Contempt of Court - COPA v Wright

Author Satoshi Nakamoto Source Wikimedia

Jane Lambert

Chancery Division (Mr Justice Mellor) Crypto Open Patent Alliance v Wright [2024] EWHC 3315 (Ch) (19 Dec 2024) and [2024] EWHC 3316 (Ch) (20 Dec 2024)

This was an application by the Crypto Open Patent Alliance ("COPA") for the committal of Craig Steven Wright ("Dr Wright") for contempt of court.  COPA alleged that Dr Wright had breached various anti-suit and anti-threat injunctions against Dr Wright that Mr Justice Mellor had granted on 16 July 2024 by issuing proceedings against BTC Core and SquareUP Europe Ltd.  Mr Justice Mellor heard the application on 18 Dec 2024 and delivered judgment on 19 Dec 2024 (see Crypto Open Patent Alliance v Wright [2024] EWHC 3315 (Ch)).  At para [136] of that judgment he found Dr Wright to be in contempt of court.  At paras [2] and [79] of Crypto Open Patent Alliance v Wright (Re Sentencing) [2024] EWHC 3316 (Ch) which he handed down on 20 Dec 2024, his lordship sentenced Dr Wright to 12 months imprisonment suspended for 2 years.

Background

Between 5 Feb and 14 March 2024, Mr Justice Mellor tried Dr Wright's claim to be the creator of Bitcoin and the author of Bitcoin: A Peer-to-Peer Electronic Cash System ("the Bitcoin White Paper") and the Bitcoin source code.  The judge found the claim to be unfounded in Crypto Open Patent Alliance v Wright [2024] EWHC 1198 (Ch) on 20 May 2024 which I discussed in Bitcoin - COPA v Wright on 11 June 2024. His lordship explained at para [54] of his judgment of 19 Dec 2024 that he granted the anti-suit and ant--threat injunctions of 16 July 2024 to protect others (particularly those who had been sued previously by Dr Wright) from threats and vexation in future.  I considered those injunctions and other relief in  Consequential Orders and Directions - COPA v Wright on 21 July 2024.

The Injunctions of 16 July 2024

Subject to some exceptions in para 3 which have no application,] the anti-suit injunction made clear that Dr Wright

"shall not commence or procure the commencement by any other person of any proceedings (whether by claim or counterclaim) in the Courts of England and Wales, the Courts of any foreign jurisdiction or in any arbitral tribunal (wherever seated) any proceedings of any of the following kinds ('Precluded Proceedings'):

(a) Proceedings in which rights are claimed or asserted (whether legal or equitable, whether founded on common law, statute or other basis and whether or not the rights are known to English law) based wholly or partly on any one or more of the following grounds:
(i) that Dr Wright is the or an author of the Bitcoin White Paper (i.e. the paper entitled 'Bitcoin: a Peer-to-Peer Electronic Cash System', which was released on or about 31 October 2008 under the name 'Satoshi Nakamoto' and subsequently published in a revised version on or about 24 March 2009);
(ii) that Dr Wright…..is the or an owner of the copyright and/or moral rights in the Bitcoin White Paper (as defined above);
(iii) that Dr Wright is the person or one of the persons who adopted or operated under the pseudonym 'Satoshi Nakamoto' in particular in the period 2008 to 2011;
(iv) that Dr Wright is the person or one of the persons who devised and/or created the Bitcoin System (i.e. the peer-to-peer electronic cash system implemented from around January 2009 which originated from the Bitcoin White Paper);
(v) that Dr Wright is the or an author of any of the versions of the Bitcoin software created or issued in the period up to 2011 (including the executable file and related source code issued under the name Satoshi Nakamoto on or about 8 January 2009);
(vi) that Dr Wright… is the or an owner of database rights in the Bitcoin Blockchain (i.e. the blockchain which was made available for transmission between nodes from January 2009 and later extended by the addition of blocks up to the present day) or in any part of it;
(vii) that Dr Wright is the or an author of the Bitcoin File Format (i.e. the structure of blocks within the Bitcoin Blockchain (as defined above));
(viii) that Dr Wright…. is the or an owner of copyright and/or moral rights in the Bitcoin File Format (as defined above) or the Bitcoin software referred to at (v) above;
(ix) that Dr Wright devised the name 'Bitcoin';
(x) that Dr Wright …… owns goodwill and/or unregistered trade mark rights in the name "Bitcoin" and/or in the Bitcoin System (as defined above); and/or
(b) Proceedings in which it is otherwise asserted that Dr Wright is the person or one of the persons who adopted or operated under the pseudonym 'Satoshi Nakamoto' or that Dr Wright is responsible for acts done by such person or persons.'

The anti-threat injunction was as follows:

"…Dr Wright …shall not threaten (explicitly or implicitly) or procure any other person to threaten (explicitly or implicitly) that any Precluded Proceedings will be pursued against any person in the Courts of England and Wales, the Courts of any foreign jurisdiction or in any arbitral tribunal (wherever seated)."

The Breach

By a claim form dated 10 Oct 2024, Dr Wright claimed the following relief from (1) "BTC Core (a Partnership)" and (2) "Square Up Europe Ltd (a Partner)":

"This claim addresses the wrongful passing off of BTC as Bitcoin. The defendants have, without authorisation, altered the original Bitcoin protocol—introducing modifications such as SegWit and Taproot—that fundamentally deviate from the original system as defined by Satoshi Nakamoto in the Bitcoin White Paper.
These modifications have led to a misrepresentation of BTC as the original Bitcoin, resulting in confusion within the market. The true version of Bitcoin, represented by BSV, adheres strictly to the original protocol and vision of a peer-to-peer electronic cash system. The defendants' actions have misled the public into believing that BTC retains the attributes of the original.
Value
Estimated value of claim: £911,050,000,000. This is based on the difference in market valuation between Bitcoin (BSV) at £50 per unit and BTC at £48,000 per unit, reflecting the financial impact of misrepresentation and resulting market loss."

