Digests

Halford v. Seed Hawk Inc.

T-2406-93

2004 FC 1259, Pelletier J.

16/9/04

37 pp.

Plaintiffs sued Seed Hawk defendants for patent infringement, Simplot Canada Ltd. for inducing infringement by offering financial incentives to Seed Hawk to infringe-- Patent's validity challenged by counterclaim--Following lengthy, protracted trial, action, counterclaim dismissed-- Now before Court were motions regarding costs--Seed Hawk defendants claim double party-and-party costs in view of some seven settlement offers made in course of litigation--Plaintiffs saying not within Federal Court Rules, 1998, r. 420 as offers not remaining open to judgment date--Two requirements under r. 420: settlement offer must be in writing and not revoked--One "offer" not offer but mere inquiry as to settlement possibility--Some offers not in writing--Of three written offers, dated December 19, 1992, not limited in time, not responded to; one withdrawn; one lapsed one minute after opening of trial--While, in Monsanto Canada Inc. v. Schmeiser (2002), 220 F.T.R. 60 (F.C.T.D.), MacKay J. held offer open only to commencement of trial complied with r. 420(2), according to plain language of rule, offer must remain open until date of judgment to support double costs claim--Plaintiffs suggesting December 21, 1992 offer must be treated as revoked by later offers: Canadian Pacific Forest Products Ltd. v. Termar Navigation Co., [1998] 2 F.C. 328 (F.C.T.D.)--In Mackenzie v. Brooks (1999), 130 B.C.A.C. 95 (B.C.C.A.) drew distinction between formal, informal offers: rejection of formal offer sounds in costs if case goes to trial but if both formal, informal offers outstanding at one time, opposing party may accept either--But not here question of formal versus informal offer--Significant that December 21, 1992 offer made prior to statement of claim being issued--Unclear whether offer at such time settlement offer under r. 420(2) as requires offer made by "defendant"--No "defendant" until statement of claim issued--But as issue not argued, Court assumed, for purposes of motions, offer within r. 420(2)--Mackenzie illustrating point that whether subsequent offer revokes earlier one is matter of intention-- Settlement offer rules not necessarily to be read according to traditional contract theory--In offering lump sum payments for royalty-free licence, defendants had decided against continuing financial relationship with plaintiffs, impliedly revoked first offer--R. 420(2) inapplicable herein--But, defendants arguing even if rule inapplicable, Court has discretion to award double costs: Champion International Corp. v. Sabina (The) (2003), 227 F.T.R. 107 (F.C.T.D.)-- "Automatic triggering" discussed in cases relied on by defendants was in relation to assessment officer's power to double costs on own initiative without reference to judge, not to r. 420(2) doubling--More fundamental objection: double costs under r. 400 allowing party to escape r. 420(2) burden of leaving offer open until judgment without loss of benefit--In that situation, no one would leave settlement offer open until judgment--May be that r. 420(2) is deeply flawed as having serious potential for unfairness, but that is matter for Rules Committee--Cannot be remedied by reading out r. 420(2) non-revocation requirement by resorting to r. 400--While r. 400 permits Court to take into account written settlement offers, it may not be used as less onerous version of r. 420(2) as would deprive latter rule of any effect--This was not case for double costs--As to appropriate scale of costs, by r. 407, party-and-party costs to be assessed under column III of table to Tariff B--This is default position, departure from which must be justified--Defendants sought costs assessment under column V of Tariff B on numerous grounds including: length of trial; plaintiffs' outrageous monetary demands at mediation before prothonotary; service of three of plaintiffs' expert affidavits consisting of more than 1,000 pages within two weeks of trial--Case law supports proposition costs increase based on complexity of issues is unjustified--Here, technology at issue was relatively straightforward but legal issues were more complex and fact many issues arose mid-trial, necessitating adjournments for research, argument, increased burden on counsel--That issues not trivial borne out by fact decisions in six interlocutory motions were published in topical law reports--Since these issues brought up by both sides, any tariff increase would apply to both in matters for which entitled to costs--No weight attached to