Toy beads in court: attempt to get judge to examine merits in interim proceedings fails

Epoch Co. Ltd v Character Options is a decision of the England and Wales Intellectual Property Enterprise Court (IPEC) of 29 October, courtesy of Judge Hacon. Being extempore, the judgment has not been uploaded to BAILII but was potted by the subscription-only Lawtel service.

This dispute revolved around Epoch's patent for a fusible bead toy in which beads could be first arranged and then fused together to form a specific design. CO, a company that imported bead toys from Australia and sold them on the UK market, placed a new type of bead toy on the market which, Epoch said, infringed its patent. Epoch sued for infringement and sought an interim injunction against CO, who alleged that the patent was invalid.

CO, relying on Series 5 Software Ltd v Clarke [here], submitted as a preliminary point that the court should investigate the merits of the case as a whole on the evidence available at the interim hearing. No, said Epoch: there was a serious issue to be tried and it would suffer irreparable harm without the injunction. This was because

• the lifespan of individual product designs was short, so CO's products were likely to cut short any interest in Epoch's; 
• one of CO's products had been under scrutiny in 2007 for containing harmful chemicals; if its products remained on the market there would be a risk of them damaging the reputation of that type of product generally; 
• there was brand loyalty for Epoch's products, and if Epoch succeeded at trial and the CO's products came off the market, customers would buy Epoch's beads but could not match the colours to what they had left of CO's, thereby damaging the image of Epoch's products.

Judge Hacon refused the application for interim injunctive relief. In his view

* The approach adopted in Series 5 Software had not been endorsed by other courts. While the American Cyanamid principle [which requires the court to look at the balance of convenience, or relative inconvenience, of the parties ahead of the full trial] did not prevent some weight being given to the merits, there should not be a mini-trial, especially where interim relief could influence the commercial outcome. The court would therefore apply American Cyanamid in the usual way.

* There was a serious issue to be tried as to whether Epoch's patent was valid, either because it lacked an inventive step or was unpatentable as a merely an aesthetic creation under the Patents Act 1977 s.1. The court would not however take a view at the interim stage in the absence of full legal argument on the meaning of "aesthetic creation".

* The likelihood of irreparable harm being caused to Eppoch if no injunction was ordered was low, as

• there was no evidence of overlap in the designs, and it was somewhat speculative to suggest that the lifespan of a popular Epoch design would be cut short by CO's activities, although it was possible; 
• there was no evidence that CO's products were dangerous; CO's evidence was that the beads were now formulated with a bitter taste to prevent their being swallowed; the evidence showed that there was a lively interest in the products; any damage to Epoch's reputation had occurred in 2007 but had disappeared; 
• even if there were difficulties in matching the beads as suggested, customers would recognise that it was due to the difference in brands -- there would be no damage to the image of Epoch's products. If there was brand loyalty, on its face that was a reason for not granting an injunction, This was because, if an injunction was granted but CO succeeded at trial, it was liable to find it difficult to re-enter the market. 

* There were only two parties on the market in the UK, and there was a strong inference that, to the extent that CO sold its products, Epoch lost sales on a 1:1 basis. Therefore if no injunction were granted and Epoch succeeded at trial, it should be able to assess its lost sales and calculate appropriate damages with reasonable precision. The balance of irreparable harm favoured not granting the injunction.

£27 million award for wrongful interim relief upheld

Recommended reading
for patent trial judges?

AstraZeneca AB & Anither v KRKA dd Novo Mesto & Another [2015] EWCA Civ 484 is a major ruling delivered yesterday on the calculation of damages from the Court of Appeal, England and Wales (Lords Justices Longmore, Kitchin and Floyd). This is an unusual instance of two specialist patent judges sitting together in the three-judge panel: one is usually enough. In the event Kitchin LJ delivered a unanimous judgment, so we weren't treated to display of duelling between the two virtuoso patent judges.

The question before the Court of Appeal was whether, in awarding damages of over £27 million to pharmaceutical companies for their losses resulting from an interim injunction restraining the launch of a non-infringing generic version of esomeprazole for a year, the trial judge -- Mr Justice Sales (not a specialist patent judge), was in error. Sales J's decision is noted on PatLit here. The point of the matter was that, but for the injunction, those companies would have entered the market for esomeprazole with full force and effect, and the sum awarded took account of the success they would have achieved and the profits they would have made, subject to an appropriate 20 per cent discount to reflect the various uncertainties inherent in that assessment. The award of £27 million was the largest ever made by the Patents Court on an enquiry of damages of this kind.

Essentially, said the Court of Appeal, Sales J had got it right and had was entitled to reach the conclusion which he had done, on the basis of the evidence before him. The assessment of damages was compensatory, not punitive, and while some of the reasoning was "concise" it was not (as counsel for the appellants had suggested) "wholly inadequate".

This blogger welcomes more concise reasoning in the decisions of trial judges. They are easier to follow and, in his opinion, less likely to result in an appeal since there's not so much rope with which trial judges can hang themselves.

Interim injunctions pending an appeal: Court restates principles

In Novartis AG v Hospira UK Ltd [2013] EWCA Civ 583, a decision of the Court of Appeal, England and Wales, of 22 May, the court, consisting of Lords Justices Lewison, Kitchin and Floyd), restated the principles applying to the grant of an interim injunction pending appeal where the claimant was unsuccessful at first instance. Giving judgment for the court, Floyd LJ said

"I would summarise the principles which apply to the grant of an interim injunction pending appeal where the claimant has lost at first instance as follows:

i) The court must be satisfied that the appeal has a real prospect of success.

ii) If the court is satisfied that there is a real prospect of success on appeal, it will not usually be useful to attempt to form a view as to how much stronger the prospects of appeal are, or to attempt to give weight to that view in assessing the balance of convenience.

iii) It does not follow automatically from the fact that an interim injunction has or would have been granted pre-trial that an injunction pending appeal should be granted. The court must assess all the relevant circumstances following judgment, including the period of time before any appeal is likely to be heard and the balance of hardship to each party if an injunction is refused or granted.

iv) The grant of an injunction is not limited to the case where its refusal would render an appeal nugatory. Such a case merely represents the extreme end of a spectrum of possible factual situations in which the injustice to one side is balanced against the injustice to the other.

v) As in the case of the stay of a permanent injunction which would otherwise be granted to a successful claimant, the court should endeavour to arrange matters so that the Court of Appeal is best able to do justice between the parties once the appeal has been heard".

In this case the Court determined that the trial judge was right to say that the best way of "holding the ring" pending trial would have been to grant an injunction (had one been necessary) but wrong to say that the same did not apply pending the appeal. The Court accordingly allowed the appeal and granted the injunction until final judgment in the appeal or further order.

This ruling is a curiosity in that all three Court of Appeal judges are former members of the Patents Court, a fact that will no doubt considerably enhance its authority.