Costly Consequences

Three decisions handed down on 12 June 2008 illustrate how various tactical decisions can have implications on the costs awards made in intellectual property litigation.

In ITW AFC Pty Ltd v Loi and Tran Pty Ltd (No 2) [2008] FCA 895, Finkelstein J held that costs should lie were they fell in a patent dispute where both the claim for infringement and the cross-claim for revocation were unsuccessful. In rejecting the respondents argument that the proceeding should be treated as a single case in which the patentee failed, his Honour made several comments on the undesirability of parties bringing revocation actions without merit for purely tactical reasons concluding that:

“The usual order for bringing a hopeless case is to require the losing party to pay indemnity costs. Sometimes even that might not be enough. In patent litigation the parties are often large organisations that will not sufficiently feel the pain of an indemnity costs order. In those cases (I do not suggest this one) the proper order might be to require the legal practitioner to himself bear the costs, coupled with an order that the practitioner shall not be entitled to recover those costs from his client, notwithstanding any agreement to the contrary.”

In Nutrasweet Australia Pty Ltd v Ajinomoto Co Inc (No 4) [2008] FCA 876, also decided by Finkelstein J, his Honour was not prepared to award the successful party their costs on an indemnity basis because the ground upon which they had succeeded was raised only six days before the trial.

Finally, in Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 3) [2008] FCA 896, Besanko J ordered that the applicant should have its costs of the infringement of copyright and breach of implied contractual term claims on which it succeeded, but that the respondents should otherwise have their costs of the proceeding. Despite the applicant being awarded only $10 nominal damages for the infringement of copyright, his Honour also made an order that the costs payable to the applicant not be reduced pursuant to O 62 r 36A(1) on the basis that copyright litigation is appropriately commenced in the Federal Court even where the monetary claim is small.