Triple Multiplier Applied to Lump Sum Tariff Award to Dow in Patent Infringement Action against Nova

On August 8, 2017, Justice Fothergill issued his Order and Reasons awarding Dow lump sum costs in excess of $4.3 million dollars for the remedies phase of a patent infringement action.

Background

In the liability phase, Dow’s Canadian Patent No. 2,160,705 was found valid and infringed by Nova (2014 FC 844; aff’d 2016 FCA 216). Dow was awarded $6.5 million in costs and disbursements for the liability phase (2016 FC 91, see our blog post here; aff’d 2017 FCA 25). In the remedies phase Dow sought damages in the form of a reasonable royalty and an accounting of Nova’s profits and was awarded $644,623,550.00 plus interest.

Analysis

Dow requested a lump sum award of 30% of its legal fees plus all reasonable disbursements stemming from the remedies phase. This comprised $2,338,823.10 in legal fees and $3,155,555.63 in unchallenged disbursements, totaling $5.5 million. Alternatively, Dow submitted a draft Bill of Costs in accordance with the maximum allowable under Tariff B in the amount of $410,130.00.

After reviewing the jurisprudence on lump sum awards, Justice Fothergill held that when a party seeks a lump sum award it should provide a sufficient description of the services rendered to justify that the fees actually incurred are reasonable. While Dow had submitted total amounts of invoices for legal services it did not submit itemized invoices enabling the Court to assess of the reasonableness of its legal costs. Justice Fothergill also noted that Dows legal fees for the remedies phase were disproportionate to the liability phase making them appear unreasonable on their face:

The length and complexity of the remedies phase clearly justify an award of legal fees in excess of the amount prescribed by the Tariff. However, Dow has provided only the total amounts of the invoices submitted by counsel. Dow has not provided itemized invoices or any other information that would enable Nova or the Court to assess the reasonableness of the legal fees incurred.

Dow claims to have incurred legal fees of approximately $7.8 million in the remedies phase. This may be compared to the legal fees of approximately $9.6 million incurred by Dow in the liability phase. The liability phase comprised 33 days of discovery, 32 days of trial and 180 days of testing. The remedies phase comprised 11 days of discovery and 17 days of hearing. I agree with Nova that the legal fees incurred by Dow in the remedies phase are not supported by evidence, and do not on their face appear reasonable.

Justice Fothergill held that given the comparable complexities between the liability and damages phases, it was appropriate to use the same 3x multiplier of the maximum available under the Tariff applied by Justice O’Keefe in the liability phase and accordingly awarded Dow $1.2 million for legal fees.  Holding that the lump sum award was not “an exact science”, Justice Fothergill refused to further reduce the award by one third because “Dow was largely successful in the remedies phase”:

[23] I am not persuaded that this amount should be reduced by one third, as proposed by Nova. While a costs award may reflect successful defences to important parts of a proceeding (Eurocopter v Bell Helicopter Textron Canada Ltée, 2013 FCA 220 at para 5; Merck & Co v Apotex Inc, 2013 FC 751 at paras 272, 275-277), the calculation of lump sum awards is “not an exact science, but reflects the amount the Court considers to be a reasonable contribution to the successful party’s actual legal fees” (Dow v Nova Costs Award (FCA) at para 21, citing Consorzio del prosciutto di Parma v Maple Leaf Meats Inc, 2002 FCA 417 at para 8).

A copy of Justice Fothergill’s Order and Reasons can be found here.