Threats Actions - Bargain Busting v Shenzhen Technology
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Chancery Division (Mr Justice Miles) Bargain Busting Ltd v Shenzhen SKE Technology Co Ltd and others [2025] EWHC 1239 (Ch) (21 May 2025)
This was an application by Shenzhen SKE Technology Co Ltd (Shenzhen) to restrain Bargain Busting Ltd ("BB") from threatening trade mark infringement proceedings against Shenzhen's distributors and retailers. BB is the registered proprietor of UK trade marks UK00003235344 and UK00003534551, which Shenzhen has challenged on the grounds of non-use and invalidity. BB has also applied to register CRYSTAL BAR as a trade mark under trade mark number UK00003786148. Shenzhen responded to BB's threats by seeking an order under s.21C to prevent BB from making further threats of proceedings against Shenzhen's distributors and retailers. It also sought information on the parties BB had already threatened to sue. The application was heard by Mr Justice Miles on 30 April and 1 May 2025. He handed down judgment on 21 May 2025. In para [111] of his judgment in Bargain Busting Ltd v Shenzhen SKE Technology Co Ltd and others [2025] EWHC 1239 (Ch), his lordship announced that he would grant an injunction against threatening further proceedings, though in narrower terms than had been sought.
Threats Actions
In most areas of civil litigation, a claimant can send a letter before claim without fear of repercussions, regardless of the strength of his or her case. In patent, trade mark and registered and unregistered design infringement disputes, he or she has to be careful because an ill-considered letter can sometimes be answered by a claim for a declaration that the threat of proceedings was unjustified, an injunction against continuing or further threats and damages.
Mr Justice Miles explained the reason for such actions between paras [22] and [24] of his judgment in Bargain Busting:
[23] Simon Brown LJ said in Unilever Plc v The Procter & Gamble Co [2000] 1 WLR 2436 at 2451,
'Essentially, therefore, in its earliest manifestation, this provision was designed to stop those patentees who were willing to wound but afraid to strike from hanging a Damocletian sword above any trader's head.'
'Essentially, therefore, in its earliest manifestation, this provision was designed to stop those patentees who were willing to wound but afraid to strike from hanging a Damocletian sword above any trader's head.'
[24] After 1883 the original provisions for patents were extended to trade marks, designs and other rights."
The judge noted Shenzhen's submission at para [34] that:
"The mischief of threats against parties other than the primary producer or importer (who may be thought of as "the primary party") is that they can be used to clear the way to market at little cost to the threatening party. Retailers and other customers of primary parties ("secondary parties") who are threatened with infringement actions may well take their custom to other suppliers, particularly where there are multiple suppliers of goods. The damage to the primary party may be rapid, significant and severe."
"The mischief of threats against parties other than the primary producer or importer (who may be thought of as "the primary party") is that they can be used to clear the way to market at little cost to the threatening party. Retailers and other customers of primary parties ("secondary parties") who are threatened with infringement actions may well take their custom to other suppliers, particularly where there are multiple suppliers of goods. The damage to the primary party may be rapid, significant and severe."
The law relating to groundless threats was revised by the Intellectual Property (Unjustified Threats) Act 2017. Before that Act, lawyers, patent and trade mark attorneys, as well as their clients, could be sued for threatening litigation. Joining the other side's legal advisors to a threats action introduced a conflict between that party and its lawyers, forcing it to appoint a new legal team at very short notice.
Shenzhen's Case
Shenzhen complained that letters threatening litigation had been sent to a wide range of distributors and retailers seeking to persuade them to cease distributing or selling Shenzhen's goods just before Christmas 2024. It argued that the threats were unjustified, that the letters were calculated to be as disruptive as possible because undertakings had been demanded by 6 Jan 2025 and that their purpose was to damage Shenzhen's business. There could be no other reason for sending those letters because BB had already notified those intermediaries of its rights the previous October. Some of the recipients of those letters indicated to Shenzhen that they were minded to withdraw that company's products from the market. Shenzhen felt obliged to offer to indemnify those distributors and retailers and deposit funds in escrow to mitigate the risk of litigation and reassure its distribution network.
