This case illustrates the importance of undertaking IP due diligence prior to making investment decisions on the basis of a product or service that is claimed to be protected by a patent or another form of intellectual property protection.
Andrew Harsley, the inventor of the Rapstrap®, successfully lured two Dragons into his lair in the BBC Dragons' Den programme aired in August 2008. The Dragons, Duncan Bannatyne and James Caan, invested a total of £150,000 in exchange for 50% of the equity in Rapstrap Limited after Mr Harsley impressed them with the concept of the removable and reusable polyurethane band, which can be used to tie up bin bags, cables, plants, saplings etc., known as the Rapstrap®. The Rapstrap® is described on Rapstrap's website as "Essentially… a long chain of cells that can slide through each other, forming loops at any point, which can then be pulled tight. If… used correctly, then the remaining portion can be cut off and used again & again. As a result, a single rapstrap can perform several ties, and just gets a little shorter with each use".
Since appearing on Dragons' Den, a number or sales and orders have been reported, including one of the world's leading plastics distributors ordering 1billion Rapstraps® said to be worth £36million over the next three years. The product is said to be scheduled for UK launch within the next couple of months. Patents have apparently been granted in respect of the Rapstrap® in China, Mexico and South Africa, with a pending UK patent application.
However, an opinion under s74A of the Patents Act 1977 issued by the UK Intellectual Property Office (UKIPO) on 27 February 2009 casts some uncertainty as to the future success of the Rapstrap®. The opinion was sought by Millipede Marketing Limited, a company purportedly founded by Mr Harsley in 1994, which owns the European patent EP0765281 B1 which records Mr Harsley as inventor. Millipede's patent was filed on 23 June 1995 claiming an earlier priority date of 24 June 1994 and the patent was granted on 24 March 1999. The patent covers a cable tie in which an end unit is threaded through the aperture of another unit to form a closed loop for securing cable which is described in the specification as being configured such that any excess cable tie material left over after forming the closed loop can be re-used to form another. On the face of it, a similar concept to the Rapstrap®.
After a technical evaluation of the evidence before him, the UKIPO examiner who prepared the opinion came to the conclusion that the Rapstrap® falls within the scope of claims 1 and 5 of Millipede's patent.
An opinion issued by the UKIPO is not legally binding as it is an opinion based simply upon the evidence put before it and, as such, there may be contrary evidence refuting Rapstrap's patent infringement. As such, in order for Millipede to legally challenge Rapstrap on the infringement of their patent, Millipede would need to raise a legal action against Rapstrap on the basis that Rapstrap had infringed Millipede's patent. Given the reported pre-launch sales, any award for damages has the potential of being of high value to Millipede, however this has to be balanced against the risk that the action could result in Millipede's patent being declared invalid.
In terms of Rapstrap's options, these depend entirely on the course of action which Millipede elects to take and whether Rapstrap believes that the Rapstrap® infringes Millipede's patent. If a legal action is raised against Rapstrap, Rapstrap will have the option of defending it on the ground that i) it is not infringing Millipede's patent; or (ii) that Millipede's patent is invalid.
Alternatively, should Rapstrap believe that it has infringed Millipede's patent, it may seek to reach a commercial agreement with Millipede for Rapstrap to either purchase Millipede's product or to enter into a licence arrangement with Millipede enabling Rapstrap to continue to manufacture, sell and import the product. The potential for a commercial agreement is looking remote however, given that Mr Harsley has been quoted as saying: "We are carrying on regardless. This is an opinion but if it was taken to court, the court would look at the bigger picture to see if the patent was valid in the first place. There is a similar product from the Sixties which we will ask the Patent Office to give us an opinion on, which would indicate if the patent is valid or not. Millipede have scored a free kick and are acting like they have won the game – there is a lot more to be played yet" (source: GranthamJournal.co.uk 12/03/09).
Watch this space for updates on any proceedings raised by or agreements reached between the parties following on from publication of the UKIPO's opinion.