HP-2020-000016 - [2025] EWHC 1451 (Ch)

It is common ground that if there are several causes of loss, it is not necessary to determine weight as between those causes. The classic statement is that of Devlin J in Heskell v Continental Express [1950] 1 All ER 1033, 1047:

“Where the wrong is a tort, it is clearly settled that the wrongdoer cannot excuse himself by pointing to another cause. It is enough that the tort should be a cause and it is unnecessary to evaluate competing causes and ascertain which of them is dominant.”

If my conclusion on abuse of dominance is correct, it is not disputed that, if Cabo can establish any loss flowing from MGA’s conduct, the conduct alleged to be an abuse of a dominant position was at least “a” cause of that loss. In that event, therefore, no threshold question of the causative effect of MGA’s conduct arises. If however, contrary to the conclusions above, the patent threats claim were to be the only basis on which Cabo could establish liability, then a threshold question of causative effect would arise, because it is disputed whether the patent threats on their own were “a” cause of any loss suffered by Cabo.

Cabo’s position was that even if the only unlawful element of MGA’s conduct was the threats of patent infringement, the entirety of Cabo’s damage could be claimed as flowing from that conduct, since the patent threats were at least “a” cause of Cabo’s loss. Its submission was that either the patent threats on their own would have caused the retailers to drop the Worldeez product, or those threats at least made a material contribution to the retailers’ decision not to stock Worldeez.

MGA’s response was that any actionable patent infringement threats were neither a sufficient nor effective cause of any loss which Cabo suffered, because Cabo would have been in precisely the same position had those threats not been made. Its position was in essence that in so far as Cabo did suffer any loss, that was caused by MGA’s refusal to supply LOL Surprise to any retailers that supplied the Worldeez globe. In the context of that policy, MGA said that any threats of patent infringement made no material difference to the retailers’ decisions and were therefore not causative in fact or law of any loss suffered by Cabo. The logic of MGA’s argument was therefore that Cabo’s damages claim could only flow from the facts underlying the competition law arguments, such that if MGA’s conduct did not as a matter of law infringe the Chapter I/II prohibitions or Article 101/102 TFEU, then no damages claim could be brought.

Both Cabo and MGA relied on the judgment of the Supreme Court in Financial Conduct Authority v Arch Insurance [2021] UKSC 1, [2021] AC 649 concerning insurance claims for business losses as a result of the Covid-19 pandemic. The judgment of Lords Hamblen and Leggatt (with whom Lord Reed agreed) considered extensively the analysis of causation in circumstances of concurrent causes of a loss. Their starting point was the established proposition that to establish causation of loss it is not necessary to show that the relevant causative act is the sole cause of that loss; rather it is sufficient that the act is one of a combination of causes that are of equal or almost equal efficacy in bringing about the loss. §§172–173 of the judgment thus cited Heskell, at 1048, setting out the principle that “if a breach of contract is one of two causes, both co-operating and both of equal efficacy … it is sufficient to carry judgment for damages”, and ENE Kos 1 v Petroleo Brasileiro (No. 2) [2012] 2 AC 164, §74, where Lord Clarke stated that “where there are two effective causes, neither of which is excluded but only one of which is insured, the insurers are liable”.

Lords Hamblen and Leggatt continued to note, at §175, that in these cases it could not be said that either cause that was characterised as a proximate cause “on its own rendered the loss inevitable in the ordinary course of events. In each case it was the combination of the two causes which together made the loss inevitable. Neither would have caused the loss without the other.”

The difficulty in the Arch case was the conclusion that the relevant clauses in the insurance contracts covered only the effects of cases of Covid-19 occurring within the specified radius of the insured premises. If the relevant question was whether the Government would have acted in the same way if there had been no cases of Covid-19 within the specified radius, the answer would have been that it probably would have acted in the same way (§179). That problem led to a discussion of the situations where causation may nevertheless be established where a series of events combines to produce a particular result, but where none of the individual events is either necessary or sufficient to bring about the result itself (§§183–185).