In his particulars of claim, he claimed:

"(1) An injunction restraining each of the defendants from—
(a) Passing off. Engaging in any activities or representations that cause BTC or any other Modified System to be misrepresented as Bitcoin, thereby creating confusion or misleading the public about the nature and identity of Bitcoin as defined in the White Paper and maintained through Bitcoin Satoshi Vision (BSV).
(b) Infringing copyright. Reproducing, using, or distributing copyrighted works associated with the Bitcoin White Paper and original software developed by Satoshi Nakamoto without proper authorisation, including using such materials to promote Modified Systems.
(c) Infringing database rights. Unauthorised use of the Bitcoin blockchain database, including reproducing or distributing copies of the original blockchain data in a manner that deviates from the unchanged protocol and is not authorised for use in systems that diverge from the original Bitcoin system.

(2)  An inquiry as to damages for passing off and for infringement of database rights and copyright, including damages pursuant to regulation 3 of the Intellectual Property (Enforcement, etc.) Regulations 2006 and Directive 2004/48/EC, and further or alternatively, at the claimant's option, an account of profits derived from the unauthorised activities described."

SquareUp Europe Ltd had been a defendant in previous litigation launched by Dr Wright.   By an application dated 25 Oct 2024, Dr Wright sought to add businesses and individuals whom he had sued before as defendants to the new proceedings on the ground that they were partners of BTC Core.

The Contempt Application

By an application notice dated 23 Oct 2024, COPA alleged that Dr Wright's claim against BTC Core and ScaleUP Europe Ltd. fell within the scope of the anti-suit and anti-threat injunctions.   

 

Case Management Conference

A case management conference ("CMC") took place on 27 Nov 2024 which Dr Wright attended by video link.  The issues for decision were:

• whether Dr Wright should be allowed to attend the hearing of the committal application remotely from Indonesia;
• other directions for the hearing, including a request to cross-examine Dr Wright on certain limited topics; and
• Dr Wright's allegations of apparent bias.

Mr Justice Mellor delivered his judgment on those issues in Crypto Open Patent Alliance v Wright [2024] EWHC 3135 (Ch) on 6 Dec 2024.  

He dismissed Dr Wright's application for permission to attend the committal hearing by video link. He explained in para [14] of his judgment that the decision whether to require an in-person hearing of the contempt application or to allow Dr Wright to attend remotely by video link from outside the jurisdiction required consideration of a number of legal and procedural factors which included (i) the strong presumption in favour of personal attendance at a contempt hearing; (ii) principles governing remote hearings, including restrictions on the court's ability to receive evidence from foreign jurisdictions; and (iii) principles relating to adjustments for vulnerable witnesses.

As to the presumption, he referred to para [33] of Mr Justice Miles's judgment in Business Mortgage Finance 4 plc v Hussain [2022] EWHC 353 (Ch):

"I ordered the trial [of the contempt application] to take place in person. There are compelling reasons for that: a committal application concerns a public administration of justice and the applicants are contending that the respondent has breached the order of the court; the hearing should therefore take place with the alleged contemnor present to answer the charges. It may be possible to contemplate unusual cases where remote appearance may be justified for reasons of health or vulnerability or otherwise. But that requires evidence and is not this case."

He also mentioned para [13] of Mrs Justice Ellenbogen's judgment in Mex Group Worldwide Ltd v Ford [2024] EWHC 1486 (KB) who had directed a fully in-person hearing of a contempt application because "it is not appropriate to attend a committal application remotely". He noted that the court has power under CPR 81.7 (2) to issue a bench warrant to secure the attendance of a defendant at a committal hearing,  He added that it was particularly unsatisfactory to cross-examine by video link witnesses who had proved to be dishonest since they could be assisted by prompts that might not be picked up by camera citing para [33] of the judgment in JSC BTA Bank v Zharimbetov [2014] EWHC 116 (Comm) and paras [79] to [81] of Mr Justice Bryan's judgment in Deutsche Bank AG v Sebastian Holdings, Inc and Vik [2023] EWHC 2234 (Comm).

He considered Appendix Z to the Chancery Guide (Remote and Hybrid Hearings Protocol) which encourages the question of hearing format to be raised in good time before the hearing.   The judge took account of Dr Wright's concerns for his personal safety were he to return to the UK and evidence that he suffered from autism spectrum disorder.   After weighing those circumstances he directed the committal hearing to be fully in person and for Dr Wright to be present in court at para [58] of his judgment of 6 Dec 2024.

His lordship also gave COPA permission to cross-examine Dr Wright at para [66] of his judgment and rejected Dr Wright's allegations of apparent bias between paras [67] and [81].

Application for Permission to Appeal

Dr Wright also applied to the Court of Appeal for permission to appeal against Mr Justice Mellor's order of 16 July 2024 alleging inter alia bias on the part of the judge.   Lord Justice Arnold dismissed Dr Wright's application on 29 Nov 2024 describing it as totally without merit.  

