H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 (7 September 2009)

Federal Court of Australia Act 1976 (Cth), s 43

Arrow Pharmaceuticals Ltd v Merck & Co Inc [2005] FCA 188
Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2002) 54 IPR 495
Emirates v Australian Competition and Consumer Commission (No 2) [2009] FCA 492
Gibbett v Forwood Products Pty Ltd (No 2) [2001] FCA 434
H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70
JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (No 2) [2007] FCAFC 6
Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 2) [2007] FCAFC 172
PAC Mining Pty Ltd v Esco Corporation (No 2) [2009] FCAFC 52
Ruddock v Vadarlis (No 2) (2001) 115 FCR 229
Telstra Corporation Ltd v Australian Competition Tribunal (No 2) [2009] FCAFC 34

H LUNDBECK A/S and LUNDBECK AUSTRALIA PTY LTD v ALPHAPHARM PTY LTD (ACN 002 359 739)
NSD 1048 of 2008

H LUNDBECK A/S v ARROW PHARMACEUTICALS PTY LTD (ACN 003 144 170)
NSD 1052 of 2008

H LUNDBECK A/S v COMMISSIONER OF PATENTS and ALPHAPHARM PTY LTD (ACN 002 359 739)
NSD 1053 of 2008

EMMETT, BENNETT AND MIDDLETON JJ
7 SEPTEMBER 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1048 of 2008

BETWEEN:	H LUNDBECK A/S First Appellant LUNDBECK AUSTRALIA PTY LTD Second Appellant
AND:	ALPHAPHARM PTY LTD (ACN 002 359 739) Respondent

JUDGES:	EMMETT, BENNETT AND MIDDLETON JJ
DATE OF ORDER:	7 SEPTEMBER 2009
WHERE MADE:	SYDNEY

1. The appellants pay 50% of the respondent’s costs of the appeal and cross-appeal.

2. Order 11 made by primary judge on 19 June 2008 be varied to delete "30%" and substitute "25%".

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1052 of 2008

BETWEEN:	H LUNDBECK A/S Appellant
AND:	ARROW PHARMACEUTICALS PTY LTD (ACN 003 144 170) Respondent
JUDGES:	EMMETT, BENNETT AND MIDDLETON JJ
DATE OF ORDER:	7 SEPTEMBER 2009
WHERE MADE:	SYDNEY

1. The appellant pay 50% of the respondent’s costs of the appeal and cross-appeal.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1048 of 2008

BETWEEN:	H LUNDBECK A/S First Appellant LUNDBECK AUSTRALIA PTY LTD Second Appellant
AND:	ALPHAPHARM PTY LTD (ACN 002 359 739) Respondent

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1052 of 2008

BETWEEN:	H LUNDBECK A/S Appellant
AND:	ARROW PHARMACEUTICALS PTY LTD (ACN 003 144 170) Respondent

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1053 of 2008

BETWEEN:	H LUNDBECK A/S Appellant
AND:	COMMISSIONER OF PATENTS First Respondent ALPHAPHARM PTY LTD (ACN 002 359 739) Second Respondent

JUDGES:	EMMETT, BENNETT AND MIDDLETON JJ
DATE:	7 SEPTEMBER 2009
PLACE:	SYDNEY

1 These appeals have been disposed of by orders made in accordance with the reasons of the Court published on 11 June 2009 (see [2009] FCAFC 70). However, the parties asked the Court to defer dealing with the question of the costs of the appeals and of the proceeding at first instance until after the parties have had an opportunity of considering the Court’s conclusions and its reasons for those conclusions. The parties have now made written submissions on the question of costs.

2 In some respects, I reached conclusions different from those of Bennett and Middleton JJ. The orders for costs that would have been appropriate on the basis of the conclusions that I reached would be different from those that are appropriate in the light of the conclusions of the majority. However, there is no utility in my indicating the orders that I would have made on the basis of the conclusions that I reached and the parties have made no submissions on that basis.

3 I have read in draft form the proposed reasons of Bennett and Middleton JJ on the question of costs. I do not wish to say anything about what their Honours propose.

