ASSA ABLOY NEW ZEALAND LIMITED v ALLEGION (NEW ZEALAND) LIMITED [2016] NZHC 2436

ASSA ABLOY NEW ZEALAND LIMITED v ALLEGION (NEW ZEALAND) LIMITED [2016] NZHC 2436 [14 October 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2013-404-4178[2016] NZHC 2436BETWEEN ASSA ABLOY NEW ZEALANDLIMITEDFirst PlaintiffASSA ABLOY IP ABSecond PlaintiffAND ALLEGION (NEW ZEALAND)LIMITEDDefendantHearing: On the papersCounsel: C Elliott QC, N Taefi and T Ip for PlaintiffsJ Miles QC, M Sumpter and J Graham for DefendantJudgment: 14 October 2016JUDGMENT OF WHATA J AS TO COSTSThis judgment was delivered by me on 14 October 2016 at 4.00 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate: .Solicitors: Terry IP Law, WellingtonChapman Trip, Auckland[1] Assa Abloy lost its infringement claim. Allegion lost its invalidity claim. As I said in my judgment:1[155] In summary, the infringement and invalidity claims are premised on a monopoly that does not conform to the Patent's terms. The infringement claim assumes that the Stella involves a latching mechanism configurable to end uses. But the Stella does not achieve that object and in a material respect does not contain the requisite integer necessary to do so, namely a driver coupled to the snib. Conversely, the invalidity claim erroneously assumes that the object of the Patent is simply to achieve a latching mechanism with all locking options, an outcome already achieved by the Sentry and other latch mechanisms. Once the object is properly defined as one of configurability to end uses, which was not achieved by the prior art, the invalidity challenge falls away.[2] Remarkably it might be thought, both parties seeks costs with uplifts and, inAssa Abloy's case, with unauthorised prolixity.[3] Costs are governed by r 14. Holdfast NZ Ltd v Selleys Pty Ltd2 and Packing In Ltd (in liq) v Chilcott3 remain the guiding authorities of general application on costs; particularly as they relate to Calderbank offers (a key matter in this case). As noted in the latter case:4In the end, as in all costs matters, the Court must endeavour to do justice to both sides, bearing in mind all features of the case.[4] Assa Abloy claims costs because:(a) It won most of the issues; and(b) Allegion engaged in pre-trial and in-trial steps that were a waste of time.[5] Allegion claims costs because:1 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2016] NZHC 1738.2 Holdfast NZ Ltd v Selleys Pty Ltd (2005) 17 PRNZ 897 (CA).3 Packing In Ltd (in liq) v Chilcott (2003) 16 PRNZ 869 (CA).4 At [5]. For a more recent applications of this guidance see Gauld v Waimakariri District Council[2014] NZHC 956 at [24]–[28], affirmed on appeal in Waimakariri District Council v Gauld[2015] NZCA 200; see also Weaver v HML Nominees [2016] NZHC 473 at [17].(a) It won the real issue; and(b) Before trial, it offered to limit the use of the Stella and pay a royalty of 6% for that use.[6] Allegion also claims patent attorney fees as a disbursement.[7] I have resolved that costs should lie where they fall, for the following reasons:(a) Brown J categorised the proceeding as 2C. Allegion sought costs on a 2C basis. Assa Abloy sought costs on a 3C basis. While aspects of the proceedings involved some complexity and demanded specialist analysis and extensive evidence, I consider that (had it been necessary to make an award) 2C is fair for all attendances.(b) As the judgment exemplifies, success (and failure) was evenly shared in the result and involved similar and largely co-extensive contribution in terms of the effort expended on the infringement and invalidity claims.(c) An issue by issue based approach to costs (as appears to be taken by the English Courts in patent cases)5 produces an inaccurate picture of relative success this case. Admittedly, Assa Abloy was successful on all key issues save one – but this was, in the end, the determinative issue on infringement, namely that the Stella did not contain a "driver, coupled to the snib" and the significance of this element to the Latchmonopoly for validity purposes was only fully revealed as a result of the detailed analysis required for both the infringement and invalidity5 Counsel for Assa Abloy referred me to Monsanto Technology LLC v Cargill International SA (No 2) [2007] EWHC 3113 (Pat), [2008] FSR 16. In Monsanto Pumfrey LJ approved an issuebased approach in exceptional cases. He also noted that "as one moves away from the generalrule that the unsuccessful party will be ordered to pay costs of the successful party, anincreasingly strong justification is required" (at [8]). This approach was adopted in Research in Motion UK Ltd v Visto Corporation [2008] EWHC 819 (Pat) and a similar approach was also taken in Smithkline Beecham plc v Apotex Europe Ltd [2004] EWCA Civ 1703, [2005] 2 Costs LR 293.claims – refer to my judgment at [33]–[44] (object), [47]–[56] (the descriptive elements), [68]–[73] (whether the Stella spigots are coupled to the snib), [100]–[102] (whether the Latch is disclosed by the Sentry) and [138]–[147] (whether the Latch was obvious).