Dr Wright's Absence from the Committal Hearing

The hearing was listed for 18 Dec 2024.  Fifty-one minutes before the hearing on 18 Dec 2024 was due to start, Dr Wright advised the judge's clerk by email that he was abroad on business and lacked the means to fly back to the UK. The judge requested the email to be forwarded to COPA's solicitors. Within an hour of receiving that email, the solicitors offered to pay Dr Wright's airfare to London.  Dr Wright declined the solicitors' offer on the grounds that it would not cover all his expenses or the losses he would sustain if he could not finish his work.  The solicitors asked him how much more he would need to cover his expenses.  He replied: 

"The funding required to accommodate these expenses would be £240,000, calculated as £40,000 per month for the next six months."

Mr Justice Meller decided to proceed with the hearing in Dr Wright's absence after considering in para [22] of his judgment paras [4] to [5] of  Mr Justice Cobb's guidance on the issue in Sanchez v Oboz [2015] EWHC 235 (Fam):

"(i) Whether the respondents have been served with the relevant documents, including notice of this hearing; Yes, Dr Wright has been served, including notice of this hearing.
(ii) Whether the respondents have had sufficient notice to enable them to prepare for the hearing; I am entirely satisfied that Dr Wright had sufficient notice to enable him to prepare for the hearing.
(iii) Whether any reason has been advanced for their non-appearance; I agree with COPA that no sufficient reason had been given for his non-appearance.
(iv) Whether by reference to the nature and circumstances of the respondents' behaviour, they have waived their right to be present (i.e. is it reasonable to conclude that the respondents knew of or were indifferent to the consequences of the case proceeding in their absence); I consider that Dr Wright has waived his right to be present, since he has known since the first CMC on 1st November 2024 that this Contempt Hearing would take place on 18/19 December 2024.
(v) Whether an adjournment would be likely to secure the attendance of the respondent or facilitate their representation; I am clear that an adjournment would not make the slightest difference, either by way of securing the attendance of Dr Wright or facilitating representation for him.
(vi) The extent of the disadvantage to the respondents in not being able to present their account of events; As COPA submitted, Dr Wright has been able to file substantial material in his defence to the contempt allegations. He also insists he is better in writing than orally. Accordingly, I am satisfied that Dr Wright has had a full opportunity to present his account of events, particularly because the allegations of contempt depend on (a) the construction of the terms of the Order and (b) analysis of his pleading of the New Claim.
(vii) Whether undue prejudice would be caused to the applicant by any delay; Delay would cause significant prejudice to the applicant and to those whose interests the applicant represents. Many businesses and individuals are facing an enormous claim made against them in the New Claim and the Contempt Allegations need to be determined at the earliest opportunity. Furthermore, in view of Dr Wright's whereabouts (in the Far East, possibly Thailand) and his claim that he could not even afford the airfare to the UK, the prospects of him paying the costs of an adjournment to COPA appear somewhat remote.
(viii) Whether undue prejudice would be caused to the forensic process if the application was to proceed in the absence of the respondents; No, because, as indicated above, the contempt allegations depend on (a) the construction of the terms of the Order and (b) analysis of his pleading of the New Claim.
(ix) The terms of the 'overriding objective' (rule 1.1 FPR 2010) including the obligation on the court to deal with the case justly, including doing so "expeditiously and fairly" (r.1.1(2)) and taking "any step or [making] any… order for the purposes of… furthering the overriding objective" (r. 4.1(3)(o)). Overall, it is clear to me that Dr Wright has voluntarily absented himself from this Contempt Hearing. Whether he has done so because of fears of being incarcerated if he returned to the UK or because attendance interfered with his business interests does not matter. He had ample time to rearrange any business meetings so he could have attended. His non-attendance is a plain breach of my Order that he had to attend. I considered it was necessary to continue with the hearing in his absence to deal with the contempt allegations expeditiously and fairly, particularly since he had made ample submissions in response to the allegations of contempt."

After listening to COPA's submissions on Dr Wright's liability for contempt of court, the judge asked COPA's solicitors to send Dr Wright a transcript of the hearing on 18 Dec 2024 together with a further invitation to Dr Wright to attend in person or, failing that, to attend by remote link at 14:00 the next day.

Dr Wright's Cross-Application for Recusal

Before he could hear the committal application, Mr Justice Mellor had to address an application by Dr Wright for the judge to recuse himself on grounds of bias.  It will be recalled that Dr Wright had made similar accusations in his unsuccessful application to the Court of Appeal for permission to appeal and in the case management conference of 27 Nov 2024. The recusal application at the committal hearing was supported by an affidavit from one Gavin Gregory Mehl which alleged among other things that the judge had attended a COPA event.  Mr Justice Mellor denied that he had ever attended such an event and rejected all allegations of bias once again.

  

Applicable Principles

After setting out the background to the proceedings which included the history of the previous litigation, the reasons for the order of 16 July 2024 and Dr Wright's claim against BTC Core and SquareUp Europe Ltd which I have discussed above, Mr Justice Mellor turned to the committal application. 

He referred to para [20] of Mrs Justice Proundman's judgment in FW Farnsworth Ltd v Lacy [2013] EWHC 2387 (Ch) for a summary of the elements of contempt by breach of a court order:

"A person is guilty of contempt by breach of an order only if all the following factors are proved to the relevant standard: (a) having received notice of the order the contemnor did an act prohibited by the order or failed to do an act required by the order within the time set by the order; (b) he intended to do the act or failed to do the act as the case may be; (c) he had knowledge of all the facts which would make the carrying out of the prohibited act or the omission to do the required act a breach of the order. The act constituting the breach must be deliberate rather than merely inadvertent, but an intention to commit a breach is not necessary, although intention or lack of intention to flout the court's order is relevant to penalty."

