1. The Appellant was (and is) a substantial enterprise carrying on business in the design, manufacture, marketing and selling of fashion dolls, including in particular a highly successful fashion doll known as “Bratz”. The Respondents, in comparison to the Appellant, were a much smaller enterprise carrying on the same business, which began to manufacture and market a range of dolls known as “Funky Tweenz” around early 2002. In June 2002, the Appellant commenced an action alleging that the Respondents had infringed its copyright by manufacturing and marketing the “Funky Tweenz” dolls. Prior to the commencement of action, the Appellant caused “Cease and Desist” letters to be sent to the actual and potential customers of the Respondents, threatening to sue them if they dealt with the “Funky Tweenz” dolls. In July 2002, upon the Appellant’s application, an interlocutory injunction against the Respondents was granted, and although not expressly included in the order, it was common ground between the parties that a cross-undertaking as to damages had been given by the Appellant by implication. After nearly six years, very shortly before the trial, the Appellant applied to discontinue the action and for the injunction to be discharged. An inquiry was ordered as to damages on the basis of the Appellant’s cross-undertaking sustained by the Respondents as a result of the interlocutory injunction. 2. The appeal raised the issue of what loss the Respondents sustained as a result of the injunction. The Court of First Instance rejected the Appellant’s argument that the loss caused by the “Cease and Desist” letters was attributable to the litigation (or threatened litigation) per se instead of the injunction, and held that it was artificial in the circumstances to draw a distinction between the two. It accepted the evidence of the Respondents’ expert, and awarded damages of US$7,250,000 to the Respondents on the basis that they had sustained ten years loss of profit from 2002 to 2011 inclusive as a result of the injunction. The Appellant’s appeal on such award was dismissed by a majority of the Court of Appeal. The Appellant appealed to the Court of Final Appeal. 3. The Court unanimously allowed the Appellant’s appeal, setting aside the award by the Court of First Instance and substituted it with an award of US$450,000. The Court agreed with the test on causation laid down by Arnold J in Lilly Icos LLC v 8PM Chemists Ltd, that the loss must be such that it would not have been sustained but for the injunction but the injunction need not be the sole cause of the loss. 4. The Court held that, in the circumstances, it was wrong to say that it was artificial to draw a distinction between the effect of the litigation and threatened litigation on the one hand and the effect of the interlocutory injunction on the other because the evidence showed that in a number of cases, it could not have been the injunction that put the customers off e.g. it was the Respondents’ evidence that some recipients of the “Cease and Desist” letters cancelled their orders or did not place orders in the “Funky Tweenz” dolls because they did not wish to be sued in their respective jurisdictions. Moreover, the Respondents recognised in their evidence that the effect of the “Cease and Desist” letters was independent of any injunction. 5. The Court also held that the ten years loss of profit sustained as a result of the injunction could not be justified because there was evidence from both parties that a particular doll would have a life span of no more than about two years, unless there was some refreshment of the dolls. It was clear that the Respondents did not contemplate such refreshment of the “Funky Tweenz” dolls during the first ten years. Moreover, it was wrong to have regard to the “Bratz” and “Barbie” dolls as comparators given the disparity in size between the Respondents and the Appellant, and there was no convincing evidence that the Respondents could have spent anything approaching the amounts spent by the Appellant in developing, marketing and refreshing their dolls. 6. As to what sum should be awarded to the Respondents, the Court adopted a liberal approach and held that the assessment should be carried out in a broad commonsense way. After considering a number of factors which suggested that there was a good chance that, absent the injunction, the Respondents would have made significant profits, as well as all other circumstances, the Court came to the figure of US$450,000.