Shenzhen urged the court to take American Cyanamid v Ethicon [1975] AC 396 as its starting point. It accepted that the injunction sought would (to a very limited extent) affect the rights of BB under art. 10 of Schedule 1 to the Human Rights Act 1998 ("the HRA") and that s.12 of the HRA was therefore engaged.In this kind of case, the court should apply the guidance of Lord Hoffmann in National Commercial Bank of Jamaica v Olint [2009] 1 WLR 1405 at [17]:
"The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other".
As to the potential for injustice, damages will not adequately compensate Shenzhen if there are further threats. Damages are likely to be difficult to assess and to occur quickly. There is no evidence about the ability of BB to cover any damages. On the other hand, BB would be unlikely to suffer any material damage if restrained.
Shenzhen did not seek to prevent BB from making permitted communications. BB would not be prevented from bringing proceedings for infringement. It might conceivably face a costs liability if it brought proceedings without writing a letter before action, but that was unlikely. Moreover, the amount of any such costs would be limited. Any infringement of BB's art. 10 rights would be very limited for the reasons already given. Both Shenzhen and the second defendant had agreed to give a cross-undertaking in damages, and Shenzhen had offered to pay £100,000 into court to support its cross-undertaking.
There had been no significant delay in bringing this application. The offending letters were written just before Christmas. There was party-to-party correspondence about this from 8 Jan 2025, and the application was issued on 21 Jan 2025.
BB's Response
BB replied that its threats were justified because it could make out its case against both Shenzhen and its distributors and retailers at trial. The damages or profits that it could recover from those intermediaries would be different from those that it could recover from Shenzhen. The reason why it had limited its claim to 4 intermediaries was to avoid overloading the proceedings with parties and legal teams and that had been a proportionate and sensible step to take. If its action against those 4 intermediaries was successful, it could rely on the same facts and arguments against the other 7. There was no proper basis for a quia timet injunction at the time of the hearing because any harm that might have been done by reason of the December letters would already have occurred.
As to the approach that the court should take, BB argued that the injunction sought would interfere with its rights under art. 10 of the Convention. Accordingly, s. 12 (3) of the Human Rights Act would napply. There was no basis for departing from the general rule that a court should be very slow to grant an interim injunction unless the applicant shows that it will probably succeed at trial. This case was analogous to comparative advertising, where such an approach had been adopted by the Court of Appeal in Boehringer Ingelheim v Vetplus [2007] ETMR 67. There was therefore a higher merits threshold than under American Cyanamid. Shenzhen had to show that it was more likely than not to win at trial, and that it could not do. BB argued that that was because substantially the same case had been rejected by the hearing officer in Re CRYSTAL BAR, Shenzhen SKE Technology Co Ltd. v Bargain Busting Ltd BL O/1063/24 8 Nov 2024.
Shenzhen had failed to comply with the Civil Procedure Rules in that it had launched its application without pre-action correspondence. It had waited 4 months before complaining that BB's letters before claim amounted to unjustifiable threats. A further 3 months had elapsed without any examples of irreparable harm coming to light. Damages would be an adequate remedy for Shenzhen but not for BB, as there was no evidence that Shenzhen could pay them.
Shenzhen had failed to comply with the Civil Procedure Rules in that it had launched its application without pre-action correspondence. It had waited 4 months before complaining that BB's letters before claim amounted to unjustifiable threats. A further 3 months had elapsed without any examples of irreparable harm coming to light. Damages would be an adequate remedy for Shenzhen but not for BB, as there was no evidence that Shenzhen could pay them.
The Starting Point
The judge found the following common ground between paras [55] and [57] of his judgment:
Mr Justice Miles directed himself at para [65] of his judgment that in reaching a view as to whether an applicant's prospects of success at the trial are sufficiently favourable to justify an order being made, the court must consider the extent to which the exercise of any art. 10 right is affected as well as the potential impact on the Convention rights of others. Where the restriction on the respondent's art. 10 rights is comparatively minimal and contained, the court will more readily conclude that the case is sufficiently strong to justify an injunction. In the next paragraph, he added that the unjustified threats provisions of the Trade Marks Act 1994 are calibrated to protect the intellectual property rights of aggrieved persons on the one side and the rights of parties seeking to allege infringement of their own rights on the other.
- The December letters constituted a threat of infringement proceedings within the meaning of s. 21 of the Trade Marks Act 1994;
- Shenzhen may be treated as a person aggrieved by such a threat within the meaning of s. 21A (1) of that Act; and
- a threat to join a party to existing proceedings is a threat of infringement proceedings.
