Wednesday, 4 November 2015

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.

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