DSM IP Assets B.V. successfully defended Israel Patent Application No. 142789 from an Opposition filed by PMS Shielding Factory LTD.
Now DSM IP Assets B.V. have asked for a cool three million shekels that they claimed defending the Opposition cost them. This sum includes $450,147 for legal fees, 262,849 Euros costs and workers time. Furthermore, DSM has requested punitive damages due to the inequitable behaviour of PMS. The first request for costs was filed in November 2013 when the Opposition was rejected and the patent was ruled to be registerable. That decision was appealed to the District Court who over-ruled a decision by Ms Shoshani Caspi that the entire file wrapper of the corresponding European patent could be admitted as evidence and the Patent Office should review the case and issue a new ruling.
In accordance with the Court order, the .case was reconsidered and Ms Yaara Shoshani Caspi once again concluded that the patent was registerable and the Opposition should be thrown out. The Applicant again requested costs. PMS responded and this ruling considers the claims and counter-claims.
Essentially the issues are whether the opposition and the way it conducted was justified. DSM claimed that the case was both legally and scientifically difficult, and resulted in it being expensive to defend. However, PMS’s behaviour had resulted in unnecessary interim procedures and additional costs. The opposer should have to pay for the original opposition as well as for the second reconsideration which was totally unnecessary.
Based on an affidavit from the collection clerk at Reinhold Cohn, the actual costs for the original case were $347,912.3 in legal fees and a further $20,397.49 in accrued out-of-pocket expenses. Receipts and detailed invoices were added to this affidavit. A second,separate affidavit signed a second cost calculation for the costs of the second round. A further affidavit from Mr Lok, legal counsel for DSM, related to 255,459 Euros for work performed by the staff of DSM in fighting this case, and a further 8225 Euros for reviewing the European patent.
PMS considered the alleged costs as inflated. They alleged that the opposition was no more difficult than other opposition cases. Furthermore, since the Applicant was well aware of the European file wrapper but tried to suppress it, it was the Applicant and not the Opposer who can fairly be accused of inequitable behaviour regarding the European file wrapper, and of causing an additional and costly, ultimately superfluous proceeding. Indeed, PMS considers that DSM is billing twice or more for the same work. The opposition should be considered as a complimentary process to the patent examination and necessary to ensure the purity of the register. Consequently, real costs should not necessary be awarded.
DSM’s employees costs and their legal counsel were not required for Agent of Record to manage the opposition and are not refundable as these costs are part of their work. Similarly Applicant’s employee’s limousine transport to and from the airport is not something fairly rolled over to the Opposer.
The Opposer therefore concluded that the costs should be simply estimated by comparison with other cases of similar complexity, or that each side should bear their costs.
Applicant responded that since the Patent Office had found Opposer guilty of widening their grounds for Opposition, they Opposer’s actions were not justified, or at least they mismanaged the case causing unnecessary expense.
Applicant rejected claim that Oppositions should be treated specially. The purity of the Register requires not only Applications to be filed in good faith for proper inventions, but also Oppositions should only be filed where there are proper grounds for so doing. The costs calculation was sufficiently detailed to support a request for real costs. The scientific and legal complexity of the case resulted in the costs being necessary, proportional and reasonable.
In her ruling, Ms Yaara Shoshani Caspi noted that the courts do not need to rule actual costs, but take into account judicial principles. To support a claim for actual costs, these have to be necessary, reasonable and proportional in the circumstances, and citing Tnuva vs. the Import and Export Authority, P.D. 60(1) 600, 615, 20 June 2005, these considerations include the amount of work in managing the case and submitting papers, the legal and factual complexity, the stage reached, the behaviour of the parties with respect to each other and the Patent Office, equitable behavior, and so on.
However, citing various rulings, she noted that one should not make it too expensive to fight legal battles and that interested parties may and often do spend more than is really necessary. Furthermore, as ruled in Opposition 113433 Smithkline Beecham vs. Teva, 30 May 2005, not all costs are recoverable. Actual costs are, therefore, merely a starting point in coming up with a fair legal costs ruling. The winning party makes his claims for actual costs and attempts to justify them. Then the opposing party can challenge the costs as exorbitant or unnecessary. Furthermore, the more extravagant the costs claimed, the more difficult it is to prove that they were indeed necessary. See Opposition 153109 Unipharm vs. Merk Sharp & Dohme, for example.
Ms Yaara Shoshani Caspi refrained from addressing the claims and counterclaims regarding the behaviour of the parties and her previous ruling and confined herself to considering the various costs requested.