Human Rights Act
His lordship considered s.12 (1), (3), (4) and (5) and art 10 to Sched 1 of the Act and the following paragraphs of Lord Nicholls's speech in Cream Holdings Ltd and others v. Banerjee and others [2004] UKHRR 1071, [2004] 4 All ER 617, 17 BHRC 464, [2004] 3 WLR 918, [2005] EMLR 1, [2005] AC 253, [2004] UKHL 44, [2005] 1 AC 253, [2004] HRLR 39:
"[22] … Section 12 (3) makes the likelihood of success at the trial an essential element in the court's consideration of whether to make an interim order. But in order to achieve the necessary flexibility the degree of likelihood of success at the trial needed to satisfy section 12 (3) must depend on the circumstances. There can be no single, rigid standard governing all applications for interim restraint orders. Rather, on its proper construction the effect of section 12 (3) is that the court is not to make an interim restraint order unless satisfied the applicant's prospects of success at the trial are sufficiently favourable to justify such an order being made in the particular circumstances of the case. As to what degree of likelihood makes the prospects of success 'sufficiently favourable', the general approach should be that courts will be exceedingly slow to make interim restraint orders where the applicant has not satisfied the court he will probably ('more likely than not') succeed at the trial. In general, that should be the threshold an applicant must cross before the court embarks on exercising its discretion, duly taking into account the relevant jurisprudence on article 10 and any countervailing Convention rights. But there will be cases where it is necessary for a court to depart from this general approach and a lesser degree of likelihood will suffice as a prerequisite. Circumstances where this may be so include those mentioned above: where the potential adverse consequences of disclosure are particularly grave, or where a short-lived injunction is needed to enable the court to hear and give proper consideration to an application for interim relief pending the trial or any relevant appeal.
[23] This interpretation achieves the purpose underlying section 12 (3). Despite its apparent circularity, this interpretation emphasises the importance of the applicant's prospects of success as a factor to be taken into account when the court is deciding whether to make an interim restraint order. It provides, as is only sensible, that the weight to be given to this factor will depend on the circumstances. By this means the general approach outlined above does not accord inappropriate weight to the Convention right of freedom of expression as compared with the right to respect for private life or other Convention rights. This approach gives effect to the parliamentary intention that courts should have particular regard to the importance of the right to freedom of expression and at the same time it is sufficiently flexible in its application to give effect to countervailing Convention rights. In other words, this interpretation of section 12 (3) is Convention-compliant."
"[22] … Section 12 (3) makes the likelihood of success at the trial an essential element in the court's consideration of whether to make an interim order. But in order to achieve the necessary flexibility the degree of likelihood of success at the trial needed to satisfy section 12 (3) must depend on the circumstances. There can be no single, rigid standard governing all applications for interim restraint orders. Rather, on its proper construction the effect of section 12 (3) is that the court is not to make an interim restraint order unless satisfied the applicant's prospects of success at the trial are sufficiently favourable to justify such an order being made in the particular circumstances of the case. As to what degree of likelihood makes the prospects of success 'sufficiently favourable', the general approach should be that courts will be exceedingly slow to make interim restraint orders where the applicant has not satisfied the court he will probably ('more likely than not') succeed at the trial. In general, that should be the threshold an applicant must cross before the court embarks on exercising its discretion, duly taking into account the relevant jurisprudence on article 10 and any countervailing Convention rights. But there will be cases where it is necessary for a court to depart from this general approach and a lesser degree of likelihood will suffice as a prerequisite. Circumstances where this may be so include those mentioned above: where the potential adverse consequences of disclosure are particularly grave, or where a short-lived injunction is needed to enable the court to hear and give proper consideration to an application for interim relief pending the trial or any relevant appeal.
[23] This interpretation achieves the purpose underlying section 12 (3). Despite its apparent circularity, this interpretation emphasises the importance of the applicant's prospects of success as a factor to be taken into account when the court is deciding whether to make an interim restraint order. It provides, as is only sensible, that the weight to be given to this factor will depend on the circumstances. By this means the general approach outlined above does not accord inappropriate weight to the Convention right of freedom of expression as compared with the right to respect for private life or other Convention rights. This approach gives effect to the parliamentary intention that courts should have particular regard to the importance of the right to freedom of expression and at the same time it is sufficiently flexible in its application to give effect to countervailing Convention rights. In other words, this interpretation of section 12 (3) is Convention-compliant."
