England and Wales High Court (Chancery Division) Decisions

IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
INTELLECTUAL PROPERTY LIST (ChD)

		The Rolls Building 7 Rolls Buildings Fetter Lane London EC4A 1NL
		25th July 2023

This judgment was handed down remotely by circulation to the parties' representatives by email. It will also be released for publication on the National Archives and other websites. The date and time for hand-down is deemed to be Tuesday 25^th July 2023 at 10.30am.

............................. THE HON MR JUSTICE MELLOR

MR JUSTICE MELLOR :

1. This Judgment is based on an ex tempore Judgment given at the joint CMC in the four actions identified in the heading. The joint CMC was arranged following a CMC in the Coinbase and Kraken actions which took place on 25^th & 26^th May 2023 at which the Coinbase and Kraken Ds sought a stay of their actions pending judgment in the COPA Claim. At the start of the hearing on 25^th May 2023, I made it clear that case management was required in all four of these actions. Fortunately, the parties co-operated to arrange this joint CMC which took place on 15 June 2023. Having reflected further on the central issue, I considered it right to amend slightly what I said in my ex tempore ruling.
2. It is common ground that a common issue arises, speaking at a general level, in all four actions, namely as to whether Dr. Wright is/was Satoshi Nakamoto. Of the four claims, for understandable reasons the COPA Claim is the furthest advanced, and directions have been given down to a trial which is going to take place in January and February of next year. Fortunately, it is also common ground that this common issue, which has been characterised as the "identity issue", should be decided once and once only, and how that issue should be decided has been the subject of debate at this hearing.
3. For this hearing I received skeleton arguments and oral submissions from Counsel identified in the heading, representing either individual parties or groups. I should also mention those parties in the BTC Core Claim who are not represented:

i) D1, BTC Core itself, is alleged to be a partnership comprising or including D2-D26 in the BTC Core Claim. There is a dispute as to whether that partnership exists.

ii) D13, Mr. Eric Lombrozo, who has not entered an appearance.

iii) D17, Spiral BTC Inc. Although the Cs in the BTC Core action claim to have served this company, other parties claim that no such company exists in Delaware. I cannot resolve that dispute. Suffice to say that if this entity exists, it has not entered an appearance and was not represented at the hearing before me.

The issues for determination

4. The key issues fall under three headings.
5. The first is essentially a procedural issue, and that is whether the identity issue should be tried by way of a preliminary issue in all four actions, or whether a general stay should be granted in the later three actions, pending the outcome of the COPA claim in which the identity issue will essentially be decided. Certainly in the skeletons for this hearing, the battle lines were drawn in terms of either preliminary issue or a general stay. At the outset of this hearing I introduced a middle ground, a hybrid, whereby some defendants seek a stay, on the basis that they will agree to be bound by the decision on identity in the COPA claim, whereas some other defendants, who are not going to undertake to be bound by the outcome of the COPA trial, will be involved in the preliminary issue: in either case, so they are bound by the result.
6. The second main issue concerns how to identify the identity issue to be decided, and I have received competing suggestions on this.
7. The third main issue concerns directions that should be given to accommodate the outcome of the first two issues. As I mentioned, extensive directions have already been given in the COPA claim, down to trial. Dr. Wright seeks a four-week extension for exchange of witness statements, and I will come back to that. The other aspect is how, if other parties are going to be involved in the preliminary issue, directions should be given for them to be involved.