That specific problem does not, however, arise in the present case. This is not a case of damage caused by the combination of elements which were not individually either necessary or sufficient to cause the loss. Rather, this case is a classic situation where, if Cabo did suffer loss as a result of MGA’s conduct, that loss was caused by a combination of several elements of conduct, including the patent threats, each of which was necessary to produce the result.

That is because, as I have found (§§317–319 above), MGA’s threats of patent infringement proceedings were bound up with its threats to withhold supplies of LOL Surprise from retailers that stocked the Worldeez globe. From the outset, MGA justified its refusal to supply policy on the basis of its objections that the Worldeez globe infringed its intellectual property rights, with the claims of patent rights prominent in those objections. That is why, although MGA’s communications with retailers did not always distinguish between the globe and the 5- and 10-packs, its real objection was to the globe rather than the other products in the Worldeez range, and MGA did not take issue with The Entertainer stocking the Worldeez blind bags or the 5- and 10-packs.

It is also clear from the extensive exchanges between MGA and The Entertainer that the latter clearly understood that MGA’s objections, and its consequent refusal to supply policy, turned on its intellectual property claims. The Entertainer noticeably initially sought to push back on Mr Larian’s claims that Worldeez was a “knock off” of LOL Surprise, pointing out that the product was completely different to LOL. The Grants capitulated, however, after Mr Larian’s statement on the evening of 23 May 2017 (PDT) that MGA would be taking action against Sinco and others involved in Worldeez, followed minutes later by forwarding to the Grants the case and desist letter that had been sent to Cabo.

Stuart Grant’s subsequent email explicitly stated that he had put Worldeez orders on hold because of Mr Larian’s legal action (§123 above). Stuart Grant reiterated that point in his oral evidence:

“… by him providing that cease and desist letter, it tells us that he is actually not threatening, he is actually moving forward with some kind of legal response to the other side, at which point we are saying, okay, we are just going to step back and we will leave you to figure out your differences between you. In the meantime, we will put the product on hold because we don’t want to sell something that’s illegal or that’s infringing anyone’s rights …

… the defining moment in that cycle, as it were, was seeing that Isaac had gone from emails to us stating lots and lots of different things around the Worldeez product to actually issuing a legal document or giving us sight of a legal document that he was or is issuing and therefore, okay, this is actually serious. He is not just threatening, this is actually serious. There is some infringement here, so we will put our orders on hold.”

It is apparent from The Entertainer’s subsequent correspondence with MGA, and in particular Stuart Grant’s 15 February 2018 email (§132 above), that even during the year after the events forming the focus of these proceedings, The Entertainer maintained the position that it would refrain from selling products which MGA genuinely believed to infringe its intellectual property rights, but considered that it was free to sell products for which MGA had not taken legal action.

The communications between MGA and other retailers were not as extensively documented as those with The Entertainer, but it is clear from my findings above regarding the threats made to and responses of TRU and Smyths, in particular, that MGA’s patent infringement threats were (as with The Entertainer) central to its objections to the sales of the globe, and its demands that the retailers should not stock the globe if they wished to maintain supplies of LOL.

The present case is, therefore, not one in which it is possible to separate the patent infringement threats from the refusal to supply policy, so as to say that the former had no causative effect on the retailers’ decisions. Rather, the evidence is that the refusal to supply threats were always made in conjunction with the intellectual property objections, and in particular the patent infringement threats, and were intended to be (and were) understood in that context. The patent infringement threats were therefore an inextricable part of the effect of MGA’s refusal to supply policy.

This case therefore falls into the category of cases where, if loss can be established, that loss was the result of two effective causes which combined to produce the outcome relied upon as causing loss to the claimant. On that basis, if anything had turned on the point, I would have rejected MGA’s causation argument and would have found that the patent infringement threats were causative of any loss suffered by Cabo. Whether Cabo did in fact suffer loss as a result of MGA’s conduct is the next question.