Law Times

Page 12 February 1, 2016 • Law Times www.lawtimesnews.com Federal courts should raise tariff rates, say lawyers BY MICHAEL McKIERNAN For Law Times T he federal courts need to boost their outdated tariff rates to bring cost awards more in line with the reality of modern litigation, according to intellectual prop- erty lawyers. The calls came as the Federal Court and the Federal Court of Appeal sought input from prac- titioners who appear before the courts as part of a review of their rules on costs. "The tariffs are way behind the real cost of litigation," says John Myers, the chair of the litigation committee at the Intellectual Property Institute of Canada. The effect becomes magni- fied at the more sophisticated end of the litigation spectrum, a position occupied by many in- tellectual property cases before the courts, according to Myers, a partner at Taylor McCaffrey LLP in Winnipeg. "When you're dealing with re- ally high stakes, the current tar- iffs don't come anywhere near to properly indemnifying success- ful parties," he says. "I think there is a consensus that the tariff could be improved, and increased in various columns to move us a little closer to the reality." IPIC's submission to the fed- eral courts' review suggests in- creasing Tariff B, the one most commonly applied to intellectual property cases, but accompany- ing the boost with additional protection in the rules "that rec- ognize the importance of access to justice." Ultimately, the sub- mission says the level of indem- nity provided to the successful party should depend on the im- pact any award could have on ac- cess to justice. "We'd like to see successful parties rewarded, but at the same time the court should retain the f lexibility to craft cost awards that fit particular circumstances, rather than enforcing tariffs rig- idly," Myers says. Despite the dangers a general increase in costs poses to access to justice, the IPIC submission suggests it may be worth the risk if it forces a change in the way parties approach litigation before the Federal Court and Federal Court of Appeal. "The current situation where cost consequences have little im- pact on the behavior of litigants presumably causes a greater strain on limited judicial resources than would be the case if costs were in- creased in a manner that encour- aged settlement, with the result that low costs may also be having an adverse impact on access to justice," the submission reads. Norman Siebrasse, a professor at the University of New Bruns- wick's faculty of law who special- izes in patent law, says the dispar- ity between costs awards and the actual cost of litigation in that field is particularly stark, espe- cially when the players are large pharmaceutical companies. "I've found that costs awards tend to be in the range of around 15 per cent of actual costs. At that rate, it's kind of pointless because there's no real effect on litigation incentives, but you still have the fight over the amount of costs," Siebrasse says. As part of its submission to the federal courts, the Canadian Bar Association's intellectual property section highlighted a number of cases that illustrate the concern over the adequacy of current Tariff B rates. In one 2011 case, Target Event Produc- tion Ltd. v. Cheung, the success- ful plaintiff received $47,000 in party and party costs, about 21 per cent of its total solicitor and client costs. This was despite the court taking into account the fact that most of the documents were in Chinese as a factor for an in- creased award. A 2015 case, No- vartis Pharmaceuticals Can- ada Inc. v. Teva Canada Lim- ited, saw the successful applicant awarded more than $100,000, or less than 11 per cent of its full $950,000 costs. The CBA's submission rec- ommends preserving the tariff method for costs, noting that its predictability makes it easier to advise clients of expectations in the event of success. However, it says Tariff B costs are "too low and do not ref lect the current practice in intellectual property issues." The CBA acknowledges that a general increase in litigation costs may have a negative impact on access to justice, but it says the impact would be felt less keenly in intellectual property cases compared with other areas of practice, "given the complexity" of the disputes settled by the fed- eral court in the area. In its submission, the CBA recommends a number of chang- es to improve the tariff system, including: Cutting the number of col- umns under Tariff B from five to three, matching the practice in B.C.'s superior court; Specifying in the court rules that the middle column should be the norm, the lower column for matters of little difficulty, and the upper column for matters of extraordinary difficulty or im- portance ; Significantly increasing the upper range of costs available under Tariff B; Clarifying which tariff items can be claimed multiple times or only once; Adjusting the tariff for dis- covery of documents to depend on the number of documents produced. Both the CBA and IPIC reject the concept of one-way fee shift- ing for most intellectual property matters. That approach allows successful plaintiffs to recover costs, but it forces successful de- fendants to absorb their own costs. Both groups pointed out that the most likely beneficiaries of such a system — impecunious plaintiffs — are already protected by other costs rules in the federal courts. Angela Furlanetto, a Toron- to-based partner at intellectual property boutique Dimock Strat- ton LLP, says the federal courts' task in setting new costs rules is complicated by the range of sub- ject matter in the cases heard by their judges. "I don't think there's a case for separate rules for different types of intellectual property disputes, but you are going to get a lot of different ideas from lawyers who deal in aboriginal law, tax law, and refugee cases," she says. LT FOCUS The Canadian Lawyer InHouse 2016 Innovatio Awards is the pre-eminent award program recognizing innovation by members of the Canadian in-house bar in business, government or non-profit. The third annual awards celebrate in-house counsel, both individuals and teams, who have found ways to show leadership by becoming more efficient, innovative and creative in meeting the needs of their organizations. For more information, please contact Jennifer Brown Email: jen.brown@thomsonreuters.com | Phone: 416-649-8867 NOMINATIONS ARE OPEN! We are looking for Canada's most innovative in-house counsel NOMINATE AN INDIVIDUAL OR TEAM IN THE FOLLOWING CATEGORIES: • Law department management • Diversity • Best practices in compliance systems • In-house M&A/Dealmakers • Working with external counsel NOMINATIONS CLOSE FEBRUARY 15, 2016 Nomination forms and more information can be found at: www.innovatio-awards.com • Litigation management • Risk management • Tomorrow's leader in innovation • New this year: Law department leadership HOSTED IN PARTNERSHIP WITH BRONZE SPONSOR PLATINUM SPONSOR SILVER SPONSOR 'The tariffs are way behind the real cost of litigation,' says John Myers.

• Cover