In the patent infringement case of Bayer Pharma Aktiengesellschaft v Generic Health Pty Ltd  FCA 250, Bayer made an offer of compromise to Generic Health at an early stage in the proceedings to settle the matter in exchange for around $20 million in compensation.
Generic Health did not accept the offer. However, the court found them guilty of patent infringement and made a damages award of over $25 million against them.
Accordingly, Bayer sought orders for the court to award them all of their legal costs (in addition to the damages) under rule 25.14(3) of the Federal Court Rules 2011.
Normally, only amount about 60% of legal costs are due to be paid by the loser to the winner of the case.
Rule 24.13(3) applies in cases where an applicant makes an offer which was not accepted by the respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer. In that instance, the applicant is entitled to their costs on an "indemnity basis", rather than a "party-party basis."
Generic Health argued that it could not assess the offer of compromise at the time it was made because Bayer had not filed evidence in support of its claim.
However, Justice Jagot found that Generic Health could have calculated its possible liability in order to assess the offer. Generic Health did not seek an explanation from Bayer regarding how it had calculated the amount of the offer.
The case is a reminder that if an offer of compromise or Calderbank offer is rejected, a clear reason must be given to the offeror as to the grounds for rejection.