I certify that the preceding three (3) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1048 of 2008

BETWEEN:	H LUNDBECK A/S First Appellant LUNDBECK AUSTRALIA PTY LTD Second Appellant
AND:	ALPHAPHARM PTY LTD (ACN 002 359 739) Respondent

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1052 of 2008

BETWEEN:	H LUNDBECK A/S Appellant
AND:	ARROW PHARMACEUTICALS PTY LTD (ACN 003 144 170) Respondent

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 1053 of 2008

BETWEEN:	H LUNDBECK A/S Appellant
AND:	COMMISSIONER OF PATENTS First Respondent ALPHAPHARM PTY LTD (ACN 002 359 739) Second Respondent

JUDGES:	EMMETT, BENNETT AND MIDDLETON JJ
DATE:	7 SEPTEMBER 2009
PLACE:	SYDNEY

4 These appeals and cross-appeals were heard together arising from proceedings similarly heard together by the primary judge. The nature and history of the proceedings and of the appeals and cross-appeals is set out in the reasons for judgment of Emmett J (see H Lundbeck A/S v Alphapharm Pty Ltd [2009] FCAFC 70), and substantive orders have already been made by the Full Court disposing of the appeals and cross-appeals.

5 Written submissions have been filed by the parties as to the appropriate cost orders to make in the appeals and cross-appeals, and in the proceedings below. The parties have consented to the Full Court dealing with the issue of costs on the basis of the written submissions alone. In relation to appeal NSD 1053 of 2008, the Full Court has already made an order that the appeal be dismissed with costs, and no further consideration is given to that appeal.

6 The position contended for by each of the parties in relation to the remaining appeals can be summarised as follows:

(a) Alphapharm submitted that Alphapharm was the overall successful party in commercial terms and that accordingly Lundbeck should pay its costs, discounted by 50%, to account for the fact that some of Alphapharm’s arguments were not successful.

In addition, Alphapharm submitted that the order for costs made by the primary judge should be adjusted to reflect its additional success in the Full Court, by replacing the primary judge’s order that Alphapharm pay 30% of Lundbeck’s costs with an order that Alphapharm pay 15% of those costs.

(b) The Lundbeck Companies submitted that the appropriate order on the issue of costs was that Alphapharm and Arrow pay 15% of the Lundbeck Companies’ costs of the appeals and cross-appeals, and that Alphapharm and Arrow ought to be jointly and severally liable for payment of these costs.

Lundbeck then submitted that the primary judge’s order in relation to the costs of the trial should not be disturbed. In the alternative, Lundbeck submitted that, at worst, there should be no more than a very modest adjustment of the costs of the trial to be paid by Alphapharm, and certainly no more than a 5% adjustment.

This was submitted to be particularly so in view of the fact that the finding of infringement of claims 1 and 3 of the Patent was not challenged on appeal and so, despite the different result regarding claim 6, Alphapharm had still been found to have infringed the Patent.

In relation to the issues arising in the Arrow proceeding (where infringement of claim 6 was not in issue), as the Full Court has upheld the primary judge’s decision on the substantive issues, Lundbeck submitted that the primary judge’s order in relation to the costs of the trial should not be disturbed.

(c) Arrow submitted that Lundbeck should pay a proportion (say, 50%) of Arrow’s costs of the appeal and the cross-appeal, or at worst, there should be no order as to the costs of the appeal and the cross-appeal. In any event, Arrow submitted that the primary judge’s orders in relation to costs should not be disturbed.

7 The Court has a broad discretion in relation to costs under s 43 of the Federal Court of Australia Act 1976 (Cth). The principles relevant to the exercise of that discretion are well-settled. A convenient summary was given by Black CJ and French J in Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11], recently cited by the full court in PAC Mining Pty Ltd v Esco Corporation (No 2) [2009] FCAFC 52 at [9].

8 It is not uncommon for the Court to apportion costs between parties, depending on their success on different issues: see, eg, Gibbett v Forwood Products Pty Ltd (No 2) [2001] FCA 434 at [17], [18]; Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2002) 54 IPR 495; Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 2) [2007] FCAFC 172; JMVB Enterprises Pty Ltd v Camoflag Pty Ltd (No 2) [2007] FCAFC 6 and Arrow Pharmaceuticals Ltd v Merck & Co Inc [2005] FCA 188.

