In this case, the Court has crystallized and reiterated several patent principles relating to patentability under Section 3(k), novelty, inventive step, infringement of Standard Essential Patents (SEPs), Exhaustion, FRAND royalty determination, and so on. Along with other principles, the Court has also outlined the principles for grant of actual costs, which has now become an increasingly common trend in IP litigation before the Delhi High Court. Discussing about costs, the Court referred to the common law, CPC, and IPD Rules, and spelled out what may be included as costs, and when costs may be granted.
Principles relating to Actual Costs
Some principles outlined by the Court with respect to actual costs are as follows:
- Costs may be granted to a successful party in a case;
- The grant of costs may be assessed based on the conduct of parties before the Court;
- Reasonableness of the approach of a party to the litigation, responses relating to settlement, implementation of a pre-planned strategy, and unreasonable extension of the case are some factors that may be considered while deciding on costs;
- Granting of costs is required because of the increase in cost of litigation springing from attorney fees, witness attendance, attendance in Court, travel, expert opinions, legal research and citation, senior advocate costs, Court fees, expenses for commissions, etc., which may pose a disproportionate burden on litigants;
- Costs may include actual costs incurred by the successful party towards different aspects of the litigation ranging from attorney fee to travel expenses; and
- The costs must follow the event, and must be based on judicial decision-making and reason, and must be aimed at avoiding frivolous and vexatious litigation.
Costs to Ericsson
As Ericsson succeeded in the case, and Lava had not approached the litigation in a reasonable manner, the Court granted costs in favor of Ericsson. While doing so, the Court stated that both the parties are financially sound, and are capable of bearing the costs if they lose the case. Additionally, the Court pointed out that Lava could have accepted Ericsson’s proposals, but not only refused to do so, but also failed to make a counteroffer. Instead, Lava decided to file suits against Ericsson and prolong the litigation. As per the Court, the conduct of Lava makes Ericsson eligible for the actual costs of the proceedings.
Relevant Paras
The relevant paras from the Court’s Judgment read as follows:
“19. COSTS
- Ericsson presses for actual costs of litigation in the present suits.
19.1. LEGAL PRINCIPLES FOR DETERMINATION OF COSTS
828. The Supreme Court in Uflex Limited v. Government of Tamil Nadu and Others, (2022) 1 SCC 165, has laid down the principles for determining costs in commercial matters. The relevant observations of the Supreme Court are set out below:
“55. We may note that the common thread running through all these three cases is the reiteration of salutary principles: (i) costs should ordinarily follow the event; (ii) realistic costs ought to be awarded keeping in view the ever-increasing litigation expenses; and (iii) the costs should serve the purpose of curbing frivolous and vexatious litigation. [ Report No. 240 of the Law Commission of India.] “56. We may note that this endeavour in India is not unique to our country and in a way adopts the principle prevalent in England of costs following the event. The position may be somewhat different in the United States but then there are different principles applicable where champerty is prevalent. No doubt in most of the countries like India the discretion is with the court. There has to be a proportionality to the costs and if they are unreasonable, the doubt would be resolved in favour of the paying party [ UK Civil Procedure Rule 44.2.] . As per Halsbury’s Laws of England, the discretion to award costs must be exercised judicially and in accordance with reason and justice. [ Vol. 10, 4th Edn. (Para 15).] The following principles have been set out therein:
“In deciding what order (if any) to make about costs, the court must have regard to all the circumstances, including:
(i) The conduct of all the parties;
(ii) Whether a party has succeeded on part of his case, even if he has not been wholly successful; and
(iii) Any payment into court or admissible offer to settle made by a party which is drawn to the court’s attention.
The conduct of the parties includes:
(a) Conduct before, as well as during, the proceedings and in particular the extent to which the parties followed any relevant pre- action protocol;
(b) Whether it was reasonable for a party to raise, pursue or contest a particular allegation or issue;
(c) The manner in which a party has pursued or defended his case or a particular allegation or issue; and
(d) Whether a claimant who has succeeded in his claim, in whole or in part, exaggerated his claim.” [ 10th Vol. 4th Edn. (Para 17).] 57. We may add that similar principles are followed in Australia, Hong Kong and Canada largely based on the common law principle. In fact in Canada, the Manitoba Law Commission Report analysed the “Costs Awards in Civil Litigation” and referred to six broad goals as under:
(a) indemnification — successful litigants ought to at least be partially indemnified against their legal costs;
(b) deterrence — potential litigants should carefully assess the merits of the claim and should refrain from taking any unnecessary legal actions;
(c) rules should be made decipherable and simple to understand;
(d) early settlement of disputes should be encouraged;
(e) the costs regime should facilitate access to justice; and
(f) there should be flexibility in rules to ensure that justice can be done. [ Report No. 240 of the Law Commission of India.] 58. We have set forth the aforesaid so that there is appreciation of the principles that in carrying on commercial litigation, parties must weigh the commercial interests, which would include the consequences of the matter not receiving favourable consideration by the courts. Mindless appeals should not be the rule. We are conscious that in the given facts of the case the respondents have succeeded before the Division Bench though they failed before the learned Single Judge. Suffice to say that all the parties before us are financially strong and took a commercial decision to carry this legal battle right up to this Court. They must, thus, face the consequences and costs of success or failure in the present proceedings.”