The 'procedural' issue

8. I mentioned the possibility of a hybrid approach on the procedural issue. For the purposes of this issue, it seems to me that in the various parties who are opposing Dr. Wright and his companies, there are essentially two groups. The first group comprises those companies who are either members of or involved in COPA. That includes the Coinbase defendants, one of the Kraken defendants and the Cash App defendants. Perhaps not surprisingly, because they have perhaps varying degrees of involvement in COPA, they are content to be bound by the outcome of the identity issue in the COPA claim. I infer that is because they have sufficient visibility of how that claim is being conducted to leave the trial to be conducted by COPA. Therefore, that group of defendants are very keen on having the proceedings against them stayed, for further reasons which I will come on to.
9. The second group I characterise in rather general terms as perhaps 'not privies'. These are the Developers, Blockstream and Chaincode. Some of these defendants have only relatively recently been served with the BTC Core Claim, and they are in a very real sense struggling to catch up with the position which has been reached in the COPA claim. There is certainly evidence filed on their behalf which persuades me at the moment they simply do not know enough to commit one way or another, whether to be bound by the outcome of the COPA claim or whether they should in some way participate in the COPA trial.
10. It seems to me that on the first procedural issue I should adopt a hybrid approach. For those parties who want a stay, and are prepared to give an undertaking to be bound for all purposes by the outcome of the COPA trial, that should be their way forward. Certainly, there were persuasive points put forward that if that is what they are prepared to offer, they should not be exposed to the incurring of further costs in the COPA trial nor exposed to a costs liability in that trial.
11. By contrast, for those parties who are unable yet to decide what role they should play in the proceedings, I think it is right to order a preliminary issue as regards them. They will participate at their own risk as to costs, if they choose to engage in the trial beyond what COPA are already doing. It seems to me quite likely that once they have visibility of the disclosure already given by Dr. Wright in the COPA claim, and perhaps some further discussions with the solicitors for COPA in that claim, they may well decide to leave the COPA claim to proceed without their assistance. However, I cannot rule out the possibility that some of the Developers, having reviewed Dr. Wright's disclosure, may consider they have something to add or contribute on the identity issue, and it is important that they have sufficient opportunity to do so. I am quite satisfied that whoever is representing the additional parties who do wish to take part in the COPA trial (by way of a preliminary issue in their part of the BTC Core Claim) will be aware of their risk as to costs and they will behave sensibly as a result.
12. Because of that conclusion, I do not think it is necessary for me to go through all the submissions that Mr. Hough KC made to me in support of the general stay. The problem with granting a general stay of all the other actions is that, although some of the defendants in the BTC Core Claim are, and they accept they are, privies of COPA, it is quite clear that there are some defendants in the BTC Core Claim who are not or that it is arguable that they may not be privies and therefore not bound by the outcome of the COPA claim. I think in case managing this case, it is important that, as far as possible, I do not leave such issues to be exploited at another date.

The Identity Issue

13. In this section of my ex tempore judgment, I considered three competing proposals as to how the identity issue should be defined by way of preliminary issue for the BTC Core Claim. These proposals were generated following some observations I made at the earlier CMC in the Coinbase and Kraken actions (on 25^th & 26^th May 2023) to the effect that it was necessary to delineate as precisely as possible what was going to be tried by way of preliminary issue and what was not.
14. Dr Wright proposed a formulation, which I can summarise as follows. His proposed issue starts with a general issue as follows. The trial shall determine the following issue of fact, namely whether Dr. Wright was the person who devised the Bitcoin electronic cash system and who, using the name Satoshi Nakamoto, actively promoted this system during the period 2008 to end April 2011, including the following issues. Then he has set out four sub-issues, which are under the headings of authorship and release of the White Paper, the Bitcoin Code, communications made using the Satoshi Nakamoto pseudonym and the Bitcoin blockchain.
15. For their part, the BTC Core defendants proposed a slightly different approach. Their proposal for the issues to be resolved in the COPA claim was as follows. First of all, they identify the identity issue as whether or not Dr. Wright is the pseudonymous Satoshi Nakamoto, i.e. the person who created Bitcoin in 2009. Second, they say that if the court finds in the COPA claim that Dr. Wright is Satoshi Nakamoto, then it follows that the parties in the BTC Core Claim will accept that Dr. Wright carried out various acts specified in 12 subparagraphs containing various references to the pleadings, such as 2.1, he wrote the Bitcoin White Paper, 2.2, devised and created the Bitcoin System, et cetera. I will mention in particular 2.11, whether Dr. Wright handed over the network alert key and access to the SourceForge repository to Mr. Gavin Andresen as pleaded at paragraph 12 of the amended particulars of claim.
16. The third part of the proposal is that if the court finds in the COPA claim that Dr. Wright is Satoshi Nakamoto, then the defendants that I mentioned before will accept that if the following activities occurred at all, which the Coinbase defendants, Cash App defendants and COPA will continue to deny, then it was Dr. Wright who did them: e.g 3.1 Dr Wright made the Bitcoin blockchain available for transmission etc.
17. There are various other points, such as in paragraph 4, if the court finds Dr. Wright is not Satoshi Nakamoto, then it follows that Dr. Wright did not do the things listed at 2.1-2.12 and 3.1-3.4.
18. Then paragraph 5 contains what have been referred to as the carve-outs. By way of example, resolution of the identity issue will not resolve any other issues, including, for example, whether or not Dr. Wright had any control over the development of the Bitcoin network following its release under the MIT licence, and various other qualifications.
19. The Coinbase, Kraken and Cash App defendants have their own proposal which is very similar. Thus they propose that the identity issue is whether Dr Wright is the pseudonymous Satoshi Nakamoto, i.e. the person who created Bitcoin in 2009. Then the points that follow, if the court finds in the COPA claim that Dr Wright is Satoshi Nakamoto, are slightly different, based on the pleadings in those passing off actions. There are similar carve-outs. Also, there is a list in their proposal of what the identity issue will not resolve. In particular, the identity issue will not resolve the issue of whether or not the name Bitcoin attracted any goodwill. Naturally, that is a fairly important issue in the passing off claims.
20. As I observed in the course of argument, there is actually not a great deal between these various proposals. Various points were made in argument about what should happen if the Court feels unable to decide one or more of the particular sub-issues identified. The example taken was whether it was Dr. Wright who handed over effective stewardship of the network alert key to Gavin Andresen in April 2011. It seems to me that there is a potential for these sub-issues to distract from the key issue, and it seems to me that the key issue is the identity issue as formulated, i.e. whether Dr Wright is the pseudonymous Satoshi Nakamoto. When deciding that at the trial in January next year, the court may well find it helpful to consider who it was who researched and authored the White Paper, who devised the name Bitcoin, who created the Genesis Block and who, for example, handed over the effective control of the network alert key. However, it does not seem to me to be necessary at this stage to be prescriptive as to precisely which of the sub-issues the court needs to decide in January. All that needs to be decided in January is whether Dr Wright is Satoshi Nakamoto or not.
21. In my ex tempore judgment, I expressed a general preference for the adoption of the proposals put forward by the Coinbase and BTC Core defendants albeit in a modified form. I indicated that I favoured identifying the identity issue at a broad level. I also indicated that I would not include any of the carve-outs. Some may not be applicable and some may require yet further carve-outs. I did not think it was necessary to be prescriptive at this point in the proceedings. The judge, which is likely to be me, who hears the trial in January, will be able to keep control of what issues are raised by the parties in deciding the identity issue. For example, acts which are pleaded as done by Dr. Wright to generate goodwill on his behalf are clearly outside the scope of the identity issue. For that reason, I think the court will be able to maintain control over the identity issue at the January hearing without creating any difficulties over carve-outs or carve-outs to carve-outs.
22. Following the hearing, I asked the parties to seek to agree an Order, including the terms of the preliminary issue. Whilst the parties were endeavouring to agree that Order, I reflected further on this issue. Having done so, I maintain my view that the identity issue can be defined at a broad level and this will not create any particular difficulties in view of the following considerations:

i) First, the parties to the later three actions are all going to be bound by the outcome of the COPA Trial. If the Court decides that Dr Wright was not Satoshi Nakamoto, then (subject to provision being made to accommodate appeals) those three actions end at that point. By contrast, if the Court decides that Dr Wright was Satoshi, then all three actions proceed in full.

ii) Mr Greenberg points out a slight wrinkle in the distinction I draw here. Whilst the primary claims in passing off would end if the Court decides Dr Wright was/is not Satoshi, he reserves his position as to the secondary claims in 'extended' passing off which are said not to depend on Dr Wright being Satoshi.

iii) If all three actions proceed (or to the extent the claims in 'extended' passing off proceed), there is no difficulty in Dr Wright giving and leading any further evidence necessary to establish his contentions specific to those actions: e.g. concerning the generation of goodwill or database right, by way of example. Whilst the defendants will have the ability to challenge this evidence in the usual way, what they will not be permitted to do is to contend or imply that Dr Wright was not Satoshi Nakamoto (save as necessary in the 'extended' passing off claims).

23. Subsequently, the parties submitted a draft Order for my review, containing just a few relatively minor points of disagreement. I am very grateful for the work which must have gone into agreeing that draft. I was pleased to see that the parties seemed to have reached the same conclusion as I did – that the identity issue could and should be defined in broad terms, and that is reflected in paragraph 1 of the Order which reads as follows:

'There shall be a trial of a preliminary issue in the BTC Core Claim, that issue being whether Dr Wright is the pseudonymous "Satoshi Nakamoto", i.e. the person who created Bitcoin in 2009 ("the Identity Issue").'