arguments concerning production, volume of affidavits, equities being equally divided--Results of interlocutory proceedings not taken into account where costs liability depends primarily on success in action--Plaintiffs' decision to name individual directors as defendants should not impact upon costs assessment--Complex area of law and plaintiffs may not have acted improperly in adding them--Court not willing to engage in ex post facto assessment of counsel's conduct absent egregious abuse of process--Considering complexity of legal issues, Court prepared to depart modestly from default position, award Seed Hawk defendants costs at bottom end of column IV of Tariff B--Returning to impact of settlement proposals, that doubling unjustified does not mean offers to be entirely disregarded: r. 400(3)(e)--December 21, 1992 offer to enter into licence agreement recognized validity of patent, ought to have received more consideration than it did--Had offer been accepted, patent monopoly would have been confirmed, plaintiffs secured significant financial advantage, avoided ruinously expensive trial--Failure even to respond to offer was sufficient reason to increase costs--Seed Hawk defendants to have costs at high end of column IV of Tariff B --In all circumstances, appropriate to allow fees for junior counsel at trial, rate being 50% that allowed senior counsel-- Whether assessment premature as appeal pending--In Casden v. Cooper Enterprises Ltd., [1991] 3 F.C. 281 (T.D.), Stinson T.O. wrote that it was established principle that one taxation of costs should occur in relation to a cause of action at a time when taxing officer had benefit of final (not subject to further appeal) conclusion on substantive issues generated by action --But another line of cases holds filing notice of appeal does not stay execution of judgment, preclude assessment of costs at trial--While recognizing potential for multiple assessments in case of successful appeal, better view that final Court order must be given effect unless stayed--Law not that validity of final order put into question by filing of notice of appeal--No reason to make order amounting to stay of execution as to costs awarded defendants and costs should be assessed without awaiting appeal outcome--Lump sum not ordered, there being numerous issues regarding disbursements; matter better left to assessment officer--Costs of successful defence of counterclaim alleging invalidity--Case at bar on all fours with Illinois Tool Works Inc. v. Cobra Anchors Co. (2003), 312 N.R. 184 (F.C.A.) and plaintiffs not entitled to costs of defending counterclaim--Plaintiffs entitled to costs only with respect to matters for which they have been awarded costs in any event of the cause--Defendant, Simplot Ltd., sought doubling of costs due to settlement proposals-- Question was whether written offer of December 16, 1994 deemed revoked by subsequent offers--Subsequent offers revealing Simplot no longer interested in collaboration with plaintiffs, interested only in ending litigation, expense and intended to revoke December 16, 1994 offer--Evidence disclosing Simplot took early, active role in dispute resolution attempt, made number of reasonable settlement proposals--When Simplot agreed to cease supporting Seed Hawk device until infringement issue resolved, plaintiffs achieved primary objective i.e. patent protection but did not respond to proposal thus justifying increase in scale of costs awarded Simplot--Simplot's costs to be assessed at top end of column IV (except for motions at which Simplot had kept watching brief or adopted Seed Hawk's position)--Matter of post- and pre-judgment interest dealt with in Federal Courts Act, s. 36(1), wherein reference made to laws in force in province where action arose--While trial in Manitoba, events said to have constituted cause of action all in Saskatchewan--Under Pre-judgment Interest Act, a Court shall not award interest on award of costs--But as for post-judgment interest on costs, in Saskatchewan judgment bears interest from date judgment given--Rate to be fixed by assessment officer--Costs of instant motions fixed at $7,500 for Seed Hawk, Simplot--Each party to bear own costs of plaintiffs' costs motion--Federal Court Rules, 1998, SOR/98-106, rr. 400, 407, 420, Tariff B--Federal Courts Act, R.S.C., 1985, c. F-7, ss. 1 (as am. by S.C. 2002, c. 8, s. 14), 36 (as am. by S.C. 1990, c. 8, s. 9; 2002, c. 8, s. 36), 37 (as am. idem, s. 37)--Pre-judgment Interest Act, S.S. 1984-85-86, c. P-22.2, s. 5--Queen's Bench Act, 1998, S.S. 1998, c. Q-1.01, s. 77.