Assessment of Party and Party Costs Stemming from a Successful Patent Infringement Action: Forensic Accounting Services Must Meet Threshold of Reasonable Necessity



ASSESSMENTOFPARTYANDPARTYCOSTSSTEMMINGFROMASUCCESSFUL
PATENTINFRINGEMENTACTION:FORENSICACCOUNTINGSERVICESMUSTMEET
THRESHOLDOFREASONABLENECESSITY

By
AlexandraSteele*
LEGERROBICRICHARD,Lawyers
ROBIC,Patent&TrademarkAgents
CentreCDPCapital
1001Square-Victoria-BlocE–8
thFloor
Montreal,Quebec,CanadaH2Z2B7
Tel.:(514)9876242-Fax:(514)8457874
www.robic.ca-info@robic.com
TheFederalCourtofCanadarecentlyreaffirmedthecriteriaforassessing
costsforservicesrenderedbyanforensicaccountingexpertretainedin
respectofareferenceregardinganaccountingofprofitsafteratrialonthe
issueofliabilityinapatentinfringementaction.TheAssessmentOfficerruled
thatmanyoftheservicesdetailedinthebillofcostsofthesuccessfulPlaintiff
wereunnecessaryandconsequently,theAssessmentOfficerreducedthe
Plaintiff’sawardofcosts(Merck&Co.Inc.v.ApotexInc.,2002FCT842,
August7,2002,CharlesE.Stinson,AssessmentOfficer).
Thefacts
Afteratrialonthemerits,Defendant,ApotexInc.(“Apotex”),wasfound
liableforthesaleofpharmaceuticalproductswhichinfringedthoseofthe
PlaintiffsMerck&Co.Inc.andMerckFrosstCanada&Co.(“Merck”).Since
themonetaryawardforsuchinfringement,namelydamagesoran
accountingofprofits,wastobedeterminedseparatelyfromthatofApotex’s
liability,i.e.bywayofareferenceontheissue,Merckeventuallyelectedan
accountingofApotex’sprofits.Thepartiesagreedonmostoftheissues
relevanttothecalculationoftheprofitspriortothereference,leavingfew
mattersfortheRefereetodetermine.Uponrulingontheamountofprofits
ApotexwouldpaytoMerck,theRefereealsoawardedMerckthecostsof
thereferencetobetaxedonapartyandpartybasis.Abillofcostswas
presentedtotheAssessmentOfficeroftheFederalCourtofCanada,
togetherwiththesubmissionsofthepartiesrelatingthereto.



















































©LEGERROBICRICHARD,2002.*OftheLawfirmLEGERROBICRICHARD,g.p.andthePatentandTrademarkAgencyFirmROBIC,
g.p.Publication142.143.



Thequestionatbar
TheprincipaldebatebeforetheAssessmentOfficerrevolvedaroundthe
necessityandcostofMerck’sforensicaccountingexpertwhoseservices
wereretainedtoanalyzeandadviseMerck’scounselontheissueof
Apotex’sprofitsandalsototestifybeforetheCourtontheamountofprofits
tobeawardedtoMerckasaresultofApotex’ssaleofinfringingproduct.
Thesubmissionsoftheparties
MerckrepresentedthattheconductofApotexandthenatureofthe
informationdisclosedtoitforthepurposeofanaccountingofprofits
rendereditessentialtohiretheservicesofaforensicaccountingexpert.The
expertwasrequiredtoestablishthevalidityofthefiguresprovidedby
Apotex.Althoughtheexpertdidnottestifyatthereference,thedecisionto
incurtheexpenseforsuchexpertiseshouldbeevaluatedinlightofthe
circumstancesexistingatthetimethedecisionwasmade.Moreover,asit
appearedfromtheCourtrecord,Apotexhadagreedthatanexpertwas
requiredtosettlethefigures.
ApotexdisagreedwiththeamountofcostsrequestedbyMerck,sinceitwas
oftheviewthatnocosts,orreducedcostsonly,shouldbeawardedtoMerck
inrespectofthereimbursementoftheexpert’sfees.Apotexreliedonthe
factthatithaddisclosedsalesdatawhichrequirednoanalysisandthatthe
expertiseofaforensicaccountantwasnotneededfortheissueswhichwere
debatedatthereference.Inaddition,Apotexsubmittedthattheamounts
claimedwereunreasonable:itarguedthatpartoftheexpert’sworkcould
havebeendonebyMerck’scounselandhence,thattheamountsclaimed
weresimplyadisguisedwayofenablingMercktorecoverfullindemnityfor
workofitscounselwhichhadbeendelegatedtotheexpertforthispurpose.
TheAssessmentofCosts
TheAssessmentOfficeraddressedthecaselawpresentedtohimbythe
partiesinsupportoftheirrespectivepositions.TheOfficernotedthatthe
absenceofspecificrulingontheassessmentoftheexpert’sfeesbythe
Refereedidnotprecludetheirassessment.However,inhisview,itwould
havebeenpreferabletoobtaindirectionsfromtheCourtinthisrespectsince
theCourtisinabetterpositiontoevaluatethenecessityandamountofthe
expert’sfeessinceitisabletoobservetheexpert’srolethroughoutthe
reference.



