to partially indemnify successful litigants for the
costs of litigation; (ii) to encourage settlement; and (iii) to
discourage and sanction inappropriate behaviour. Further, a costs
award should reflect what the court views as a fair and reasonable
amount that should be paid by the unsuccessful party.
Upon consideration of I-MED's actual fees incurred to
successfully defend both injunction motions, and the factors set
out in subsection 400(3) of the Federal Courts Rules,
Justice Manson concluded that the quantum of costs stipulated by
Column III of Tariff B was woefully inadequate.
Justice Manson further held that I-MED was entitled to reasonable
disbursements. He noted that I-MED's disbursements were
generally reasonable, but made some discounts for the overlap
involved in the two injunction motions, and a lack of evidence on
the dates and length of stay for travel expenses and the hourly
rate of I-MED's expert.
Justice Manson ultimately awarded a lump sum to I-MED, which
covered approximately 40% of the defendant's actual fees and
approximately 60% of the defendant's disbursements.
This decision is another example of the Federal Court's
willingness to deviate from the tariff when doing so will be fair
and reasonable.3
Link to decisions:
Interim motion judgment: 2016 FC 350
Interlocutory motion judgment: 2016 FC 606
Judgment regarding costs: Costs judgment
Footnotes
1. 2016 FC 350.
2. 2016 FC 606.
3. In The Dow Chemical Company v Nova Chemical
Corporation, 2016 FC 91, Justice O'Keefe deviated from
the tariffs and awarded the plaintiffs of a successful patent
infringement proceeding a lump-sum award of 30% of the
plaintiffs' legal fees. Following the tariffs would have
restricted the costs award to only 11% of the plaintiffs' legal
fees. Our IP Monitor relating to this judgment can be
found here.
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