The judge noted that the Court of Appeal had approved her ladyship's approach in para [25] of Lord Justice Leggatt's judgment in Cuadrilla Bowland Ltd v Persons Unknown [2020] EWCA Civ 9, [2020] 4 WLR 29, para [13] of Lord Justice Warby's judgment in Cuciurean v Secretary of State for Transport [2021] EWCA Civ 357 and para [37] of Lord Justice Lewison's judgment in Isbilen v Turk [2024] EWCA Civ 568.  Mr Justice Mellor added at para [67] of his judgment that the standard of proof which applies is the criminal standard: beyond reasonable doubt.

Mr Justice Meller also referred to para [47] of Lord Justice Males's judgment in Navigator Equities Ltd v Deripaska [2024] EWCA Civ 268, [2024] BCC 526 which endorsed the following statement of principle by His Honour Judge Pelling KC at first instance in the case:

"The applicant must prove to the criminal standard of proof, that is beyond reasonable doubt or so that the judge is sure, that the defendant:
a) knew of the terms of the undertaking breached;
b) acted in breach of, or failed to act in compliance with, the undertaking concerned; and
c) knew of the facts that made his conduct a breach."

Referring to para [35] of AG v Punch Ltd [2002] UKHL 50; [2003] 1 AC 46, para [82 (ix)] of Navigator Equities Ltd v Deripaska [2021] EWCA Civ 1799, [2022] 1 WLR 3656 and para [47] of Navigator Equities Ltd v Deripaska [2024] EWCA Civ 268, Mr Justice Meller reminded himself at para [69] of his judgment that when deciding upon liability, the court must be satisfied that the terms of the order which an alleged contemnor is said to have breached are sufficiently clear and certain to make plain what is permitted and what is prohibited.  He quoted sub paras [47 (vi)]  to [47 (viii)] of Lord Justice Males's judgment in Navigator Equities:

"vi) Lack of clarity may arise where (i) the language used may have more than one meaning or (ii) in a borderline case where it is inherently uncertain whether the term applies at all or (iii) the language is so technical or opaque as not to be readily understandable by the person to whom the injunction is addressed or by whom the undertaking is given – see Cuadrilla Bowland Ltd v Persons unknown [2020] EWCA Civ 29 per Leggatt LJ as he then was at [58];
vii) However, whether a term of an order or undertaking is unclear in any of these ways, is dependent on context and in any event the alleged lack of clarity is irrelevant if it is immaterial to whether the breach alleged has occurred, because there would have been a breach whichever possible construction applied - see Cuadrilla Bowland Ltd v Persons unknown (ibid.) per Leggatt LJ at [60];
viii) In relation to context, the words of an undertaking are to be given their natural and ordinary meaning and are to be construed in their context, including historical context and with regard to the object of the order – see Pan Petroleum AJE Ltd v Yinka Folawiyo Petroleum Ltd [2017] EWCA Civ 1525 per Flaux LJ at [41 (3)] and Navigator Equities Ltd v Deripaska (ibid.) per Carr LJ at [82 (vi)] […]"

He noted that in reaching a conclusion on the issues that must be proved to the criminal standard, it is open to the court to draw inferences from primary facts it finds established by evidence. However, after considering para [145] of Masri v Consolidated Contractors International Co SAL [2011] EWHC 1024 (Comm) and para [47] of Navigator Equities Ltd v Deripaska he observed that the court may not draw an inference as to the existence of an element essential for liability unless it is of a kind that no reasonable person would fail to make.  

He referred to para [6] of Mr Justice Dawson's judgment in Shepherd v. The Queen (1990) 170 CLR 573 (HCA) at 579/580 which Lord Justice Rix had approved in JSC BTA Bank v Ablyazov (No. 8) [2012] EWCA Civ 1441, [2013] 1 WLR 1331:

"…the prosecution bears the burden of proving all the elements of the crime beyond reasonable doubt. That means that the essential ingredients of each element must be so proved. It does not mean that every fact – every piece of evidence – relied upon to prove an element by inference must itself be proved beyond reasonable doubt. Intent, for example, is, save for statutory exceptions, an element of every crime. It is something which, apart from admissions, must be proved by inference. But the jury may quite properly draw the necessary inference having regard to the whole of the evidence, whether or not each individual piece of evidence relied upon is proved beyond reasonable doubt, provided they reach their conclusion upon the criminal standard of proof. Indeed, the probative force of a mass of evidence may be cumulative, making it pointless to consider the degree of probability of each item of evidence separately."

Taking account of those authorities, he directed himself that it is not necessary for an applicant to prove every fact relied upon in support of a charge to the criminal standard, provided that each essential ingredient of contempt is proved to the criminal standard in respect of the charge.

