“While Spin Master’s strong defenses of its IP rights in the toy sector are notable, the increasing willingness of Chinese courts to vindicate the rights of foreign patent owners is doubtlessly the more significant aspect of this news.”
On April 20, international IP firm Rouse announced the positive results of a patent infringement case brought in Chinese courts on behalf of Spin Master, a Canadian children’s toy and entertainment firm. The decision from the Suzhou Intermediate People’s Court found that defendant Guangzhou Lingdong Creative Culture Technology’s line of accused “Eonster Hunter” products infringed upon Spin Master patent claims covering the company’s line of Bakugan rollable transforming toys. The court awarded damages of 15 million RMB ($2.2 million USD), the largest damages award ever awarded by a Chinese court to a foreign patent owner.
Suzhou Court Finds Infringement of Bakugan Toy Patent
As an equivalent patent issued by the European Patent Office shows, Spin Master’s Chinese patent asserted in this suit protects a toy with an exterior structure that transforms from a first rollable state to a second state through the use of a transformation means utilizing magnetic force to release interior and exterior locking portions that otherwise maintain the toy in its rollable state. The technology is incorporated into Spin Master’s rollable Bakugan toys, which transform into anime-themed gaming monsters when the transformation means is triggered by an external magnetic force.
Spin Master’s suit against Guangzhou Lingdong targeted 20 toys in the defendant’s line of Eonster Hunter toys. In concluding that the Guangzhou toys infringed upon the Spin Master claims at issue in the infringement action, the court found that the accused products were rollable, included interior components concealed from exterior view and had a magnetically responsive body that operated according to the embodiment in Spin Master’s patent specification. While the defendant argued that the accused Eonster Hunter toys did not transform to reveal a human character as limited by claim 1 of the asserted Chinese patent, the court found that one skilled in the art would understand the claim language more broadly to cover fictitious character shapes as well.
The Suzhou Intermediate People’s Court did not dispute the compensation claim brought by Spin Master, finding that its claim was based upon a wide purchasing campaign conducted both online and offline as well as financial data including sales data from e-commerce platforms and margins in the toy industry. The defendant in the case failed to submit any records of profit from sales of the accused products and provided the court with no proper reason as to its inability to provide this data. The court found that online and offline sales data presented by Spin Master was verified by sources including Guangzhou Lingdong’s invoice records with the city tax bureau. The damages award to Spin Master reflects profits for infringement along with attorney’s fees, legal expenses and the bad faith of the defendant.
Spin Master, which makes children’s toys under entertainment brands including Paw Patrol and Erector by Meccano, has been fairly active in recent years in terms of protecting against infringing products. In February 2018, the firm filed a series of patent infringement suits against Alpha Group in Canada, the UK and in U.S. district court alleging that a line of vehicle toys transformable through a magnetically-operable means infringed upon Spin Master’s rollable toy technology. In January 2019, the two sides settled their global patent dispute with an agreement that brought to end sales of Alpha’s Screechers Wild! products which allegedly infringed Spin Master’s patent claims. Spin Master has also asserted transformable toy patent claims against Mattel and this February a divided panel at the U.S. Court of Appeals for the Federal Circuit upheld the Patent Trial and Appeal Board’s (PTAB) finding that Spin Master’s asserted patent claims weren’t invalid as either anticipated or obvious.
Decision Shows Strong Signal of Interest in Vindicating Foreign IP Owners’ Rights
While Spin Master’s strong defenses of its IP rights in the toy sector are notable, the increasing willingness of Chinese courts to vindicate the rights of foreign patent owners is doubtlessly the more significant aspect of this news. The trend is an interesting if albeit slowly developing turnaround for the Communist nation which continues to be, both in fact and in reputation, the world’s largest source of IP-infringing goods. In 2017, Boston-based athletic apparel maker New Balance announced that it had won a 10 million RMB ($1.5 million USD) damages award, the largest such award issued by a Chinese court in a trademark infringement case, against a trio of Chinese domestic shoemakers. Although that award is relatively mild compared to damages meted out in trademark infringement verdicts in the U.S., the New Balance award was multiples higher than the maximum damages for infringement allowable by Chinese statute. In January 2019, the Chinese government proposed amendments to the nation’s patent law to allow courts to award punitive damages in cases involving intentional infringement, one of China’s many recent actions aligning its system of adjudicating IP cases with courts around the world.
Douglas Clark, Global Head of Dispute Resolution with Rouse, indicated that the Suzhou court’s decision in this case is a strong signal of China’s interest in maintaining a fair marketplace for foreign IP owners, especially given the current global health crisis:
“The high damages awarded and successful private prosecution are both extremely rare and send a clear message to IP rights holders globally and to potential infringers in China that infringement of IP rights will not be tolerated. If ever there is a time when the courts in China might err on the side of local protectionism you would be forgiven for thinking it is now, just as the economy recovers from COVID-19. The fact that they have ruled so emphatically in favour of protecting the legitimate rights of the IP owner is a clear and bold statement.”
This recent victory is not the only instance in which Spin Master successfully defended its rights in China against domestic infringers. Last November, the Shenzhen Longgang District People’s Court convicted a group of Chinese entities on criminal counterfeiting charges related to the sale of knock-off versions of Hatchimals robotic toys through online e-commerce platforms including Alibaba. This judgment was entered after Spin Master engaged in China’s first-ever successful private criminal prosecution in an IP case after Chinese authorities declined to file any formal charges against the infringing parties.
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