Mr Justice Miles directed himself at para [65] of his judgment that in reaching a view as to whether an applicant's prospects of success at the trial are sufficiently favourable to justify an order being made, the court must consider the extent to which the exercise of any art. 10 right is affected as well as the potential impact on the Convention rights of others. Where the restriction on the respondent's art. 10 rights is comparatively minimal and contained, the court will more readily conclude that the case is sufficiently strong to justify an injunction. In the next paragraph, he added that the unjustified threats provisions of the Trade Marks Act 1994 are calibrated to protect the intellectual property rights of aggrieved persons on the one side and the rights of parties seeking to allege infringement of their own rights on the other.
He added at [78]:
"Drawing the threads together, it appears to me that applications for injunctions in respect of allegedly unjustified threats will often fall within the exceptional category of cases identified by Lord Nicholls in Cream Holdings. The key question as far as the merits threshold is concerned is whether the court is satisfied the applicant's prospects of success at the trial are sufficiently favourable to justify such an order being made in the particular circumstances of the case. To require the higher threshold to be met in all such cases would to my mind undermine the protection intended by Parliament in enacting the unjustified threats provisions. A party may need to move quickly to seek such an injunction as losses can be rapid as the market is cleared. It would to my mind generally place too high a barrier in the way of applicants in such cases to require them to show that they will probably win at trial."
"Drawing the threads together, it appears to me that applications for injunctions in respect of allegedly unjustified threats will often fall within the exceptional category of cases identified by Lord Nicholls in Cream Holdings. The key question as far as the merits threshold is concerned is whether the court is satisfied the applicant's prospects of success at the trial are sufficiently favourable to justify such an order being made in the particular circumstances of the case. To require the higher threshold to be met in all such cases would to my mind undermine the protection intended by Parliament in enacting the unjustified threats provisions. A party may need to move quickly to seek such an injunction as losses can be rapid as the market is cleared. It would to my mind generally place too high a barrier in the way of applicants in such cases to require them to show that they will probably win at trial."
He rejected BB's submission that an analogy can be drawn with the comparative advertising cases at para [79]:
"BB relied on the Vetplus case at [48] to [52], where the Court of Appeal held that 'the more likely than not' general approach identified in [22] of Cream Holdings should apply to cases where a party seeks to injunct comparative advertising by another. I do not think that comparative advertising is properly analogous. The use of a registered mark in comparative advertising is (subject to various qualifications and limitations) not a trade mark infringement. The unjustified threats regime is entirely separate. It is not concerned with the question whether a communication is itself a trade mark infringement. The purpose of the regime is to stop competitors seeking to clear their route to market without proper justification. The questions are very different."
"BB relied on the Vetplus case at [48] to [52], where the Court of Appeal held that 'the more likely than not' general approach identified in [22] of Cream Holdings should apply to cases where a party seeks to injunct comparative advertising by another. I do not think that comparative advertising is properly analogous. The use of a registered mark in comparative advertising is (subject to various qualifications and limitations) not a trade mark infringement. The unjustified threats regime is entirely separate. It is not concerned with the question whether a communication is itself a trade mark infringement. The purpose of the regime is to stop competitors seeking to clear their route to market without proper justification. The questions are very different."
In the next paragraph, the judge reminded himself of the words of Lord Hoffmann in Olint cited above that the court should be seeking to minimize the risks of injustice to the parties respectively from the grant or refusal of an order.
Judgment
The first question for the judge was whether Shenzhen had a sufficient prospect of success at the trial to justify the relief sought. It was common ground that this issue turned on whether there was a serious argument that BB's trade marks would be revoked or found to be invalid. BB conceded that Shenzhen had cleared the Cyanamid threshold but not the heightened threshold under s.12. After considering the evidence that was before the IPO concerning CRYSTAL BAR as well as arguments that had arisen subsequently, the judge concluded that there was at most a serious issue to be tried as to the validity of UK00003534551 However, in relation to the non-use of UK00003235344 his lordship was satisfied that Shenzhen had a realistically arguable case, which might well succeed at trial.
