Pharmascience Inc. (Pharmascience) appealed a decision of the Federal Court awarding costs to Teva Canada Innovation and Teva Canada Limited (Teva) following two infringement actions. The actions alleged that Pharmascience's product Glatect® 40mg would infringe Canadian Patents Nos. 2,702,437 and 2,760,802. In one action, Teva was unsuccessful as the Federal Court determined that Patent 437 was invalid. However, Teva was successful in the other action, with the Federal Court deciding that Patent 802 is valid and would be infringed by Pharmascience. This decision was upheld by the Court of Appeal. The Federal Court encouraged the parties to reach an agreement on costs, but since they couldn't, the court made a costs award in Teva's favor based on the parties' written submissions. Pharmascience preferred each party to bear its own costs due to the divided success but suggested an alternative of awarding each party costs in its successful action. Teva argued that its settlement offers should be reflected in the costs award, even though they did not meet the requirements under the Federal Court Rules. Pharmascience claimed that the offers did not qualify as valid offers to settle. The Federal Court disagreed with Pharmascience's argument and considered Teva's settlement proposals, stating that they should be reflected in the costs award to encourage settlement. The court ordered Pharmascience to pay Teva lump sum costs of $277,500, reflecting a portion of Teva's disbursements and fees for the successful action. Pharmascience appealed the decision, arguing that the Federal Court erred in considering Teva's settlement proposals. However, the court disagreed with Pharmascience's interpretation of the rules and stated that settlement offers that do not meet the requirements of Rule 420 can still be considered in a costs award under Rule 400. The court emphasized that costs awards are determined on a case-by-case basis, taking into account the particular circumstances of the case and exercising judicial discretion. The court cited previous cases where settlement offers were considered in costs awards, even if they did not meet the conditions of Rule 420. The court noted that not all settlement offers will be a factor in costs awards, and the impact of a settlement offer will depend on the circumstances and the court's discretion. In conclusion, the court upheld the Federal Court's decision, stating that the settlement proposals made by Teva could be considered in the costs award under Rule 400, and Pharmascience's appeal was dismissed.

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