Defendant's Right to Silence

The judge noted that CPR81.7 (3) prevents the court from compelling a defendant to give evidence either orally or in writing.  He added that CPR81.4 (2) (n) requires a contempt application to include a statement that the defendant has the right to remain silent and to decline to answer any question the answer to which may incriminate the defendant, but that the court may draw adverse inferences if this right is exercised. He observed that in Discovery Land Co LLC v Jirehouse [2019] EWHC 1633 (Ch) Mr Justice Henry Carr had agreed with Mrs Justice Whipple that under CPR Part 81 a contemnor cannot be compelled to give oral evidence, nor compelled to be cross-examined on affidavit evidence, but that an adverse inference may be drawn if he or she chooses to remain silent.  Lord Justice McCombe had said in para [30] of his judgment in Khawaja v Popat [2016] EWCA Civ 362 that the law and practice on the point as briefly stated in the White Book and applied by the judge, was entirely consistent with the jurisprudence of the European Court of Human Rights.  Mr Justice Clarke had said in Masri that such inferences may not on their own prove guilt, and an applicant must establish a sufficiently compelling case to call for an answer before an inference may be drawn from the accused's silence.

Mental Element

Mr Justice Mellor reminded himself that the court must be sure that the alleged contemnor knew both of the order and of the terms of that order allegedly breached. Referring to para [150] of Masri and para [26] of Kea Investments Ltd v Watson [2020] EWHC 2599 (Ch) he said that the court must also be sure that the alleged contemnor had knowledge of the facts which make his conduct a breach. However, the court does not need to find that the alleged contemnor knew or believed that what he did was a breach of the order. As Lord Justice Rose put it at para [54] of Varma v Atkinson [2020] EWCA Civ 1602, [2021] Ch 180:

"[O]nce knowledge of the order is proved, and once it is proved that the contemnor knew that he was doing or omitting to do certain things, then it is not necessary for the contemnor to know that his actions put him in breach of the order; it is enough that as a matter of fact and law, they do so put him in breach."

Lord Justice Warby said much the same at para [58] of Cuciurean:

"These authorities indicate that… (2) the Court's civil contempt jurisdiction is engaged if the claimant proves to the criminal standard that the order in question was served, and that the defendant performed at least one deliberate act that, as a matter of fact, was non-compliant with the order; (3) there is no further requirement of mens rea…"

Intention may be irrelevant to liability as Lord Justice Popplewell said at para [79] of ADM International SARL v Grain House International SA [2024] EWCA Civ 33, [2024] 1 WLR 3263 

"[T]he true principle, in my view, is that where the court decides what the order means, and upon that construction the defendant's conduct breaches the order, the defendant is in contempt. That is the principled consequence of the relevant ingredients of civil contempt, as summarised in Masri, and in particular that the defendant need not intend to breach the order; all that need be established is that the defendant intended to carry out the conduct in question and that such conduct amounts to a breach of the order, objectively construed. Subjective understanding or intention in relation to the meaning of the order is logically irrelevant to the existence of a civil contempt because there is no requirement of an intention to breach it."

Nevertheless, he said at para [82] that intention may be relevant to sentencing:

"However, subjective understanding is relevant to the sentence to be imposed for any contempt. Where a defendant acts in accordance with an erroneous understanding of the order, that is less culpable than a deliberate breach. And where the understanding is a reasonable one because it is one of two reasonable constructions of an ambiguous order, the usual position is that he should not be punished for contempt."

Dr Wright's Knowledge

Mr Justice Mellor found at para [78] of his judgment that by the time of the matters complained of (that is to say 9 and 10 Oct 2024 when Dr Wright threatened litigation and issued proceedings), he was fully aware of the order of 16 July 2024 and its terms.  The judge noted that Dr Wright had participated in the hearing at which the order was made, the order was served on him by substituted service, he took steps to comply with it in relation to the publication of a notice that he had been ordered to post, his application for permission to appeal referred to the order and its terms and he had referred to them in the committal proceedings.

Grounds of Contempt

COPA alleged 5 grounds of contempt each of which will be considered individually.   Under each ground, COPA contended that (a) the terms of the order were sufficiently clear and certain to leave a reasonable person in no relevant doubt as to what was permitted and what was prohibited and (b) Dr Wright had committed a clear breach of the order by bringing the new claim and in making threats to bring it. Dr Wright's response was that he was not in contempt because the claims in the new claim do not involve his claiming to be Satoshi Nakamoto and do not depend on his having invented the Bitcoin system.  COPA replied that the order could be breached without his claiming to be Satoshi Nakamoto or the inventor of Bitcoin but in any case, he had asserted expressly or impliedly that he was Satoshi Nakamoto and the owner of the intellectual property in the system.

Ground 1: The New Claim is based on Ownership of Goodwill in the name Bitcoin and/or the Bitcoin System

COPA relied on the following provisions of the order:

"i) First, paragraph 1 (a) (x) provides that Dr Wright is and was precluded from commencing proceedings 'based wholly or in part' on grounds 'that Dr Wright….owns goodwill and/or unregistered trade mark rights in the name 'Bitcoin' and/or in the Bitcoin System'.
ii) Second, the Order (at 1 (a) (iv)) defines 'the Bitcoin System' as 'the peer-to-peer electronic cash system implemented from around January 2009 which originated from the Bitcoin White Paper.'"

It alleged that the order was breached by the following paragraphs of Dr Wright's particulars of claim:

"186. Dr Wright is the owner of goodwill which exists in the name 'Bitcoin'. It designates the electronic cash system defined in the White Paper and operated by means of the software which Satoshi Nakamoto personally controlled up to and including April 2011…
187. Dr Wright holds substantial goodwill in the name 'Bitcoin,' which has accrued through the development, promotion, and investment in the original Bitcoin electronic cash system, as defined in the White Paper by Satoshi Nakamoto…
188. Dr Wright's role as an investor and a stakeholder in the Bitcoin system is integral to this claim. His substantial financial investment in businesses, technology and applications developed in alignment with the original Bitcoin protocol has further solidified the goodwill in the Bitcoin name…
191. Dr Wright's claim is rooted in the principles of passing off under English law, where he seeks protection for the goodwill that exists in the name 'Bitcoin' and its association with the Original System."

