Cabo Concepts Ltd v MGA Entertainment (UK) Ltd

Permission to appeal may be granted where a proposed ground has a real, rather than fanciful, prospect of establishing legal error. Where issues depend on concessions allegedly made at trial, or on how the case was advanced below, a rolled-up hearing may be appropriate. A hypothetical counterfactual is assessed from the totality of the available evidence. The court may use evidence from the actual world, provided it allows for any taint caused by the defendant’s conduct. The absence of evidence generated by the counterfactual does not itself justify a default presumption in favour of the claimant. Permission remains subject to the high hurdle applicable to challenges to evaluative findings.

Cabo Concepts Ltd and The Licence World Ltd appealed against the dismissal of their damages claims by Bacon J in the Patents Court. The first-instance judgment found that MGA Entertainment (UK) Ltd and MGA Entertainment, Inc had abused a dominant position and made unjustified patent threats, but held that Cabo had not shown that it would have traded profitably absent that conduct.

Cabo sought permission on three grounds concerning whether damages could include a reduction in losses, the burden of proof in a counterfactual, and the evidential basis for the finding that the business would fail. The central issues were whether grounds 1 and 2 were arguable despite recorded concessions and the conduct of the trial, and whether ground 3 disclosed an appealable error.

1. Grounds 1 and 2. The proposed arguments that a claim for lost profits might extend to a counterfactual in which the claimant was less loss-making, and that the claimant might need only to establish some loss before quantification, raised arguable points of law with a more than fanciful prospect of success. The court therefore directed a rolled-up hearing of the permission application and, if permission were granted, the appeal.
2. The recorded concessions did not make the proposed grounds unarguable at this stage. It remained open to MGA to contend that Cabo had abandoned those arguments, or that Cabo’s failure to challenge the draft judgment’s record of the concessions precluded reliance on them. Those issues required fuller investigation, including whether existing findings could establish that Cabo would have been less loss-making and whether the case should be remitted.
3. Ground 3. Permission was refused. The challenge concerned evaluative findings about the counterfactual, for which there was a high hurdle. The judge was entitled to assess the totality of the evidence and to make reasonable and realistic assumptions or inferences.
4. Armory v Delamirie (1722) 1 Str. 505 and Morris-Gardner v One Step [2018] UKSC 20; [2019] AC 649 concerned cases where the defendant’s conduct had removed evidence that should otherwise have existed. They did not support a default presumption for the claimant where the counterfactual was inherently hypothetical.
5. Actual-world evidence could be considered, provided proper allowance was made for any taint caused by the abusive conduct. Reading the first-instance judgment as a whole, the court was satisfied that such allowance had been made. The conclusion also rested on matters said to be untainted by the conduct, including product quality, marketing resources, business planning, financial projections, funding arrangements and expert evidence concerning sales prospects.

• Court of Appeal (Civil Division): the application for permission to appeal was adjourned to a rolled-up hearing on grounds 1 and 2; permission was refused on ground 3.
• High Court (Patents Court): Bacon J dismissed Cabo’s damages claim, while finding abuse of a dominant position and unjustified patent threats: [2025] EWHC 1451 (Ch).