The NOCO Company v Brown and Watson International Pty Ltd (No 2)

The NOCO Company v Brown and Watson International Pty Ltd (No 2) [2025] FCA 1176 is a Federal Court costs judgment delivered after an earlier patent decision between the same parties. The Court said the earlier judgment had resulted in Brown and Watson succeeding on its cross-claim that the asserted patent claims were invalid, while NOCO's infringement claim was dismissed.

The costs judgment matters because it shows how the Court deals with mixed results inside a larger patent case. Brown and Watson won overall, so the starting point was that it should receive its costs. But the Court accepted that NOCO had real success on several discrete issues and reduced the costs payable accordingly. The final order was that NOCO pay 80 per cent of Brown and Watson's costs of the claim and cross-claim, on a party and party basis, with the amount to be determined on a lump sum basis.

NOCO brought a patent infringement claim against Brown and Watson. Brown and Watson responded with a cross-claim alleging invalidity of the asserted claims in three patents. The costs judgment does not set out the full technical background of the products or patents. Instead, it summarises the result reached in the earlier substantive judgment and then deals with the consequences for costs.

According to that summary, Brown and Watson succeeded on invalidity. For many asserted claims, the Court concluded that the claims were not entitled to the asserted priority date. Because NOCO had made a concession, that meant those claims were invalid for lack of novelty. The Court also concluded that all asserted claims were invalid for lack of inventive step. Declarations of invalidity were made and the asserted claims were revoked.

That outcome meant NOCO's infringement claim failed and was dismissed. Even so, the Court had still considered infringement issues on the assumption that the claims were valid. On that assumption, some of Brown and Watson's impugned products infringed some asserted claims. NOCO later relied on that feature of the earlier judgment to argue that it had achieved meaningful success and should not have to pay all of Brown and Watson's costs.

The costs dispute therefore became a separate practical contest. NOCO accepted that Brown and Watson was the successful party overall, but argued that the Court should reduce the costs payable to reflect NOCO's success on particular issues. Brown and Watson argued for the ordinary position that costs follow the event and also sought indemnity costs based on a formal offer to compromise made in January 2025.

The main question was not whether the patents were valid or infringed. Those issues had already been decided. The question here was how the Court should exercise its broad discretion on costs after the substantive result.

That involved three practical issues. First, should the Court apply the ordinary rule that costs follow the event, meaning the overall successful party gets its costs? Second, should the Court reduce the costs payable because NOCO had succeeded on some discrete issues during the case? Third, should Brown and Watson receive indemnity costs because NOCO did not accept Brown and Watson's 16 January 2025 offer to compromise?

The Court approached those questions by distinguishing between overall success in the proceeding and success on particular issues. It also considered the settlement offer from the perspective at the time it was made, rather than with hindsight after trial. That distinction is important for businesses. A party can lose the case overall, yet still persuade the Court that some of the work it had to do was justified and should affect the final costs order.

The Court held that Brown and Watson was the successful party in respect of both the claim and the cross-claim. On the infringement claim, the Court rejected NOCO's argument that it had succeeded merely because some products were found to fall within some claims on the assumption of validity. The Court said the relevant order on the claim was that it was dismissed. So, as a starting point, NOCO should pay Brown and Watson's costs.

But the Court did not stop there. It accepted that this was an appropriate case for an issues-based approach. In many patent cases, discrete issues can consume substantial evidence, submissions and hearing time. Where one party has been successful or largely successful on those issues, the Court may adjust costs even though that party lost overall.

The Court identified several such issues in NOCO's favour. They included three construction and associated infringement issues: the Automatic Start issue, the USB issue, and the DC-DC converter issue. They also included issues relating to CN190, a piece of prior art that Brown and Watson abandoned late in the trial, and the best method issue, which Brown and Watson had run as part of its invalidity case but lost.

The Court considered those issues sufficiently discrete and significant to justify a reduction. It therefore made a single order covering both the claim and the cross-claim, rather than separate costs orders for each. The final result was a 20 per cent reduction from the costs otherwise payable, leaving NOCO to pay 80 per cent of Brown and Watson's costs of the proceeding.

On indemnity costs, Brown and Watson relied on a formal offer to compromise dated 16 January 2025. The Court accepted that the offer was made under the Federal Court Rules and that NOCO's proceeding was dismissed. But that was not enough by itself. The rule still required the Court to be satisfied that NOCO had unreasonably failed to accept the offer.

