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Federal Court Awards Elevated Costs on the Basis of Refusal to Bifurcate

June 15, 2022

By Adam Bobker and Bruna D.D. Kalinoski 

Can a litigant be penalized with a higher cost award for its refusal to agree to bifurcate a patent infringement action? A recent Federal Court decision suggests so.

In Paid Search Engine Tools, LLC v. Google Canada Corporation2022 FC 519 (“Paid Search”), Justice McDonald accepted Google’s argument that the increased litigation costs owing to Paid Search Engine Tools refusal to bifurcate should bear on a higher costs award. Google did not seek a lump sum, so the Court ultimately awarded costs at a higher level by reference to the upper range of Column of IV of Tariff B.

Up to this point, the Federal Court has not typically given any weight to a party’s failure to seek bifurcation or refusal to agree to bifurcation as a factor relevant to increasing the ultimate costs award. In two prior cases, the successful litigants had asked the Court to consider the role of litigation conduct in the assessment of costs, including the tactical decisions of the adverse party around bifurcation. However, unlike in Paid Search, the Court concluded that the parties’ strategic choices were already reflected in the base amount of the calculation of the lump sum award, which was based on legal fees. The Court did not increase the percentage of the recovery based on the decision not to bifurcate.

In Seedlings Life Science Ventures, LLC v. Pfizer Canada ULC, 2020 FC 505 (“Seedlings”), Pfizer submitted that Seedlings’ failure to seek bifurcation, among other things, should weigh in favour of a higher costs award. The Court rejected the argument and held in paragraph 25 that:

“[…] While it is common for parties to seek bifurcation in intellectual property cases, they are not required to do so. Nor is it always the case that bifurcation will expedite a trial […]. Seedlings will already face the consequences of not bifurcating the trial […] as the costs award will be based on an amount that includes the fees Pfizer spent defending the compensation aspects of the claim, with respect to both reasonable royalty and accounting of profits. Moreover, Seedlings will have to pay for the fees of the experts Pfizer retained to provide opinion evidence about compensation issues. It is not necessary to punish Seedlings further by raising the percentage of recovery.”

Subsequently, in Bauer Hockey Ltd. v. Sport Maska Inc. (CCM Hockey), 2020 FC 862 (“Bauer”), CCM argued that it should be entitled to a higher percentage of lump-sum costs owing to Bauer’s litigation conduct in, among other things, refusing to bifurcate the proceedings. That, CCM argued, resulted in the waste of the portion of the trial devoted to remedies. However, the Court noted that CCM’s request for bifurcation had been dismissed by the case manager as CCM failed to ask for bifurcation in a timely manner. In paragraph 32, Justice Grammond concluded:

“[…]  My role in awarding costs, however, is not to engage in an autopsy of the trial and criticize retrospectively the parties’ tactical decisions. To the extent that they lengthened the trial, Bauer’s decisions are reflected in CCM’s legal fees.”

In Paid Search Engine Tools, LLC v Google Canada Corporation 2022 FC 519, Justice McDonald mentioned the Court’s prior decision in Seedlings, but came to a different conclusion without drawing any distinguishing lines between the two cases:

[25] In my view, this is a case that should have been bifurcated. The trial on construction, infringement and validity could have been conducted in half the time with significantly fewer experts. Although I acknowledge that, as in Seedlings, PSET will be responsible for Google’s damage experts’ fees, this was, nonetheless, a case that would have benefited – from the liability portion of the claim–proceeding in advance of the damages portion of the claim.

[26] Here, despite there being 59 claims that required construction, there is no doubt that the damages portion of the case took the majority of time and was the focus of most of the expert evidence. Damage and remedy-related evidence focused on reasonable royalty, accounting of profits, apportionment and non-infringing alternatives.

[27] This proceeding would have been more efficient as a bifurcated matter. The failure of PSET to agree to bifurcate is a factor which weighs in favour of higher fees.

While the earlier decisions in Seedlings and Bauer dealt with lump-sum costs awards, the Court in Paid Search awarded costs in accordance with Tariff B. It remains to be seen, however, whether this will be deemed a distinguishing factor in other cases where a party asks that a refusal to bifurcate be considered as part of a request for increased costs — whether by assessment or a lump-sum — beyond the costs consequences that would otherwise flow from having required the Court and the parties to include monetary issues as part of the trial unnecessarily.

 

 

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Author(s):

Adam Bobker Adam Bobker
B.Sc. (Elec. Eng.), LL.B.
Partner
416.957.1681  email Adam Bobker
Bruna D.D. Kalinoski Bruna D.D. Kalinoski
LL.B., L.L.M.
Associate
416.957.1648  email Bruna D.D. Kalinoski