Bargain Busting v Shenzhen: Crystal clear messages from the Court

There have been two recent judgments in the ongoing dispute between Bargain Busting Limited (BBL) and Shenzhen SKE Technology Co. Ltd (SKE). These judgments provide valuable insight into the Courts’ approach when determining whether to make an order for costs on an indemnity basis, as well as highlighting the human rights considerations which may arise when seeking to restrain a party from making intellectual property threats.

Background to the dispute

The dispute arose between two competing suppliers of e‑cigarettes. The claim began when BBL (the Claimant) sought to register a number of trade marks centred around the word ‘CRYSTAL’ for use in relation to e‑cigarette products. SKE (the Defendant) responded by opposing the registration of one of those marks and applying to revoke another on the ground of non-use. The Claimant subsequently issued proceedings alleging that the Defendant had infringed its trade mark rights through the use of signs containing the word ‘CRYSTAL’.

What followed was a series of intertwined and fraught proceedings, including opposition and revocation actions before the UK Intellectual Property Office (UKIPO) and High Court. The proceedings are still ongoing.

Human Rights Considerations

The first of the recent judgments concerns allegations that the Claimant made unjustified threats of trade mark infringement proceedings to the Defendant’s distributors and retailers. Following service of the Defence and Counterclaim, the Claimant sent letters before claim to 11 distributors, wholesalers and/or retailers of the Defendant’s products, alleging trade mark infringement and indicating that it would seek to add them as defendants to the proceedings unless they provided appropriate undertakings. It was common ground that these letters amounted to actionable threats of trade mark proceedings. The Defendant successfully obtained an interim injunction restraining the Claimant from making further threats. The present judgment concerns the Claimant’s appeal against that decision (the Appeal).

The Appeal was ultimately successful, and the interim injunction was set aside. A key part of the Court’s reasoning was the manner in which section 12 of the Human Rights Act 1998 was applied in the initial judgment. This provision requires that, where the Court is considering granting relief that may affect a party’s right to freedom of expression under the European Convention on Human Rights (such as an interim injunction), such relief should not be granted unless the Court is satisfied that the applicant is likely to establish at trial that the publication should not be allowed. The meaning of ‘likely’ in this context formed the basis of the Claimant’s first ground of appeal.

In his judgment, the appellate Judge Lord Justice Arnold referred to Lord Nicholls’ speech in Cream Holdings Ltd v Banerjee [2004] UKHL 44, [2005] 1 AC 253, which establishes that the general threshold under section 12(3) is that the applicant must be “more likely than not” to succeed at trial. Lord Nicholls also identified exceptions to this general rule, including where the potential adverse consequences of refusing an injunction are particularly grave, or where a short-term injunction is required to enable the Court properly to consider an application for longer-term interim relief.

As the first-instance Judge had not applied this general rule, and did not find that the Defendant’s claim met the required threshold, he erred in law. The Defendant’s counsel had argued that this was an exceptional case justifying a departure from the general rule on the basis of particularly grave consequences if relief were refused, but this argument was rejected. Accordingly, there was no basis for departing from the general rule set out by Lord Nicholls, and so the injunction was set aside.

This judgment gives clear guidance on the general approach the Court will take when applying section 12(3) of the Human Rights Act 1988 in cases where an interim injunction is sought. Namely, the general position is that an interim injunction will not be granted unless the applicant demonstrates that it is “more likely than not” to establish at trial that the publication of such material should not be allowed. Otherwise, applicants must be prepared to establish that an exception applies.

Approach to indemnity costs

The facts relevant to the second case concern actions before the UKIPO. As stated, the Claimant applied to register the trade mark ‘CRYSTAL BAR’ (the Mark), which the Defendant opposed. The opposition was dismissed following a hearing, and the Defendant’s subsequent appeal to the High Court was also unsuccessful. The order giving effect to the High Court’s judgment provided that the Mark “shall proceed to registration”. While the order preserved the Defendant’s right to appeal, it did not include any stay of proceedings. A further dispute arose when the Defendant entered into correspondence with the UKIPO seeking to delay registration of the Mark pending an appeal.

The Claimant disagreed, maintaining that the order required immediate registration of the Mark, and subsequently issued criminal contempt proceedings on the basis that the Defendant’s conduct amounted to an interference with the administration of justice. Those contempt proceedings were subsequently struck out. The second judgment concerns the appropriate costs order arising from the contempt proceedings.

In his judgment, HHJ Paul Matthews set out the approach to determining the appropriate costs order, emphasising that the Court must consider all the circumstances of the case, and in particular the conduct of the parties. He further noted that an award of costs on the indemnity basis will generally be appropriate where the conduct of the paying party, or the overall circumstances, takes the case out of the norm.

Ultimately, the Judge ordered the Claimant to pay the Defendants’ costs on the indemnity basis, finding that the Claimant’s conduct, as a whole, was improper, far outside the norm, and overwhelmingly justified such an award. He placed particular weight on the opportunistic weaponisation of criminal contempt proceedings in an attempt to pressure the Defendants to abandon efforts to delay registration of the Mark, as described above. He also attached significant weight to a letter sent by the Claimant to the Defendants’ solicitors, in which it alleged they had breached the SRA Code of Conduct and indicated that they would report those solicitors to the SRA unless they agreed to terms favourable to their client.

The judgment highlights the importance of taking a measured and reasonable approach during litigation and provides a useful illustration of the Court’s approach to determining whether costs should be awarded on the indemnity basis. In particular, it emphasises that the parties’ conduct throughout proceedings will be scrutinised in relation to costs, and that tactics which depart markedly from the norm may be penalised.

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