In Ortho-McNeil Pharmaceutical, Inc. v. Mylan Inc., the Court of Appeals for the Federal Circuit (CAFC) upheld the majority of $1.3 million in costs to Daiichi, the prevailing party, but vacated and remanded to be reduced the portion of discovery costs that the prevailing party had jointly incurred with another suit on the same patent. Daiichi and its licensees, Ortho-McNeil and Johnson & Johnson, had successfully brought an infringement suit against Mylan. The Northern District of West Virginia found that Mylan had failed to prove any invalidity or uneforceability of Daiichi’s U.S. Patent No. 5,053,407 on an antibiotic compound known as levofloxacin. The CAFC affirmed this finding in 2005 in Ortho-McNeil Parm., Inc. v. Mylan Labs., Inc., 161 F. Appx 944, 945 (Fed. Cir. 2005).

This appeal concerned the award of costs stemming from the previous action. As the prevailing party, Daiichi submitted to the West Virginia district court a bill of costs seeking approximately $2.2 million from Mylan. The district court awarded a reduced $1.3 million in costs to Daiichi. However, the district court rejected Mylan’s argument that discovery costs should be allocated between its case and a separate levofloacin civil action filed against Teva Pharmaceuticals in the District of New Jersey. The Teva suit was settled following the New Jersey district court’s grant of summary judgment to Daiichi on the issue of inequitable conduct. On appeal, Mylan opposed many of the costs and reasserted its argument on joint discovery costs.

The CAFC affirmed the West Virginia district court’s judgment with regard to all costs except the joint discovery costs. Mylan argued that allowing full recovery of the shared discovery costs would amount to double recovery since Daiichi effectively received half of the shared costs when it settled with Teva. The depositions of Daiichi’s witnesses were taken jointly by Mylan and Teva, with attorneys for both Mylan and Teva present. In addition, the captions of both cases appeared on the transcripts. Daiichi pointed out that the costs were not awarded in the Teva action, and that Daichi and Teva executed a settlement in which Daiichi agreed not to seek to recover its costs in exchange for Teva agreeing not to appeal the New Jersey district court’s grant of summary judgment. The order of dismissal stated that both parties should bear their own costs. Daiichi argued that because it did not recover its costs in the Teva action, the West Virginia district court acted appropriately in awarding all of the shared deposition costs without reduction.

The CAFC started by noting that no precedent for how costs should be apportioned in such circumstances exists in the Fourth Circuit. Generally, in multiparty proceedings before a single judge, the district court has discretion to apportion payment of jointly incurred costs among losing parties or make the losing parties jointly and severally liable for the costs. In either case, the usual limitation is that the prevailing party may receive only one satisfaction of costs. However, when joint discovery is conducted in multiple cases pending in different districts, there is no single judge who can make a determination concerning the award of jointly-incurred costs, leading to the risk of double recovery.

The CAFC determined that Daiichi had in effect already recovered some amount of costs through its settlement agreement with Teva. Although Daiichi did not actually receive costs from Teva, the costs were taken into account by the parties in their settlement agreement. Having been compensated for these costs in its settlement, Daiichi could not then recover more than it was entitled to by receiving full costs from Mylan.

Because the settlement agreement did not explicitly indicate which costs were included, the CAFC determined that a mechanical allocation by the number of parties sharing those costs was a reasonable approach. However, the CAFC indicated that other factors may make such an allocation inappropriate. Although such factors were not identified by the parties in this case, the CAFC remanded the case for the district court to determine if such factors did exist.