Case No: HC-03-CO 2951
Neutral Citation Number: [2004] EWHC 2316 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
PATENT COURT
Royal Courts of Justice
Strand, London, WC2A 2LL

Date: Tuesday, 31 August 2004
B e f o r e :

THE HONOURABLE MR. JUSTICE LADDIE

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	(1) AFFYMETRIX INC.
(2) AFFYMETRIX, UK LIMITED 	
Claimants	
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MULTILYTE LIMITED	Defendant	

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Tape Transcription/Transcript of the Shorthand/Stenographic Notes of Marten Walsh Cherer Ltd.,
Midway House, 27/29 Cursitor Street, London EC4A 1LT.
Telephone No: 020 7405 5010.  Fax No: 020 7405 5026
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Mr. R. Meade (instructed by Bristows) appeared for the Claimants)
Ms. L. Brazell (instructed by Bird & Bird) appeared for the Defendant)

Hearing date: Tuesday, 31 August 2004
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Judgment
Mr. Justice Laddie: 
1.	 There is a small point on costs which has to be resolved in this matter in which the claimants are Affymetrix Inc. and Affymetrix UK Limited and the defendant is Multilyte Limited.  This is a patent action which was commenced by the claimants in the form of an application to revoke certain patents held by the defendant and for declarations of non-infringement. The defendant responded both by defending the claim brought by the claimants and by launching a counterclaim for infringement. 
2.	As it happens, the defendant has now decided not to contest this action any further and, as a result, I have made an order revoking the defendant’s two United Kingdom patents and also dismissing the defendant’s counterclaim for infringement.  The normal order for costs on the making of such an order would be that the defendant bears the claimants’ costs.  However, in this case the claimants, represented before me by Mr. Meade, seek a modified order.  They ask for their costs, but that the costs for the period from 4 to 18 August to be on an indemnity basis.  
3.	The reason for that is as follows.  The action was due to come on for trial in early October and the parties were under a timetable for preparation of evidence and preparation of documents which involved the exchange of expert and factual evidence during the vacation.   It appears that on 4 August the defendant ceased all further work on preparing evidence, whether from experts or witnesses of fact, and came to the conclusion that it was likely to wish to withdraw from the action.  It appears from a letter sent to the claimants that it had all but decided to withdraw from the action on 4 August, although this fact was not notified to the claimants until 18 August.  In that period the defendant attempted to negotiate a withdrawal of the action.  Attempts to reach an agreement with the claimants failed.  As soon as that failure became apparent, the defendant notified the claimants of its intention no longer to defend these proceedings.    Mr. Meade says that in those circumstances his clients have continued to work hard to meet the timetable ordered by the court for the preparation of evidence, and that the costs incurred in the two weeks from 4 to 18 August were costs wholly and unnecessarily incurred by his clients. The defendant should bear the costs for that period on an indemnity basis. 
4.	Against this, Ms. Brazell, who is the solicitor acting for and on behalf of the defendant, argues that that is too Draconian an order. He says that orders for indemnity costs are only to be made in cases where it is necessary for the court to show its disapproval of the way in which a party has conducted proceedings. He says that in this case it was reasonable and certainly not in any sense wrongful for the defendant to have sought to negotiate a settlement in the period from 4 to 18 August.  
5.	In response to a question from me as to why the defendant had not put in evidence in response to the evidence filed by the claimants on this application, which evidence expressly asserted that the defendant had made a final decision to withdraw from the action on 4 August, Ms. Brazell explained that this was a case where the defendant was as anxious as possible to minimise the costs, if that could be done, since it, a very small company, is involved in litigation not only in this country but in Germany and the United States of America in relation to this patent portfolio.  As a result, she says that she attempted to reach a compromise on the question of costs in the short period since the service of the claimants’ evidence on this application, but that that attempt also was unsuccessful.  The claimants maintain their pursuit of full indemnity costs for the two weeks in issue.  
6.	In my view, it is necessary to bear in mind that indemnity costs will only be awarded where the court considers that the cost paying party’s behaviour has been in some material sense improper or unreasonable.  In my view, this is not such a case.  It is reasonable for a party to try to negotiate a termination of proceedings. Taking two weeks to do so is not excessive. Furthermore it is clear to me that most, if not all, of the claimants’ costs for the period from 4 to 18 August will be recoverable on the standard basis, so there is not much at stake.  I have come to the conclusion that there is not sufficient material here to justify making a special order for indemnity costs for the period from 4 to 18 August.