Directions

24. Next, we have the directions down to the January trial. As I have already indicated, Master Clark, back in September last year, set out a very detailed series of directions down to trial. My guiding principle is to interfere as little as possible with the timetable that she set out. Nonetheless, I have to recognise that Dr. Wright, in the COPA claim, has recently changed his solicitors, as recently as last Sunday, although Mr. Greenberg has been involved in the case for considerably longer, I think since January of this year. Dr. Wright's new solicitors, Travers Smith LLP, have filed a witness statement in which his solicitor says he has considered the task for his team very carefully, and he requires a four-week extension to prepare Dr. Wright's witness statements. They are currently due on 7th July and he seeks an extension of four weeks to 4th August. It is true, as various of the defendants have pointed out, there is very little reasoning, other than his assertion that he needs four additional weeks. Dr. Wright has known since last September about the deadline for witness statements falling on 7th July 2023 and I have been given no explanation at all as to how far his previous firms of solicitors got in preparation of his witness evidence. So on one view, Dr. Wright's application for an extension of time of four weeks has not got a lot of support. Be that as it may, I think I should give Dr. Wright an opportunity to prepare, or have prepared, his witness statements in proper form for this important trial. Various changes to the timetable have been suggested before me, all of which start from the four-week extension that Dr. Wright requests. I do not think it is appropriate to give him the full four weeks. I am prepared, however, and I think this is being generous to Dr. Wright, to give an extension of three weeks for the exchange of witness statements.
25. The next point concerns the filing of technical primers. The date set for this is 21st July. Certainly, COPA can claim that Dr. Wright has not engaged properly with the obligation to co-operate on the technical primer. COPA put forward a fairly extensive draft technical primer. Dr. Wright's team did not engage with the technical primer, they just simply put forward a glossary of terms. Mr. Greenberg has heard what I had to say about the lack of co-operation there, and it is to be hoped that there will be better engagement on agreeing a technical primer. If, as directed by Master Clark, the technical primer cannot be completely agreed, then there is a provision for expert evidence, which I will come to.
26. The next point in the timetable is the service of COPA's expert evidence regarding the authenticity of documents. This is currently set for 4th August, but I am going to extend that time in view of the extension to the witness statement exchange to 25th August, which will maintain the original four-week period between exchange of witness statements and that expert evidence. Thereafter Dr. Wright's expert evidence regarding authenticity will take place on 6th October. Experts' reports on issues of digital currency technology, i.e. to the extent that the primer has not been agreed, will take place on 6th October. COPA's reply evidence regarding authenticity will take place on 3rd November, along with reply expert evidence on digital currency technology. Reply witness statements will be 17th November. The relevant date for expert discussions is 13th November. Then by 23rd November the experts are to list issues of agreement and disagreement.
27. In terms of bundles, Mr. Hough KC, for COPA, made the point that it is going to be convenient to have a document management system for the documents in this trial, such as the Opus 2 system. What I will direct is that the solicitors for COPA shall liaise with Dr. Wright's solicitors as regards how the bundles and the documents are to be handled at the trial.
28. Just before I go on to the other directions, I need to deal with a suggestion put forward by Dr. Wright that there should be lead solicitors appointed for the COPA trial who will act on behalf of anybody who is going to participate in that trial, namely COPA and any of the defendants from the BTC Core Claim who wish to participate. I am not going to appoint any lead solicitors. It seems to me to be too elaborate a proposal for this particular action, and it might well lead to greatly increased costs. Bird & Bird LLP are the solicitors for COPA, and as they have demonstrated so far, they are more than capable of communicating effectively with any party who wishes to be involved.
29. I need to deal briefly with the involvement of those BTC Core defendants who are going to be the subject of the preliminary issue trial in January. As I said, a lot of them are struggling to catch up, at least to understand where the COPA claim has got to. The proposal is that the disclosure provided in the COPA claim should be produced to those parties within a very short time frame. I have yet to hear submissions as to precisely when that should be, but the suggestion was it should take place as soon as practicable, and that seems to me to be eminently sensible. If that takes place, then I think the proposal from Mr. Ramsden KC was that those BTC Core Defendants would provide their disclosure, to the extent they have any, I think by 4th August. Subject to any further submissions, that seems a very practical suggestion.
30. In terms of the Developers and the others who may participate in the COPA claim from the BTC Core Claim, they have indicated they would be prepared to serve their witness evidence by 22nd September. Again, I may hear further submissions on that, but again that seems to me to be a sensible proposal.
31. In the run up to trial, subject to the parties either agreeing or resolving their dispute perhaps at the pre-trial review ('PTR') about the form of the trial bundles, the proposal from Dr. Wright's side is that his solicitors will send the COPA defendants a draft bundle index with a final form of the trial bundle by 15th November and then the COPA parties have to comment on them within two days. That is far too short. I hope that the parties will be able to liaise co-operatively, not only to agree on what document management system to use but also the form of the trial bundles. Mr. Greenberg proposed rolling bundles; in other words, building them up well in advance of the trial, and that is a very sensible suggestion, but I am not going to be prescriptive on this. If there are any difficulties in the preparation of the trial bundles, then it can either be raised at the PTR, which I think is currently set for 27th November, although the bundles need to be finalised before then, by the 24th. If there are any difficulties, even in advance of the PTR, applications can be made to me on paper.