(Emphasis supplied)
829. In this regard, a reference may also be made to Section 35 of the CPC as applicable to the commercial disputes:
“35. Costs.– (1) In relation to any Commercial dispute, the Court, notwithstanding anything contained in any other law for the time being in force or Rule, has the discretion to determine:
(a) whether costs are payable by one party to another;
(b) the quantum of those costs; and
(c) when they are to be paid Explanation.–For the purpose of clause (a), the expression “costs” shall mean reasonable costs relating to–
(i) the fees and expenses of the witnesses incurred;
(ii) legal fees and expenses incurred;
(iii) any other expenses incurred in connection with the proceedings. (2) If the Court decides to make an order for payment of costs, the general rule is that the unsuccessful party shall be ordered to pay the costs of the successful party:
Provided that the Court may make an order deviating from the general rule for reasons to be recorded in writing.”
(Emphasis supplied)
830. A reference may also be made to Rule 2 of Chapter XXIII of the Delhi High Court (Original Side) Rules, 2018, which is set out below:
“2. Imposition of actual costs. – In addition to imposition of costs, as provided in Rule 1 of this Chapter, the Court shall award costs guided by and upto actual costs as borne by the parties, even if the same has not been quantified by parties, at the time of decreeing or dismissing the suit. In this behalf the Court will take into consideration all relevant factors including (but not restricted) the actual fees paid to the Advocates/ Senior Advocates; actual expenses for publication, citation etc.; actual costs incurred in prosecution and conduct of suit including but not limited to costs and expenses incurred for attending proceedings, procuring attendance of witnesses, experts etc.; execution of commissions; and all other legitimate expenses incurred by the party, which the Court orders to be paid to any party.”
In addition to imposition of costs as above, the Court may also pass a decree for costs as provided in Sections 35-A and 35-B of the Code or under any applicable law.”
(Emphasis supplied)
19.2. ANALYSIS AND FINDINGS
831. The Noida Suit and Ericsson’s suit were instituted as far back in January, 2015 and March, 2015 respectively. Both the suits involved multiple hearings, wherein senior counsels appeared on behalf of both sides. Additionally, Local Commissioner was appointed by this Court to record evidence in both the matters. Evidence of various witnesses including expert witnesses was recorded by the Local Commissioner. Some of these witnesses were foreign nationals, who came to India to depose in relation to various issues that were framed in the two suits.
832. As discussed above, except to the extent that one of the suit patents has been declared invalid, Ericsson has substantially succeeded in both suits.
833. As noted earlier, Lava did not negotiate with Ericsson in good faith, which resulted in the present litigation. Prior to institution of the suits as well as during the pendency of the suits, Ericsson made several offers to Lava to settle the case, which was not accepted by Lava and neither any counter-offer was made by Lava.
834. Taking into account the aforesaid position, I am of the view that in the present facts and circumstances, Ericsson is entitled to recover actual costs from Lava.
835. In view of the above, for the purposes of calculation of actual costs, Ericsson shall file its bill of costs in terms of Rule 5 of Chapter XXIII of the Delhi High Court (Original Side) Rules, 2018 within four weeks. For this purpose, the representatives of the Ericsson shall appear before the Taxation Officer on 20th May, 2024, who shall determine the actual costs incurred by Ericsson in the present litigation.
836. Costs as determined by the Taxation Officer shall be paid by Lava to Ericsson within a period of six weeks from the date of determination.”
Citation: Lava International Limited v. Telefonaktiebolaget LM Ericsson, High Court of Delhi, 28th March, 2024, CS(COMM) 65/2016, CS(COMM) 1148/2016 and CC(COMM) 14/2017.
Disclaimer
The case note/s in this blog post have been written by IP Attorneys at BananaIP Counsels based on their review and understanding of the Judgments. It may be noted that other IP attorneys and experts in the field may have different opinions about the cases or arrive at different conclusions therefrom. It is advisable to read the Judgments before making any decisions based on the case notes.
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