Mr Justice Mellor found Ground 1 proved beyond all reasonable doubt. The relevant terms of the order were sufficiently clear and certain to leave a reasonable person in no relevant doubt as to what was permitted and what was prohibited.   Dr Wright has committed a clear breach of the order in bringing the aspects of the new claim identified above. 

Ground 2: The New Claim is based on Database Rights in the Bitcoin Blockchain

COPA relied on paragraph 1 (a) (vi) of the order of 16 July 2024 which precludes Dr Wright from commencing proceedings "based wholly or in part" on grounds "that Dr Wright …..is the or an owner of database rights in the Bitcoin Blockchain (i.e. the blockchain which was made available for transmission between nodes from January 2009 and later extended by the addition of blocks up to the present day) or in any part of it." The judge noted that the prohibition is not limited to preventing Dr Wright from bringing claims based on ownership of database rights in the Bitcoin Blockchain deriving from his having been Satoshi or having (for instance) created the Genesis Block. It extends to any claim which is based to any extent at all on Dr Wright asserting ownership of database rights in the Bitcoin Blockchain.

COPA alleged that the following paragraphs of Dr Wright's particulars of claim  breached the injunction:

"i) At paras. 36ff, he pleads a technical description of the Bitcoin Blockchain as a database, which he defines as "the Blockchain Database". This is plainly a description of the "Bitcoin Blockchain" as defined in the Order.
ii) From para. 195, he describes the creation, structure and format of the "Bitcoin blockchain" (his words), before asserting at para. 197 that each individual block and the blockchain as a whole is a database within the meaning of Directive 96/9/EC (the "Database Directive").
iii) At paras. 200 to 201, Dr Wright describes the creation of the Bitcoin System by Satoshi. Then he asserts at para. 202 that he is "entitled to the rights provided in the Database Directive to the maker of a database in all the territories of the EU, including… the UK".
iv) At para. 210, Dr Wright appears to plead joint authorship of the Bitcoin Blockchain with Satoshi Nakamoto: "Using the intellectual property and database rights without a licence or authorisation, while presenting these altered systems as 'Bitcoin', constitutes a direct infringement of the copyright and database protections that Satoshi Nakamoto and Dr Wright established."
v) At paras. 245-246, under the heading of "Infringement of Database Rights", Dr Wright pleads his claim as follows:
245. The Bitcoin blockchain and its associated data structure constitute a database within the meaning of the Database Directive and UK database law. The database right is held by Dr Wright, who has made significant investments in the development, maintenance and extension of the original database… [Emphasis added.]
246. The defendants have infringed upon these database rights by making unauthorised use of the Bitcoin database in the promotion and maintenance of their Modified Systems.
vi) In the Prayer, Dr Wright claims (a) an injunction against infringement of database rights in the Bitcoin blockchain (para. (1)(c)); (b) an inquiry as to damages or an account of profits (para. (2)); (c) orders for payment to him of those damages or other sums (paras. (3) and (8))"

The judge observed at [105] that Dr Wright's assertion that he owns database rights in the Bitcoin blockchain is an essential element of his claim for infringement of such rights.

Dr Wright's answer to this Ground is that his claim involves "a claim to reciprocal database rights as a former Bitcoin miner", deriving from his having validated and added blocks to the blockchain. Even if such activity as a miner could give rise to a relevant database right, Dr Wright's claim unquestionably asserts that he is "the or an owner of database rights in the Bitcoin Blockchain… or in any part of it" and so breaches the order.   His response was not only contemptuous, it was legally incoherent.

Ground 3: The New Claim is based on Copyright in the Bitcoin File Format/Bitcoin Software and Bitcoin White Paper

The relevant parts of the order of 16 July 2024 were as follows:

"i) First, paragraph 1 (a) (viii) of the Order provides that Dr Wright is precluded from commencing proceedings 'based wholly or in part' on grounds 'that Dr Wright……is the or an owner of copyright and/or moral rights in the Bitcoin File Format […] of the Bitcoin software'.
ii) Second, the Bitcoin file Format is defined in paragraph 1(a) (vii) of the Order as 'the structure of blocks within the Bitcoin Blockchain'.
iii) Third, the Bitcoin software is defined in paragraph 1(a) (v) of the Order to mean 'Bitcoin software created or issued in the period up to 2011 (including the executable file and related source code issued under the name Satoshi Nakamoto on or about 8 January 2009)'.

iv) Fourth, paragraph 1 (a) (ii) of the Order provided that Dr Wright is and was precluded from commencing proceedings based 'wholly or in part' on grounds 'that Dr Wright, WII and/or WII UK is the or an owner of the copyright and/or moral rights in the Bitcoin White Paper'. The Bitcoin White Paper is defined in paragraph 1(a)(i) of the Order to mean 'the paper entitled 'Bitcoin: a Peer-to-Peer Electronic Cash System', which was released on or about 31 October 2008 under the name 'Satoshi Nakamoto' and subsequently published in a revised version on or about 24 March 2009'."

