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The High Court has given judgment in a long-running dispute between US-based MGA, one of the world’s largest toy manufacturers, and Cabo, a UK-based start-up.
MGA manufactures the bestselling ‘LOL Surprise’ range of collectible dolls, and had previously had success with ‘Bratz’ dolls. Cabo, the claimant in the proceedings, designed the ‘Worldeez’ line of collectibles, which it was preparing to launch in the UK in May 2017. It alleged that MGA stifled the launch of Worldeez by claiming that the product was a “knock off” of LOL Surprise, making false allegations that Worldeez infringed its IP rights, and by threatening toy retailers that their supplies of LOL Surprise would be withheld if they stocked Worldeez. All the major retailers then withdrew their support for Worldeez, which failed and was discontinued in 2018.
The trial was originally listed for June 2022, but was adjourned shortly before it was due to start after it emerged that MGA had failed to harvest some 900,000 documents (with MGA ordered to pay the costs of the adjourned trial on the indemnity basis: see previous news article here).
Following a trial in the Chancery Division heard over four months, Mrs Justice Bacon held that MGA’s exclusionary campaign was an abuse of dominance, and that MGA had also made unjustified threats of patent infringement proceedings contrary to the Patents Act 1977. Although MGA’s agreements with retailers not to supply LOL had an anticompetitive object, the judge found that they nonetheless benefited from exemption under the Vertical Agreements Block Exemption Regulation. However, despite the findings on infringement, Cabo’s claim for damages was unsuccessful, as the judge considered that even in the counterfactual Cabo would not have traded profitably.
The judgment also contains a discussion of the purdah rules for witnesses giving evidence (which MGA’s CEO was found to have breached multiple times) and their relevance to the assessment of a witness’s credibility.
Ronit Kreisberger KC, Stefan Kuppen, and Alfred Artley represented Cabo, instructed by Spector Constant & Williams.
A full copy of the judgment can be found here.