32. So the trial bundles are due to be finalised by 24th November 2023, with the PTR on 27th November.
33. The next issue concerns when skeleton arguments should be filed and exchanged. Dr. Wright proposes a very early exchange, by 18th December 2023, whereas COPA are suggesting exchange of skeletons one week before trial. In support of that position, Mr. Hough KC suggested that because of the important procedural steps taking place in mid to late November and then December, skeletons by 18th December is unrealistic. He also made the point that he did not want to telegraph all of COPA's points to Dr. Wright, in view of the fact, as he submitted, that Dr. Wright has form for changing his story, bringing forth new documents, and he made reference to the judgment of Chamberlain J in previous litigation involving Dr. Wright. I am not sure I find the point about not wanting to telegraph COPA's points to Dr. Wright very persuasive, because after all that is precisely what opening skeletons are designed to do. I am also not persuaded by the reference to the alleged conduct of Dr. Wright in previous cases. Suffice to say that if Dr. Wright's story changes materially at the last minute, that may not bode well for his prospects at the COPA trial. I do consider that, in view of the slightly compressed timetable that proceeds into late November, it will be better for skeleton arguments to be the subject of mature consideration. Therefore, I am going to direct that they are filed and exchanged one week before the start of the trial, which I think is currently set for 15th January, although that may not be the start of the hearing in court, it may be the start of the judge's pre-reading.
34. There are various other perhaps slightly minor points that will need to be reflected in the draft order. First of all, whatever I order in relation to the BTC Core Claim, and I am staying part of it, and allowing part of it to proceed to the preliminary issue in January, none of it should interfere with the appeal that is currently ongoing in the BTC Core Claim in my judgment on the subsistence of copyright in the Bitcoin File Format.
35. Other points. Several of the defendants, against whom the BTC Core Claim will not be stayed (at least not for the moment, because they may change their minds and agree to a stay once they have had an opportunity to review the progress of the COPA claim) have raised the costs position. I agree that because they are being sort of, in a sense, dragged into the COPA claim, they should not, in the event that COPA for some reason falls away as a claimant, be visited with the considerable costs of that claim. Various proposals were put forward, such as there should be a several-only costs order made against those various defendants, or that the costs against them fall to be assessed in each preliminary issue trial. I favour the latter. Again, that can be the subject of agreement in the draft order, following this judgment.
36. Various points were made about security for costs on behalf of those various defendants from the BTC Core Claim who are going to engage in the preliminary issue trial. I have not heard any applications from them, and, as somebody mentioned, they are going to await my judgment on the security for costs applications which have already been made by the Coinbase and Kraken defendants. In that regard, there will be liberty to apply if they are so advised.
37. I am not going to make any direction concerning the ability of these BTC Core defendants who are going to participate in the preliminary issue trial regarding their ability to serve expert evidence. I think it is premature to do that. If, once they have reviewed the disclosure, which they should get promptly, they decide that they do have points to contribute to the identity issue trial, and they wish to file expert evidence, they have liberty to apply for a direction for any expert evidence they wish to file.
38. I am also not going to be prescriptive about representation or submissions at trial. Again, I think it is premature to make any decisions in relation to the representation or ability to make submissions at the trial on the part of the BTC Core defendants who are going to participate. Again, I anticipate they are going to be sensible, and they may well decide that it is in their best interests simply to rely on COPA to make the case on their behalf, namely that in their contention Dr. Wright is not Satoshi Nakamoto. Again, if they have particular points they wish to make, I do not think it is right to shut them out, either from filing an opening skeleton, or from making submissions. I think it is certainly a point to be considered further at the PTR, as to whether any of them, and, if so, to what extent, they wish to participate in the trial. Again, I am keen to avoid duplication, and to avoid having Dr. Wright subjected to numerous cross-examinations.
39. As I mentioned, I asked the parties to agree an Order reflecting my ruling at the hearing. I have decided the minor points of disagreement. The terms of the Order reflect the general point that I will be exercising close case management down to the COPA Trial.
40. There are some outstanding applications which the parties continue to want determined and COPA has recently issued an application for further information which it requested I should determine on the papers. Having reviewed the application and the extensive and detailed set of requests for further information, I do not consider it is appropriate to decide the application on the papers. However, I agree that all the outstanding applications should be determined soon. To that end, I invite the parties to liaise with my clerk and Chancery Listing to arrange a hearing in the Long Vacation, either in the week commencing 14^th August (when I am the Chancery General Judge) or, failing that, in the second half of September.