9 However, fairness does not dictate an ‘issues’ approach on all occasions: see, eg, Emirates v Australian Competition and Consumer Commission (No 2) [2009] FCA 492 and Telstra Corporation Ltd v Australian Competition Tribunal (No 2) [2009] FCAFC 34.

10 We consider in the context of the appeals and cross-appeals it is appropriate to commence by considering the ultimate result of the appeals and cross-appeals. The primary judge’s orders were principally upheld and the Patent extension had been removed from the Register. On this basis, Alphapharm and Arrow were the successful parties as a result of the orders of the Full Court. Both Alphapharm and Arrow did not originally appeal the primary judge’s orders, content with the commercial result of the primary judge’s orders, and only cross-appealed upon the Lundbeck Companies instituting their appeals. We do not consider this is a case where the Court should treat the appeals and cross-appeals separately for the purposes of identifying the successful party. The fairer approach is to consider the ultimate position of the parties as a result of the decision of the Full Court in both the appeals and cross-appeals, and thereafter to consider any necessary reduction in costs otherwise awarded to the successful parties on an "issues" basis.

11 As Alphapharm and Arrow were the successful parties, orders in their favour should be made, although it is appropriate to allow some discount in Lundbeck’s favour to account for Lundbeck’s varying degree of success in relation to the grounds of construction of claim 1, novelty and clarity. In this regard, it is to be recalled that Lundbeck’s submissions on its successful issues were not completely adopted by the Full Court. For instance, Lundbeck’s construction of the Claim, to the extent based upon the alleged convention as to purity, was rejected by all members of the Full Court.

12 Allowing for the time taken at the appeal on these issues and the extent of success of Lundbeck, as a fair estimate, a discount of 50% should be made to reflect Lundbeck’s success. This is an appropriate discount to make in relation to both Alphapharm and Arrow.

13 We now turn to the costs of the Alphapharm trial. It is to be recalled that Alphapharm was successful in overturning the primary judge’s decision in relation to the infringement of claim 6. This issue did involve an added component to the trial before the primary judge, and the complexity of the issue is reflected in the primary judge’s reasons. The issue may only have occupied a small percentage of each party’s closing submissions, but this does not necessarily reflect upon the focus at trial. However, an adjustment of more than 5% seems unwarranted.

14 In light of Alphapharm’s success on this issue, again as a fair estimate, the primary judge’s costs order below should be varied so that Alphapharm pay 25% of Lundbeck’s costs.

15 There is no other justification to vary the primary judge’s order in relation to costs. The order was well within the exercise of his Honour’s discretion. The proceedings before the primary judge were complex, involving a number of issues additional to those raised before the Full Court. Among the relevant matters considered by his Honour were the relative failures and successes of the parties, the time spent on particular issues, the interrelationship between different issues, and the level of involvement of the various parties in leading evidence and making submissions at the hearing.

16 Finally, as neither Arrow nor Alphapharm are being ordered to pay any amount of costs to Lundbeck in the appeals and cross-appeals, we do not need to consider whether that liability should be joint and several.

17 Therefore, we propose to make the following orders.
In proceeding NSD 1048 of 2008:

1. The appellants pay 50% of the respondent’s costs of the appeal and cross-appeal.

2. Order 11 made by primary judge on 19 June 2008 be varied to delete "30%" and substitute "25%".

1. The appellant pay 50% of the respondent’s costs of the appeal and cross-appeal.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Bennett and Middleton.

Counsel for H Lundbeck A/S and Lundbeck Australia Pty Ltd:	Mr D Shavin QC with Ms K Howard SC

Solicitor for H Lundbeck A/S and Lundbeck Australia Pty Ltd:	Corrs Chambers Westgarth

Counsel for Alphapharm Pty Ltd:	Mr DK Catterns QC with Mr SCG Burley SC

Solicitor for Alphapharm Pty Ltd:	Mallesons Stephen Jaques

Counsel for Arrow Pharmaceuticals Pty Ltd:	Mr C Dimitriadis

Solicitor for Arrow Pharmaceuticals Pty Ltd:	Blake Dawson

Date of Hearing:	24, 25, 26 and 27 February 2009

Date of Judgment:	7 September 2009

Federal Court of Australia - Full Court

H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 (7 September 2009)