Olaplex's legal win over L'Oreal a morale boost for startups

August 15, 2019 09:09
L’Oreal was ordered to pay US$91.4 million for stealing trade secrets from California startup Olaplex. Photo: Bloomberg

L’Oreal SA, the world’s largest beauty company, was ordered by a US federal jury to pay US$91.4 million for stealing trade secrets from California startup Olaplex.

Olaplex had accused the French giant of stealing its technology in a meeting in California in 2015, when the companies were in acquisition talks.

L’Oreal initially denied the allegations and insisted it independently conceived of the use of a critical compound in August 2014 and developed its hair coloring products on its own.

One key question the jury had to decide was whether the two patents owned by Olaplex were valid to begin with. Another was whether L'Oreal had stolen the trade secrets. A third was whether it had broken nondisclosure agreements relating to them. The jury decided that the answers to all three questions was yes and thus ruled in favor of the startup.

Olaplex was founded by two polymer chemists Eric Pressly and Craig Hawker in 2014. They came up with the idea of adding the ingredient Bis-Aminopropyl Diglycol Dimaleate to their product, which they claimed can help strengthen and reconnect protein bonds during bleaching.

Hair coloring, or hair dyeing, involves the use of chemicals capable of removing, replacing, and/or covering up pigments naturally found inside the hair shaft.  The use of these chemicals can result in a range of adverse effects.

Olaplex has created a buzz on social media, with its hair products being endorsed by Hollywood celebrities such as Kim Kardashian and Drew Barrymore.

New York Times even reported that Olaplex is a key driver behind the light hair fashion sweeping the United States.

The global hair care market was worth US$95.5 billion last year, and is expected to reach US$116.3 billion by 2024.

Leading beauty conglomerates including L’Oreal, Johnson & Johnson and Unilever are dominating this huge market.

But Olaplex’s lawsuit win may suggest more startups could be able to compete with and take business away from the entrenched brands with their unique technologies.

This article appeared in the Hong Kong Economic Journal on Aug 14

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist