Federal Court of Appeal upholds $6.5M judgment against Nova

The Federal Court of Appeal has upheld $6.5 million in costs against Nova Chemical Corporation in a dispute with the Dow Chemical Company over patent infringement.

Lawyers say the costs could be the largest reported award the Federal Court has granted in a patent infringement matter.
In Nova Chemicals Corporation v. the Dow Chemical Company, the Federal Court of Appeal dismissed an appeal from Nova, finding Federal Court Justice John O’Keefe had not erred in his determination to grant costs in a lump sum, rather than use a full assessment process in accordance to a tariff.

“Lump sum awards have found increasing favour with courts, and for good reason,” Justice Donald Rennie said the decision, on behalf of a three-judge panel. “They save the parties time and money… When a court can award costs on a lump sum basis, granular analyses are avoided and the costs hearing does not become an exercise in accounting.”

Colin Ingram, one of the lawyers representing Dow, says the decision demonstrates a continuing acknowledgement by the courts of the usefulness in appropriate circumstances of lump sum awards in patent infringement matters.
“Part of what I think the court has been acknowledging in this case and others is that there is usefulness — in appropriate cases where it can be done — for a lump sum to be awarded at the outset by the trial judge to avoid this further proceeding,” says Ingram, who is a partner with Smart & Biggar/Fetherstonhaugh.

The Federal Court proceedings included a 32-day trial, in which the judge found Nova had infringed a patent owned by Dow in one of its products. Both companies manufacture polyethylene film-grade copolymers used in packaging applications.
O’Keefe granted Dow the lump sum of $6.5 million, which was $2.9 million in legal fees and $3.6 million in disbursements.

O’Keefe noted that the proceedings were “extremely complex”, with written submissions exceeding 700 pages, and that both parties undertook extensive testing that were at the heart of the dispute. He found that given this the 11 per cent that was allowable under the tariff would be inadequate, and that Dow should get an amount that was 30 per cent of its legal costs.

Nova opposed the granting of a lump sum, arguing that the issue of costs should go to an assessments officer.

Nova claimed the record and evidence provided were not sufficient to substantiate a lump sum. Nova objected to “the lack of a supporting affidavit and its inability to cross-examine and test Dow’s claim for disbursement of $1.6 million,” but the judge dismissed this argument, saying he was satisfied with Dow’s submissions.

O’Keefe determined that the costs should be a fixed lump sum, saying an assessment would “serve no purpose”.

In their appeal, Nova submitted that any departures from the tariff should only be granted in exceptional circumstances. Nova also argued that O’Keefe had erred in awarding costs based on a percentage of Dow’s actual fees, alleging the judge did not analyze whether the time billed by Dow’s lawyers was reasonable.

Nova also argued the judge was not entitled to come to the conclusion he did, saying the evidence provided before the judge was insufficient, with respect to Dow’s fees and disbursements.
The Federal Court of Appeal found that the evidentiary record before a trial judge that awards a lump sum does not need to provide the same level of detail as would be required by an assessment officer, who would be unfamiliar with the case.

The court also determined that the judge had a sufficient basis on which to conclude that the disbursements claimed by Dow were reasonable.

Ingram says the Federal Court of Appeal decision is an acknowledgement for the need for a practical approach in certain circumstances to certain cost issues.

“Here it’s an acknowledgement that the trial judge is in a position to assess various issues relevant to costs including the complexity of the proceedings, the nature of the trial, including the number of experts and the testing that was involved,” he says.