Mylan Labs cried foul after getting stuck with the tab for almost $1.3 million in translation costs by Daiichi Pharma. A district court said Mylan had to pay under 28 U.S.C. § 1920 and Federal Rule of Civil Procedure 54(d). The U.S. Court of Appeals for the Federal Circuit agreed and said pay up. Ortho-McNeil Pharma v. Mylan Labs (08-1600).

Daiichi owns U.S. Patent No. 5,053,407, directed to an antibiotic compound known as levofloxacin and sold under the trade name “Levaquin.” After Mylan submitted an abbreviated new drug application to the USFDA seeking approval for generic levofloxacin tablets with a paragraph IV certification contending that Daiichi’s patent was invalid, Daiichi sued.

FRCP 54(d) provides that “[u]nless a federal statute, these rules, or a court order provides otherwise, costs . . . should be allowed to the prevailing party.” As the prevailing party in the action, Daiichi submitted to the district court a bill for $2.2 million from Mylan. While it might be generous, Mylan raised numerous objections, including that certain discovery had been conducted jointly for this action and a separate levofloxacin-related civil action against Teva.

After reducing Daiichi’s requested costs by approximately 40% (including most notably a substantial reduction in translation costs awarded), the district court awarded costs, which are summarized as follows:

Fees of Clerk                                                                             $ 75.00
Service of summons & subpoena                               $ 1,676.81
Court reporter fees:
Trial transcripts                                                              $ 31,225.18
Pre-trial hearing transcripts                                         $ 4,924.20
Deposition transcripts                                                 $ 112,911.70
Witness fees                                                                       $ 53,939.94
Exemplification & copying fees                                $ 89,424.20
Interpretation                                                                  $ 24,512.36
Translation                                                        $ 1,011,712.00

Total                                                                               $ 1,330,401.39

On appeal, the Federal Circuit affirmed the award of translation costs for potential trial exhibits, translation costs for privilege log documents, and other costs. The Federal Circuit then looked at the district court’s rejection Mylan’s argument that the joint discovery costs should have been apportioned between this action and the parallel levofloxacin case against Teva.

The court noted that Daiichi’s witnesses were in fact taken jointly by Mylan and Teva, with attorneys for both Mylan and Teva present, and with the captions of both cases on the transcripts. In other words, the depositions were formally taken in both cases. There is also no dispute that the depositions at issue were necessary in both cases. Daiichi even admitted that the New Jersey district court could have assessed the deposition costs, and it acknowledged at oral argument that, had the New Jersey district court done so, Daiichi could not have also recovered those same costs in here, too.

However, costs were not awarded in the New Jersey action against Teva because Daiichi and Teva executed a settlement agreement and “in exchange for Teva agreeing not to appeal the New Jersey district court’s grant of summary judgment [to Daiichi on the issue of inequitable conduct], Daiichi agreed not to seek to recover its otherwise taxable costs in that case.”

Daiichi argued that because it did not in fact receive its costs at the conclusion of the New Jersey action, it was appropriate for the district court here to award all of the shared deposition costs without reduction. Mylan argued that Daiichi could have asked for half of the shared costs when it settled with Teva but waived actual payment of the costs in return for other consideration:  Teva forgoing an appeal.

The Fed Circuit agreed with Mylan’s view that Daiichi would be double-dipping on the cost recovery:

As a general rule, it is well established that in multiparty proceedings before a single judge (as where multiple losing parties are joined in one case, or where multiple cases are consolidated into a single proceeding), the district court has discretion to apportion payment of jointly incurred costs among the losing parties or to invoke the default rule that the losing parties are jointly and severally liable for costs. … Any such award, whether apportioned or awarded jointly and severally, is subject to the usual limitation that the prevailing party may receive only one satisfaction of costs; that is, he “cannot recover more than his total entitlement.”

Had the New Jersey court made an actual award of costs to Daiichi, it would have been impermissible for the district court here to award the same costs. The district court recognized this fact, and Daiichi in fact agreed at oral argument that the same costs could not be awarded in both actions.

We see no basis for treating a settlement situation differently. Here it is apparent that Daiichi has in effect already recovered some amount of costs through its settlement agreement with Teva. Although Teva did not actually pay costs to Daiichi in cash, the taxable costs in the New Jersey action (including deposition costs) were unquestionably taken into account by the parties’ settlement, in which Daiichi agreed not to seek actual payment of costs as consideration for Teva foregoing its appeal. Having recovered the value of those costs in the form of the foregone appeal, Daiichi cannot now recover more than its total entitlement by obtaining those same costs again from Mylan.

Thus, Daiichi cannot have its cake and eat it, too.

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