His lordship rejected BB's contention that there was no realistic risk of damage and therefore no need for an order. BB's assurance that it had no intention of joining other parties or making threats of proceedings against them was at best a statement of present intention. In their letters before claim, BB's solicitors had warned 11 businesses that it intended to sue them. Although it had only joined 4 recipients to the action, it had never abandoned its intention of pursuing the rest. The judge did not accept BB's explanation for limiting its claim to 4 defendants to avoid overburdening the court with parties and legal teams. Instead of joining a representative distributor and a representative two of the defendants were Tesco and Morrisons.
BB failed to persuade the judge that damages would be an adequate remedy for Shenzhen. BB had argued that there was no evidence of actual loss. The judge noted that Shenzhen had to offer indemnities to protect its supply chain. As Shenzhen's sales in the UK had amounted to US$405.6 million in 2024, the loss of just one customer could be substantial. Even if there were a downturn in sales, it would not be easy to attribute the downturn to BB's threats. Finally, BB had failed to file any evidence of its ability to pay substantial damages.
BB failed to persuade the judge that damages would be an adequate remedy for Shenzhen. BB had argued that there was no evidence of actual loss. The judge noted that Shenzhen had to offer indemnities to protect its supply chain. As Shenzhen's sales in the UK had amounted to US$405.6 million in 2024, the loss of just one customer could be substantial. Even if there were a downturn in sales, it would not be easy to attribute the downturn to BB's threats. Finally, BB had failed to file any evidence of its ability to pay substantial damages.
The only damages that BB could identify as a likely consequence of an injunction were additional costs for non-compliance with the Pre-Action Conduct Practice Direction. The judge observed that there was nothing to stop a party that had instituted proceedings from attempting to resolve the dispute by exchanging information in accordance with the Practice Direction. Although Shenzhen's evidence of its ability to pay damages on its cross-undertaking had been inadequate, it had offered to pay £100,000 into court at the hearing, which BB did not suggest was insufficient.
The learned judge rejected BB's contention that Shenzhen had delayed in bringing the action. BB had been entitled to notify Shenzhen's distributors and retailers of its trade marks, but the letters before claim that it had issued just before Christmas amounted to a step change. Shenzhen had complained to BB early in January, and the application was issued that same month.
The learned judge rejected BB's contention that Shenzhen had delayed in bringing the action. BB had been entitled to notify Shenzhen's distributors and retailers of its trade marks, but the letters before claim that it had issued just before Christmas amounted to a step change. Shenzhen had complained to BB early in January, and the application was issued that same month.
Comment
For many civil litigators and general commercial practitioners threats actions are a hazardous anomaly because there is nothing like them in other areas of civil litigation, They can also trap intellectual property practitioners from other jurisdictions (see J Lambert Consider the Implications of Foreign Laws before Sending a Cease and Desist Letter Antoinette M Tees PLLC Intellections June 2005). The interesting feature of this case is that Mr Justice Miles balanced the right of an aggrieved party to protect its distribution chan under s.21 of the Trade Marks Act 1994 against its competitors right to free expressioin under art 10 of Sched 1 to the Human Rights Act 1998. The effect of this balancing exercise is the modification of American Cyanamid though that may have not made a crucial difference at the end of the day as the learned judge sought a balancd of justice in much the same way as every other applications judge.
Anybody wishing to discusss this case may call me on +44 (0)20 7404 5252 or send me a message through my contact form.
Anybody wishing to discusss this case may call me on +44 (0)20 7404 5252 or send me a message through my contact form.
Further Reading
Jane Lambert Damages - Dr Reddy's Laboratories (UK) Ltd. and others v Warner-Lambert Company LLC and another 7 Feb 2022
Jane Lambert Intellectual Property Litigation in England and Wales 15 Dec 2021
Jane Lambert Intellectual Property (Unjustified Threats) Bill 24 Apr 2017
Jane Lambert The IP (Unjustified Threats) Bil[ 25 May 2015
The Law Commission Patents, Trade Marks and Designns: Unjustified Threats HC510 2915
Jane Lambert Threats: Global Flood Defence Systems Ltd v Van Den Noort Innovations BV 31 Jan 2015J Lambert Threats Actions Updates 26 Jan 2006
J Lambert Consider the Implications of Foreign Laws before Sending a Cease and Desist Letter Antoinette M Tees PLLC Intellections June 2005
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