TheOfficerfurthernotedthatexpertsmightalsohavearoleinrespondingto
evidence,eventhoughtheirtestimonyisnotnecessarilyrequiredintheend;
underthesecircumstances,theexpert’sfees,althoughnotautomatically
payable,canbeassessed.Anawardofcoststoasuccessfullitigantservesas
reasonablecompensation,notafullreimbursement,oftheactualcostof
litigation.Thepreparationtimeofanexpertisassessable,despitecaselawto
thecontrary.Apartymayhaveitsexpertprepareinforesightofpossible
testimonyonaparticularissue,thereforeensuringthattheCourt’stimeis
usedasefficientlyaspossible.Itistheparty’scounselprerogativetosetand
vary,fromtimetotime,theparametersoftheexpert’sworkinorderto
providetheCourtwiththenecessarytechnicalassistance.
TheOfficeragreedwithMerck’sassertionthatthethresholdtestfor
evaluatingtheappropriatereimbursementanexpert’sfeesisthatof
“reasonablenecessity”atthetimethedecisiontoincursuchexpensesis
made.TheOfficerwrotethatalthoughareferencemayrequireaforensic
accountant’sexpertiseattheoutset,asuccessfullitigantcannotcircumvent
thelimitationsofpartialindemnitybyattributingworktoanexpertwhichfalls
withinthelegaltrainingofcounsel.Counselcannotmigrateitsresponsibilities
totheexpertinthehopesofafullerindemnityfortheworkdone.
InassessingthevariouspointsinissueinthebillofcostsofMerck,the
AssessmentOfficerruledonthefollowingaspects:
a)theexpert’stimeforreadingthepleadingswasrefused,ascounsel
forMerckcouldhaveprovidedtheexpertwithanexplanatory
briefingnote;
b)theexpert’stimeforhavingtheexperttourMerck’splant(togain
understandingofthepharmaceuticalindustry)wasreduced,asthe
experthadalreadytestifiedinpharmaceuticalmatters.Thetimeof
junioraccountantswasrefused;
c)thetimeofjunioraccountantstopreparequestionsfordiscovery
wasallowedbutnotthejunioraccountants’timeforattendanceat
thesaiddiscoverysincetheexperiencedleadexpert’stimehad
alreadybeenindemnified;
d)theexpert’stimeforpreparationofalistofoutstandingdocuments
fromthediscoverywasrefusedascounselforMerckcouldhave
handledsuchatask;



e)theexpert’stimeforupdatingpre-judgementinterestschedules
wasrefusedastheexpert’sassistancewasnotnecessary.Such
calculationswereclearlywithinMerckcounsel’sandtheCourt’s
grasp.
TheAssessmentOfficerallowedforreimbursementofpartoftheforensic
accountant’spreparationtime,eventhoughtheexpertdidnottestifyatthe
reference,sincesamehadcontributedtoadvancingtheprocessofthe
accountingofprofits.
Contrarytosolicitorandclientcostswhichareawardedtothesuccessful
litigantinaccordancewithapre-determinedtariff,partyandpartycosts
requireanassessmentofthereasonablenecessityoftheexpense.Although
eachcaseisdifferent,theunderlyingthresholdofreasonablenecessity
remainsapplicablewhateverthecircumstancesmaybe.Thiscaseservesto
remindlawyersthat,althoughitmightseemeasiertodelegateportionsof
worktotheexpertinordertosaveoncounsel’sfees,onemustbearinmind
thatultimately,theCourthasdiscretiontoevaluatetherelevanceofthe
workandtheexpensesoftheexpertandtoruleontheissueofpartyand
partycostsaccordingly.
Publishedat(2002),16-10WIPR5-7underthetitleForensicAccounting
ServicesMustMeetThresholdofReasonableNecessity
©LEGERROBICRICHARD,2002.



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