Federal Court Grants Solicitor-and-Client Costs In An NOC Proceeding

On May 30, 2014, Justice Gleason of the Federal Court awarded costs on a solicitor-and-client basis to Cobalt Pharmaceuticals Company (Cobalt) against Alcon Canada Inc (Alcon) related to Alcon’s discontinued prohibition proceeding involving the drug PATANOL. Deeth Williams Wall LLP acted on behalf of Cobalt. On December 4, 2013, five days before the scheduled hearing of its application against Cobalt, Alcon filed a notice of discontinuation. The discontinuation was the result of a prolonged, and ultimately unsuccessful, attempt by Alcon to prevent the release of a negative decision in a parallel proceeding involving the same drug and same patent. Cobalt argued that the events in the parallel proceeding involving Alcon and Apotex, and the effects on the Cobalt proceeding, merited censure and the imposition of the higher level of costs, the level often referred to as “solicitor-and-client”. The Alcon/Apotex proceeding (Court File No. T-564-10) was heard in 2012 by Justice Barnes. While the judgment was under reserve, the parties had written to the Court asking that the judgment not be released before April 12, 2012. This letter never reached Justice Barnes, and he released his Decision on April 11, 2012. The Decision dismissed Alcon’s prohibition application on the grounds of obviousness. The parties immediately collaborated to retract the Decision. What precisely was conveyed to the Court is unclear; however, the Court appears to have been notified that the parties had settled the matter and were requesting withdrawal of the Decision. On April 12, 2012, Justice Barnes issued the following Direction:

“Upon being advised by the parties that a full settlement of this litigation has been negotiated coincidental with the issuance of the Court’s Judgment and with their consent the Court’s Judgment is hereby withdrawn.”

The next day, Alcon discontinued its prohibition application against Apotex. Thereafter, the parties continued discussions but were unable to agree to a final settlement. In October 2012, Alcon made an application in Ontario Superior Court of Justice to enforce the settlement it claimed to have reached with Apotex. On July 22, 2013, Justice Mesbur of the Ontario Court held that no settlement had been reached. It was also revealed in the decision of Justice Mesbur that Justice Barnes had originally dismissed Alcon’s application. Prior to July 22, the outcome of the decision had not been made public. In August 2013, Apotex wrote to the Federal Court seeking to rely on the Barnes’ Decision in connection with another NOC proceeding it was litigating against Alcon involving the same patent. Ultimately, Apotex decided not to pursue release of the Barnes’ Decision. In October 2013, Cobalt moved to release the Barnes’ Decision. On December 3, 2013, Justice Barnes heard Cobalt’s motion which was opposed by Alcon. Justice Barnes granted the motion from the bench, re-issued his Decision nunc pro tunc and awarded $10,000 in costs to Cobalt. Justice Barnes was “critical of the conduct of Alcon” stating that it was “not open to a party to obtain an order on the strength of a miscommunication or misunderstanding by the Court and then to preserve the effect of the order by unilaterally discontinuing the proceeding.” This was particularly so when the interests of third parties were involved and to permit such an outcome “would be to abuse the Court process…”. The next day, December 4, Alcon discontinued its proceeding against Cobalt. Cobalt argued before Justice Gleason that Alcon’s conduct merited the award of costs on a solicitor-and-client basis. Cobalt asserted that the Barnes Decision, had it not been improperly retracted, would have required Alcon to discontinue the prohibition application against Cobalt as the same issues had been involved and it would have been an abuse of process for Alcon to re-litigate these issues. Alcon made several arguments against the solicitor-and-client costs level:

• Cobalt was dilatory in taking action to re-instate the Barnes Decision
• Alcon acted in good faith in seeking to uphold the purported settlement
• Alcon’s conduct was reasonable, even after Justice Mesbur’s determination, as it was not clear that it had to discontinue the Cobalt application or advise the Court as to what had transpired in Ontario Court
• The case law relied upon by Cobalt could be distinguished
• It is not an abuse of process to re-litigate the validity of the patent against Cobalt

Justice Gleason rejected all but one of these arguments. She held that the proceeding against Cobalt was an abuse of process; that Alcon had not acted reasonably, particularly once the Ontario decision issued; and that Cobalt was not dilatory in taking action to reinstate the Barnes Decision. She held that:

“Here, I find that Alcon’s conduct in seeking to avoid the impact of Justice Barnes’ Decision, after it became clear there was no settlement, and in continuing its application against Cobalt until the eleventh hour in circumstances where it was clear that the withdrawn Decision would render its conduct an abuse of process, is so serious that it warrants imposition of costs on the solicitor-client scale”.

However, Justice Gleason declined to award elevated costs for the entire period. She held that it was reasonable for Alcon, prior to July 2013, to seek to enforce the purported settlement agreement. Thus, she awarded costs on the solicitor-and-client level for the period July 23, 2013 to December 4, 2013. Summary by: Kavita Ramamoorthy