COPA relied on the following paragraphs of Dr Wright's particulars of claim:

"i) At paras. 196-197, he pleads that 'the structure and format of the Bitcoin blockchain and each of the individual blocks… constitute original literary works' and that copyright subsists in this structure and format.
ii) At para. 206, he accuses the defendants of having engaged in actions which 'involve the unauthorised reproduction and use of the Bitcoin-related databases and literary works developed by Satoshi Nakamoto and extended through the efforts of Dr Wright'. The works referred to must in context refer to or at least include the Bitcoin software and Bitcoin File Format.
iii) At para. 207(3), he alleges infringement of 'copyright associated with Satoshi Nakamoto's original works, which includes [sic] the Bitcoin White Paper and the initial software release'.
iv) At paras. 242-243, he claims that the 'original Bitcoin White Paper and Bitcoin software contain elements that are protected under copyright law as literary works'; that Satoshi's authorship 'created a copyright interest in these materials"; and that "Dr Wright's contributions in developing systems built on Bitcoin and maintaining its original design solidify the proprietary nature of these works'."

The judge added at para [117]:

"In The Prayer, Dr Wright claims (a) an injunction against infringement of copyright in "works associated with the Bitcoin White Paper and original software developed by Satoshi Nakamoto" (para. (1)(b)); (b) an inquiry as to damages or an account of profits (para. (2)); (c) orders for payment to him of those damages or other sums (paras. (3) and (8))"

He agreed with COPA that on the required objective reading,t the above passages can only be read as asserting that Dr Wright owns copyright in the Bitcoin White Paper, Bitcoin File Format and/or Bitcoin software. Although in places he ascribes authorship to Satoshi and is carefully ambiguous about whether he himself is Satoshi, the claim is and must be one for infringement of copyright which he owns.  His lordship had no doubt that Ground 3 was proved beyond reasonable doubt.

Ground 4: The New Claim is based on Dr Wright being Satoshi Nakamoto and/or being responsible for Acts done by Satoshi Nakamoto

The relevant provisions of the order were:

"i) First, paragraph 1 (a) (iii) of the Order provides that Dr Wright is precluded from commencing proceedings 'based wholly or in part' on grounds 'that Dr Wright is the person or one of the persons who adopted or operated under the pseudonym 'Satoshi Nakamoto' in particular in the period 2008 to 2011'.
ii) Second, paragraph 1 (a) (iv) of the Order provides that Dr Wright is precluded from commencing proceedings 'based wholly or in part' on grounds 'that Dr Wright is the person or one of the persons devised and/or created the Bitcoin System'.
iii) Third, paragraph 1 (a) (v) of the Order provides that Dr Wright is precluded from commencing proceedings 'based wholly or in part' on grounds 'that Dr Wright is the or an author of any of the versions of the Bitcoin software created or issued in the period up to 2011'.

iv) Fourth, paragraph 1 (b) of the Order also provides that Dr Wright is precluded from bringing 'Proceedings in which it is otherwise asserted that Dr Wright is the person or one of the persons who adopted or operated under the pseudonym 'Satoshi Nakamoto' or that Dr Wright is responsible for acts done by such person or persons'."

COPA referred to the following paragraphs of Dr Wright's particulars of claim:

"2. This claim concerns "Bitcoin" which is a 'peer-to-peer' electronic cash system used by Dr Wright since 2009.
3. At all material times Dr Wright has carried on business as, amongst other things, a computer scientist, developing, promulgating and promoting his Bitcoin system…
6. The White Paper was released under the pseudonym 'Satoshi Nakamoto'. On 31 October 2008, under that pseudonym, Satoshi Nakamoto posted on The Cryptography Mailing List (hosted on metzdowd.com) that he had been 'working on a new electronic cash system that's fully peer-to-peer, with no trusted third party' ('the Bitcoin Announcement'). In the Bitcoin Announcement, Dr Wright published the link to the White Paper, which he had previously uploaded to http://www.bitcoin.org" http://www.bitcoin.org.

...................

8. Satoshi Nakamoto, under this pseudonym, made the White Paper available for download on the "bitcoin.org" website (that is to say the website accessible at http://bitcoin.org)."

Dr Wright argued that he did not claim to be Satoshi Nakamoto but the judge agreed with COPA that that was what he had inferred.

Ground 5: Dr Wright has made Threats to Bring Proceedings which are Precluded Proceedings

The order provided that "..... Dr Wright and any of his companies, including WII, WII UK and Tulip Trading Limited, shall not threaten (explicitly or implicitly) or procure any other person to threaten (explicitly or implicitly) that any Precluded Proceedings will be pursued against any person in the Court of England and Wales, the Courts of any foreign jurisdiction or in any arbitral tribunal (wherever seated),"

"Precluded Proceedings" had the same meaning as claims within the categories outlined in sub-paras. 1 (a)(i)-(x) and 1 (b).

COPA argued that "threat" meant any intimation that would convey to a reasonable person that some person had rights and intended to enforce them against another person as in para [12] of L'Oreal (UK) Ltd v Johnson & Johnson [2000] FSR.  This definition was approved at para [21] of Best Buy Co. Inc. v Worldwide Sales Corporation Espana SL [2011] EWCA Civ 618, [2011] Bus LR 1166 and para [23= pr The Noco Company v Shenzhen Carku Technology Co Ltd [2023] EWCA Civ 1502, [2024] RPC 3. The judge added that it does not matter that the threat might be veiled or covert, conditional or future.  He also referred to the definition in the Intellectual Property (Unjustified Threats) Act 2017.

