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05 May 2020
BY Hugo Biermann AND Fae Hassan

Chinese court sends IP enforcement signal by awarding record patent damages

Global toy and entertainment company, Spin Master, has been awarded damages of USD2.2-million (over ZAR40-million at the current exchange rate) in an important patent victory in a Chinese court. This represents the largest ever amount awarded to a foreign plaintiff in a patent infringement case in China.

The case revolved around Spin Master’s patent for the Bakugan toy range, which is popular in many countries around the world, including China and South Africa. These little transforming creatures make use of clever technology that allows the toy to take the shape of a ball and then pop open to reveal the “brawler”, as the figurines are known, when the ball is rolled on a surface. These creatures also feature in the Bakugan Battle Brawlers television series and in a proprietary trading card game.

 

Two examples of the Bakugan toys in question, illustrating the “pop open” feature. Image credit.

Toronto-based Spin Master holds a Chinese patent for various aspects of the Bakugan toy range. The patent describes how the toy can be opened and closed to reveal the figurine. The features covered by the patent include the rollable shape, structure and magnetic properties of the toys.

Spin Master claimed that a prominent Chinese toy manufacturer, Guangzhou Lingdong Creative Culture Technology, infringed the Bakugan patent with its“Eonster Hunter” products. The court found that the Eonster Hunter toy range employed similar features to the Bakugan toy range and that some of these features fall within the scope of the Bakugan patent, therefore ruling in favour of Spin Master. The damages figure of USD2.2-million was calculated based on sales of the infringing toys in China.

After the judgment, Spin Master’s attorney, Doug Clark, said: “[Until now] patent cases haven’t been producing very big awards. There is a willingness of the [Chinese] courts to take a broader view of damages.”

This was not Spin Master’s first success on the Chinese intellectual property (“IP”) battlefield. In 2019, Spin Master won a criminal case for trade mark infringement where the defendants were convicted of selling counterfeit versions of Spin Master’s “Hatchimals” range on Chinese ecommerce platforms. After local prosecutors declined to act, Spin Master successfully filed a private criminal action which resulted in three people being sentenced to three years in prison and the offending companies being fined.

Over the past decade or so, China has continuously developed and improved its IP system, including the enforcement mechanisms available to rights holders. These judgments send yet another strong signal to copycats and infringers based or operating in China.

Innovation is key in today’s highly competitive toy industry. IP rights protect innovation and creativity to enable creators to preserve the uniqueness of their goods, and to prevent the sale of imitation and counterfeit products. Spin Master is a leader in the toy and entertainment industry with multiple award-winning brands such as Paw Patrol, Kinetic Sand and Air Hogs, in addition to the Bakugan and Hatchimals brands mentioned above. Spin Master has an extensive portfolio of IP rights, not only in North America, but also in a number of jurisdictions around the world, and has been proactive in protecting its IP.

In December 2019, Spin Master’s US subsidiary successfully enforced patent rights in a Federal Court in New York. In that case, the court issued an interdict preventing the defendant, Emson, from making, selling or marketing its "Radical Racers" toys in the US. The court found that the “Radical Racers” infringed Spin Master’s US patent relating to the “Air Hogs Zero Gravity Laser”. The US Federal Court Judge said: "Through its development and marketing of an innovative toy car that climbs walls and races over ceilings, Spin Master has achieved significant market recognition and success. The exclusivity promised by its patented technology has been threatened by infringers, most recently Emson."

Spin Master's Global President, Ben Gadbois, confirmed that Spin Master aggressively defends its intellectual property rights. Of the US case, he said that they “have always been particularly proud of the uniqueness of the Zero Gravity wall climbing technology” and that it has been “frustrating to have to endure threats” to the Spin Master business originating from various counterfeit producers around the world.

Spin Master’s IP portfolio comprising copyrights, trade marks, patents and designs is extensive, and has allowed it not only to prevent counterfeit products being sold, but to prevent competitors from developing copycat products, which could result in a loss of revenue. It is important to always give consideration to the protection of IP in the development of products, particularly within the toy industry, which is rife with infringers, who are ever-ready to ride off the reputation of a successful product. Strategically protecting the unique features of toys such as brands, logos, innovations, designs, and other IP rights (including sounds and even smells) is the most effective way to prevent this from happening. From this perspective, and if anything is to be learned from Spin Master’s success, always keep IP top of mind!

Reviewed by Rowan Forster, an Executive in ENSafrica’s IP department.

Hugo Biermann
Senior Associate | IP
hbiermann@ENSafrica.com
+27 81 482 3447

Fae Hassan
Associate | IP
fhassan@ENSafrica.com
+27 79 445 4606