The legal costs were $450,147 which is 1,757,463 Shekels. This was actually billed and paid. Nevertheless, despite the factual and legal complexity and drawn out nature of the case, this is an exorbitant sum for oppositions and is also disproportionate to the amount of work done in this case. Indeed, it appears that some 18 members of Reinhold Cohen’s staff worked on this file at one stage or another. Invoices bore a heading but no detail of what was actually done before a submission. In this instance, the Adjudicator felt that despite this level or detail apparently satisfying the Applicant, it was insufficient for her to conclude that the costs were justified. Furthermore, there was no apparent correlation between the legal fees and the costs accrued.
Some costs, such as translation costs, costs for reviewing the court protocol, extension fees, preemptive costs billing for the first case, and the like were not necessary. There does seem to be double billing for the first and second costs request.
At the level of detail provided, it is impossible to conclude that the costs were reasonable, proportional and necessary. True, the case was appealed and reconsidered by the Patent Office. Nevertheless, there were only two hearings. Consequently, Ms Yaara Shoshani Caspi considered it impossible to conclude that the 1,757,463 Shekels.were justified, necessary, reasonable or proportional, and decided to rule based on estimation.
In general, the 1,127,858 Shekels claimed for DSM’s staff’s time is not recoverable. Opposers’ staff are employed to work and the cost of an opposition is not an additional payment over their salaries. This principle is detailed in the cost ruling for Opposition IL 151762 Unipharm vs. Novartis AG, 21 June 2013. Sometimes, however, such costs are partially recoverable where clearly detailed. See 155919 Teva Pharmaceutical Industries vs. AstraZeneca, 18 July 2012 .
In this case, the Applicant’s basis for calculating employee’s costs, including their hourly rate, was not even specified. The amount of hours seems unreasonable,
Applicant argued that DSM were providing internal expert witnesses and legal services instead of outsourcing and this approach finds support in 165704 Israel Aircraft vs. Rafael, 12, July 2012. These witnesses were required to come to Israel and needed hotels, flights and the like. Nevertheless, the costs are insufficiently detailed.
it is necessary to find the correct balance to encourage both patent registration but also opposition by third parties where there is a legal or factual basis for the opposition, but to prevent the filing of oppositions merely as a delaying tactic.
The Applicant was not required to study new documents, only those that they should be familiar with, such as the file wrappers of corresponding applications.
In conclusion, legal costs of 350,000 NIS + VAT were awarded, as were an additional 45,000 NIS (including VAT) to compensate for employees’ time spent on the case.
PMS Shielding Factory LTD are given 21 days to settle these costs.
It seems that PMS have accused DSM of duplicated work and Ms Yaara Shoshani Caspi’s conclusion that the legal costs of $450,147 ( 1,757,463 Shekels) are exorbitant and disproportionate to the amount of work done in this case seems to imply that Reinhold Cohn’s team had several attorneys and/or patent attorneys working in parallel, each clocking up billable hours. If we assume an average billing rate of 1000 Shekels an hour, there are apparently 1757 hours billed. This is more than 10 1/2 months of full time work. Frankly, it does seem rather a lot for a case involving composite materials where the Applicant’s expert technical and legal people are hands on to the extent that on a salary basis, their accrued time is 1,127,858 Shekels.
Note, I previously commented that an opposition in a different case had cost a lot of money. Ms Rimma Pugatsch Shendelzon who had worked on that case whilst at RCIP hotly denied this and alleged that I didn’t have any experience or understanding regarding oppositions. I hadn’t commented then on whether the lot of money was justified, but did think that for a statement of case, it was a lot of money. Nevertheless, for the record, I do have some experience with oppositions, most recently representing the Ministry of Religious Services opposing a patent aplication for a high-density burial solution which was withdrawn following our Statement of Case. That said, I comment on judicial rulings in this blog despite never having issued one, and report and comment on pharmaceutical oppositions which is not part of my practice.
Going back maybe 14 years, when I worked at Seligsohn & Gabrieli, I worked with Adv. Tami Winitz on an opposition involved with composite materials for anti ballistic purposes. It may well have been for the same parties as this case. As a materials scientist who started a PhD in Applied Chemistry on fiber reinforced polymer matrix composites, who then did a PhD in Physics on surface engineering and with a client making anti-ballistic ceramics for whom I have successfully prosecuted four patents in the US, I can confidently state that in this instance I can both cope with the technology and estimate the amount of work required for handling cases of this nature. I think that the Adjudicator has been generous in ruling $100,000 costs.
I am reminded of a joke I once heard from a Reinhold Cohn patent attorney (name witheld), about a lawyer who joined the family firm and was trusted with an important file for a special client that had been with the firm for a long time. The young lawyer worked on the file diligently and six weeks later went into his father’s office and proudly announced that he’d negotiated a settlement and all parties were happy. His father informed him crossly that he had put the son through college on that file, as indeed his own father had put him through law school and paid off his mortgage…