The Court reviewed the applicable principles and considered factors such as the stage of the proceeding, the time allowed to consider the offer, and the extent of the compromise offered. The extract available here is truncated during the Court's detailed discussion of the offer, but the Court's conclusion is clear. In all the circumstances, it was not satisfied that NOCO's failure to accept the offer was unreasonable. Brown and Watson's application for indemnity costs was therefore rejected.

The most useful part of this judgment for business readers is the Court's explanation of which issues were important enough to affect costs. The Court did not accept every complaint NOCO made about Brown and Watson's case. But it did identify a limited group of issues that were discrete, substantial and worth recognising in the final order.

First, NOCO was successful or largely successful on the Automatic Start issue, the USB issue and the DC-DC converter issue. These were construction and associated infringement issues. The Court noted that, taken together, the effect of those outcomes was that each of Brown and Watson's impugned products fell within the scope of at least one asserted claim. That did not save NOCO from losing overall, because the claims were invalid, but it did show that NOCO had achieved some real success on the infringement side of the case.

Second, the Court treated NOCO as successful on the CN190 prior art issue. Brown and Watson had pressed lack of novelty and lack of inventive step arguments based on CN190, which required evidence including translation evidence. Brown and Watson abandoned CN190 late in the trial. The Court said it was not possible to determine exactly why that happened, but in circumstances where the prior art was abandoned late, including after cross-examination that occupied some time, it was appropriate to treat NOCO as successful on that issue.

Third, the Court treated NOCO as successful on the best method issue. Brown and Watson argued for a more granular analysis, saying it had succeeded on part of that topic. The Court rejected that level of slicing. Brown and Watson had relied on best method as a ground of invalidity, and that ground failed. The Court considered that enough to justify recognising NOCO's success for costs purposes.

The Court did not accept that every other matter raised by NOCO should reduce costs. It said the remaining matters were not sufficiently discrete for present purposes. That is a useful reminder that issue-based costs arguments need to be focused. A party does not get a discount simply because it won some points along the way. The points need to be separate enough, and significant enough, to justify the extra complexity of adjusting the ordinary costs position.

If your business owns patents, this case shows the danger of relying too heavily on partial technical wins. NOCO could point to findings that some products would have infringed on the assumption the claims were valid, and it succeeded on several discrete issues. But because the asserted claims were ultimately found invalid and revoked, the infringement claim failed and the overall costs position turned sharply against it. Validity remains central.

If your business is defending a patent claim, the case shows the value of a well-run invalidity cross-claim. Brown and Watson won overall because invalidity succeeded. But the judgment also shows that defendants do not get a free pass on every argument they run. Abandoned prior art, unsuccessful grounds, and failed construction positions can reduce the costs recovered even where the defence wins the case overall.

The settlement aspect is also commercially important. Businesses sometimes assume that if they make a formal offer and later do better than that offer at trial, indemnity costs will follow automatically. This judgment says otherwise. The Court still asks whether the refusal was unreasonable in the circumstances at the time. Timing, the extent of compromise, the state of the evidence, and the practical value of the offer all matter.

One feature specifically noted by the Court was that Brown and Watson's January 2025 offer involved some compromise, including withdrawal of the validity challenge, no order as to costs, and payment of $200,000 to NOCO. But the Court also noted that the offer did not involve Brown and Watson ceasing to sell the impugned products. The extract available here cuts off before the full reasoning is completed, so care is needed before drawing broader conclusions from that part of the judgment. The safe point is that formal offers are powerful, but not self-executing.

For business owners and in-house teams, the practical reading is straightforward. Patent litigation should be managed as a portfolio of risks: validity risk, infringement risk, evidence risk, issue selection risk, and settlement risk. Costs exposure can remain very substantial even where you win meaningful arguments on the way through. Budgeting, board reporting, and settlement decisions should all reflect that reality.

The costs judgment was delivered by Moshinsky J on 24 September 2025 in the Federal Court of Australia. The Court said these reasons should be read together with the earlier substantive judgment, The NOCO Company v Brown and Watson International Pty Ltd [2025] FCA 887, delivered on 7 August 2025.

The orders required Brown and Watson to file and serve a Costs Summary by 24 October 2025, NOCO to file and serve a Costs Response by 21 November 2025, and the parties to file any submissions on costs by 5 December 2025. The amount of the lump sum costs was to be determined by a Registrar of the Court.

Because this page is based on the costs judgment, it should not be treated as a complete account of the patented technology, the impugned products, or the full reasoning on validity and infringement. Those details sit primarily in the earlier substantive judgment.