(d) There was nothing extraordinary about a pre-trial skirmish in front of Asher J that warrants departing from the order made by him – adiscovery dispute resolved in Allegion's favour with costs at twothirds 2B scale. While the output from the discovery process appears to have proven fruitless, the application was not meritless. I address unresolved pre-trial cost matters below at [8].(e) "Calderbank" offers made by Allegion on 5 June and 26 August 2015invited settlement on a basis that was, at first blush, superior to the outcome of the infringement claim for the purpose of r 14.11(3) –namely a qualified licence to use the Stella (for supply to its largest client) and subject to a 6% royalty payable to Assa Abloy. I also accept that Allegion was making a genuine attempt to resolve the litigation. It may also claim bragging rights in terms of squarely identifying the key weakness of the infringement claim. But it was not unreasonable for Assa Abloy to refuse to settle on these terms given that the terms effectively required it to trade with its main trade competitor. Assa Abloy was being invited to affirmatively legitimise the Stella while leaving unresolved the true scope of its monopoly. The unlikely durability of a licence arrangement between trade competitors raises further doubt as to the efficacy and permanence of any settlement based on it. The offer was, in short, a commercially unrealistic proposition in the context of this case.(f) Furthermore, for the reasons already expressed at (c) Assa Abloy'srefusal to settle was not unreasonable for the purpose of r 14.6.3(b)(v) dealing with increased costs.[8] The remaining costs issues relate to pre trial applications by Allegion, both shortly before scheduled trial dates:(a) An application for amended counterclaim pleadings on 3 July 2015 with a five day fixture due to commence on 17 August 2015 – Brewer J granted the application noting the prejudice to the plaintiffs in doing so, but reserving costs because there was a significant dispute as to whether the plaintiffs should have discovered the prior art, being the Securicraft MC 1120 (or Sentry lock) – at [21] and [23] of his judgment;(b) Another application for amending pleadings on 23 March 2016 with a fixture set down to commence on 18 April 2016 – Heath J granted theapplication "on terms that will require costs incurred by the plaintiffs in responding to new issues to be paid in any event by the defendant." – at [3] of his minute.[9] Ordinarily I would be minded to make an award of costs on a 2C basis interms of the wasted costs in Assa Abloy's favour arising from the applications beforeand resolved by Brewer and Heath JJ. The Sentry lock was well known to the industry prior to the Latch. It was, in fact, ubiquitous. The pleadings should have taken it into account well before the allocated trial date irrespective of discovery. I also have no reason to depart from the order made by Health J. But the applications were not entirely unreasonable or meritless, and I consider that overall it would be unjust to single out these matters for separate costs awards – see my discussion at [7](c) and (e).[10] It is not necessary for me to rule definitely on whether patent attorney costs should be treated as disbursements. But given that it may be helpful to address thisissue, I will do so briefly. Disbursements exclude an expense paid "that would ordinarily be charged for separately from legal professional services in a solicitor's bill."6 The attorney did not give evidence as an expert. Save in two respects, theattorney's schedule of attendances simply refer to "professional fees" or6 High Court Rules, r 14.12(1)(a)."professional services". The exceptions are "a patent search" and "travel expenses".From this sparse information, the attorney gave advice for the purpose of the proceeding within his expertise; that is the interpretation and application of patent law. While patent attorneys are separately regulated and are not lawyers for the purpose of the Lawyers and Conveyancers Act 2006 where, as here, they simply provide legal advice for the purpose of litigation, their costs should be incorporatedinto the solicitor's bill and not recoverable separately as a disbursement. The Rulesassume that the standard allowances for legal costs are reasonable. The treatment of professional fees for legal services as a disbursement would undermine the fairness and efficacy of that assumption. In future cases, the requirement for patent attorney advice may be a reason for category 3 categorisation in respect of relevant scheduled attendances. The patents search (a specialist task not ordinarily performed by lawyers) and travel expenses, however, fall into the category of a genuine disbursement and appear to be claimable as such if otherwise payable.ResultCosts should lie where they fall.