On October 27, 2020, the District Court in the Western District of Texas issued its Final Judgment in L’Oreal USA Creative, Inc. v. Drunk Elephant, LLC, 1:18-cv-00982 (W.D.Tex.), which approved the Joint Stipulation of Dismissal in view of the settlement between L’Oreal USA Creative Inc. (“L’Oreal”) and Drunk Elephant, LLC (“Drunk Elephant”) thereby officially ending the two-year legal battle between the parties.
Drunk Elephant, founded by beauty entrepreneur Tiffany Masterson in 2013 and purchased by Shiseido in October 2019 in the midst of this legal battle, is an example of the growing number of start-up beauty companies that have been earning market share through concepts such as “clean beauty” and using direct-to-consumer business models.
In the Complaint filed on November 14, 2018, L’Oreal alleged Drunk Elephant’s C-Firma Day Serum infringed U.S. Patent No. 7,178,841 the (“’841 Patent”) that covers a skincare formula containing L-ascorbic acid and a cinnamic acid derivative in specified amounts and in combination with other ingredients.
In Drunk Elephant’s Answer to the Amended Complaint, Drunk Elephant denied the allegations that its C-Firma Day Serum directly or indirectly infringed the ’841 Patent, asked the court to declare that the product did not infringe and that the ’841 Patent was invalid, and brought a claim of inequitable conduct before the patent office.
Although the terms of the settlement are confidential, it appears that the C-Firma Day Serum is still available for purchase.
This case illustrates the highly competitive nature of the “$500 Billion-Plus” beauty and cosmetic industry, and how beauty and cosmetic companies can consider the use of utility patent protection along with other strategies such as trade secrets and trademarks/trade dress to protect their businesses and know-how. For example, L’Oreal’s 2019 annual report revealed that it registered 497 patents over the course of the year.
Utility patents cover new and useful processes, machines, manufactures, or compositions of matter. They also protect the functional aspects of a useful invention and provide 20 years of exclusivity. As illustrated with the L’Oreal case, beauty and cosmetic companies may be interested in obtaining patent protection to protect novel formulations — especially if the entity has already invested significant time and resources to develop these products.
On the flip-side, before making a substantial investment in a product, both established brands and startups in the beauty and cosmetic business may want to conduct searches to see if there are any patents that might negatively affect their ability to bring a product to market. An early analysis of the patent landscape could save the company a substantial amount of time and money in pursuing plans that might expose them to claims of patent infringement.
The trend of utilizing patent protection in the beauty and cosmetic industry is here to stay. Experts predict that skincare patents will “continue to increase in the coming years” especially in view of the post COVID-19 world where consumers will “potentially look to avoid post-COVID-19 beauty appointments in favor of using new technologies in their own homes, and as companies race to innovate (and protect their innovations) in order to win over consumers in new ways and to stand out in this ever-burgeoning market.”