On 9 Oct 2024, Dr Wright posted on "X" that he intended to bring "a champagne passing-off claim" against BTC developers with a "[focus] on the misrepresentation element rather than my identity as Satoshi" in order to "sidestep the constraints of the High Court's prior judgment."  By stating publicly his intention to bring a claim in passing off against Bitcoin developers, Dr Wright was unambiguously threatening to bring a claim in which he would assert ownership of goodwill in the name "Bitcoin" or in the Bitcoin System which was the claim he issued the next day. Any reader with even the most basic knowledge of the law of passing off would know that Dr Wright would have to assert ownership of goodwill as the basis of his claim. His posts were thus threats to bring proceedings which would necessarily fall into the category of Precluded Proceedings.

Sentencing

Mr Justice Mellor delivered his judgment in Crypto Open Patent Alliance v Wright [2024] EWHC 3315 (Ch)) on Dr Wright's liability at 14:00 on 19 Dec 2024.  Dr Wright accepted the judge's invitation to attend the hearing by video link.   After hearing submissions on the appropriate sentence from the parities his lordship retired to consider the appropriate penalty.   After a short break, he made the following orders:

(1)    He struck out Dr Wright's claim against SquareUp and BTC Core under CPR 3.3 and CPR 3.4 as an abuse of the process of the court.

(2)    He sentenced Dr Wright to 12 months imprisonment suspended for 2 years.

(3)    He ordered Dr Wright to pay COPA's costs of the contempt application (and of the new claim) on the indemnity basis. On the basis of a revised costs schedule indicating total costs of £169k incurred on the contempt application, he ordered Dr Wright to pay to COPA by way of interim payment on account of costs the sum of £145,000 within 14 days.

(4)   He ordered Dr Wright to pay SquareUp's costs of the New Claim on the indemnity basis and directed that he would make an appropriate order on provision of a costs schedule.

The learned judge referred to para [44] of the Supreme Court's judgment in Attorney General v Crosland [2021] UKSC 15, [2022] 4 WLR 103 for the general principles to be applied by the court in sentencing for contempt:

"1. The court should adopt an approach analogous to that in criminal cases where the Sentencing Council's Guidelines require the court to assess the seriousness of the conduct by reference to the offender's culpability and the harm caused, intended or likely to be caused.
2. In light of its determination of seriousness, the court must first consider whether a fine would be a sufficient penalty.
3. If the contempt is so serious that only a custodial penalty will suffice, the court must impose the shortest period of imprisonment which properly reflects the seriousness of the contempt.
4. Due weight should be given to matters of mitigation, such as genuine remorse, previous positive character and similar matters.
5. Due weight should also be given to the impact of committal on persons other than the contemnor, such as children of vulnerable adults in their care.
6. There should be a reduction for an early admission of the contempt to be calculated consistently with the approach set out in the Sentencing Council's Guidelines on Reduction in Sentence for a Guilty Plea.
7. Once the appropriate term has been arrived at, consideration should be given to suspending the term of imprisonment. Usually, the court will already have taken into account mitigating factors when setting the appropriate term such that there is no powerful factor making suspension appropriate, but a serious effect on others, such as children or vulnerable adults in the contemnor's care, may justify suspension."

He noted that the Court of Appeal had added at para [120] the following checklist to the Crossland principles in Business Mortgage Finance 4 plc v Hussain [2022] EWCA Civ 1264, [2023] 1 WLR 396:

"(a) whether the claimant has been prejudiced by virtue of the contempt and whether the prejudice is capable of remedy;
(b) the extent to which the contemnor has acted under pressure;
(c) whether the breach of the order was deliberate or unintentional;
(d) the degree of culpability;
(e) whether the contemnor has been placed in breach of the order by reason of the conduct of others;
(f) whether the contemnor appreciates the seriousness of the deliberate breach;
(g) whether the contemnor has co-operated;
(h) whether there has been any acceptance of responsibility, any apology, any remorse or any reasonable excuse put forward."

The Court also stated at [119]:

"(1) There are no formal sentencing guidelines for sentence/sanction in committal proceedings.
(2) Sentences/sanctions are fact specific.
(3) The Court should bear in mind the desirability of keeping offenders and, in particular, first-time offenders, out of prison...
(6) Committal to prison may serve two distinct purposes: (a) punishment of past contempt and (b) securing compliance: see Lightfoot v Lightfoot [1989] 1 FLR 414 at 414–417 (Lord Donaldson MR).
(7) It is good practice for the Court's sentence to include elements of both purposes (punishment and compliance) to make clear what period of committal is regarded as appropriate for punishment alone, i.e. what period would be regarded as just if the contemnor were promptly to comply with the order in question: see JSC Bank v Soldochenko (No 2) [2012] 1 WLR 350.
(8) Committal may be suspended: see CPR Part 81.9 (2). Suspension may be appropriate: (a) as a first step with a view to securing compliance with the Court's orders: see Hale v Tanner [2000] 1 WLR 2377 at 2381; and (b) in view of cogent personal mitigation: see Templeton Insurance Ltd v Thomas [2013] EWCA Civ 35.

After considering the available guidance Mr Justice Mellor decided that a custodial sentence suspended for 2 years was the appropriate sanction.

Comment

In his carefully reasoned and well-documented judgment, Mr Justice Mellor has set out and analysed the principles for determining liability for contempt of court and the imposition of the appropriate sanction,  It will therefore be of interest to all practitioners and not just intellectual property specialists.  Anyone wishing to discuss this case note may call me on +44 (0)20 7404 5252 during office hours or send me a message through my contact page at any other time.   I also wish my readers a happy New Year.