Larry sends in an article from the WSJ with yet another example of someone starting to make money and then heading off into lawsuit loserville.
Here is the heart of why Rainbow Loom attracted competitors:
Lawyers know nothing about business. Patent lawyers sell access to taxpayer-backed state violence, which is not appropriate in the market. If you have a fad product, it is not going to last long, so why put any money into it? Ty Warner made the business decision to turn a fad into a mania by killing off his designs and creating new ones constantly. Mr. White seems unaware of this distinction. If Ty Warner had 50 preliminary injunctions processed it was no doubt solely to keep his customers satisfied that the customers would not find themselves competing against fakes, most likely trade mark issues. (And a preliminary injunction is not very far in the process, I wonder if Ty knew that someone, somewhere in his org was causing them to be issued.) In any event Ty did not make exclusives, and Ty did change his products constantly. Ty was a private company so sales figures are elusive, but that Ty made billions is not in doubt, given his purchases in which he paid cash. Billions in sales and only fifty preliminary injunctions? It does not sound like Ty did much in the way of vigilance or tightly regulate enforcement. In what way is Beany Baby's analogous to Rainbow Loom, a company that esteems exclusives and design rigidity?
Two terrible ideas: exclusives and patents. I give it three years before bankruptcy. Never bet you can make something popular with 12 year old girls for longer.
Feel free to forward this by email to three of your friends.
In August, the founder of three-year-old Rainbow Loom—a rubber-band jewelry-making kit that is a blockbuster seller this fall—sued rival Zenacon LLC, claiming it copied the "distinctive trade dress" of Rainbow Loom's "unique" C-shaped clips with its competing FunLoom product.An observation: given all of the successful products out there, these stories are actually quite rare. But nonetheless, this is typical of a long succession of such stories, and I can predict where this one will be in three years: bankrupt.
"I made this famous," says Mr. Ng, who says he's sold more than 1.2 million Rainbow Loom kits so far. "I worked on it for three years and now everyone wants to come in."Hear the entitlement? Where is the customer in that argument?
Rainbow Loom also filed a lawsuit last month against another rival kit maker and Toys "R" Us Inc., which sells the competing kits. That same month, Rainbow Loom inked an exclusive contract to sell its products through national crafts chain Michaels Stores Inc. for one year.Wait, what? Suing ANOTHER competitor AND the largest potential customer out there? He signed a contract to give one business an exclusive on his product? (And what will the world look like in one year, when his exclusive is up and everyone else has cheaper better products?) Every industry is a village, and everyone will know the fact he initiates lawsuits without provocation and sues customers. That alone the kiss of death. With a Michael's exclusive, he guaranteed his competitors would be successful.
Here is the heart of why Rainbow Loom attracted competitors:
Furthermore, the C-clip in FunLoom's kit is superior, Mr. Verona says, given that it is larger and therefore easier for children to handle, plus it can hold more elastic bands.Rainbow Loom came out with a product that needed improvement. With the sunk costs of a patent, he is defending the product as it is, when he needs to be constantly improving it (making a patent pointless.)
The allegations of copycatting and patent infringement illustrate a growing challenge for entrepreneurs with a sudden blockbuster in the era of 3-D printing technology, fast manufacturing capabilities and more affordable e-commerce technology, all of which enable rivals to capitalize on nascent trends while they're still hot.There is nothing to support this, I've been watching knock-off artists for 40 years, and the process may have speeded up slightly, but the problem is not "growing." The increase in lawsuits is the result of the change in the patent law in 2011, which was designed to increase lawsuits.
"In this day and age you have to be so vigilant," says James White, an intellectual-property lawyer in Chicago who delivered more than 50 preliminary injunctions against knockoff products on behalf of Oakbrook, Ill.-based Ty Inc., the maker of Beanie Babies. "If you have a fad product that's easy to copy, the more tightly you have to regulate your enforcement program."Ka-ching!
Lawyers know nothing about business. Patent lawyers sell access to taxpayer-backed state violence, which is not appropriate in the market. If you have a fad product, it is not going to last long, so why put any money into it? Ty Warner made the business decision to turn a fad into a mania by killing off his designs and creating new ones constantly. Mr. White seems unaware of this distinction. If Ty Warner had 50 preliminary injunctions processed it was no doubt solely to keep his customers satisfied that the customers would not find themselves competing against fakes, most likely trade mark issues. (And a preliminary injunction is not very far in the process, I wonder if Ty knew that someone, somewhere in his org was causing them to be issued.) In any event Ty did not make exclusives, and Ty did change his products constantly. Ty was a private company so sales figures are elusive, but that Ty made billions is not in doubt, given his purchases in which he paid cash. Billions in sales and only fifty preliminary injunctions? It does not sound like Ty did much in the way of vigilance or tightly regulate enforcement. In what way is Beany Baby's analogous to Rainbow Loom, a company that esteems exclusives and design rigidity?
Retailers don't seem picky about the brand either. "It's about who can get it to you fast enough," said a spokeswoman for Berlin, N.J.-retail chain A.C. Moore.Trademarks? Who cares? How does an exclusive with Michael's help this retailer? Instead of figuring out how to serve the market, Rainbow Loom in essence wants taxpayers to come up with the money to control the market.
Instead of taking victory laps, however, Mr. Ng says he is suing to protect his product against sellers of copycat items and because he intends to expand his business. He now has 12 employees who work out of a 7,500-square-foot warehouse 3 miles from his home. "I can make this company become popular for longer," he says.False dilemma: Victory laps or lawsuits. How about serve your customers or lawsuits? Clearly Rainbow Loom intends to go the way of lawsuits. How does suing potential customers, and restraining trade make one popular and grow the business?
Two terrible ideas: exclusives and patents. I give it three years before bankruptcy. Never bet you can make something popular with 12 year old girls for longer.
Feel free to forward this by email to three of your friends.
6 comments:
Wow! So you're championing the rip off artists?
Toys R Us was not a potential customer considering they contracted and carry the products of a copy cat manufacturer. Why not sue them for enabling such a thing?
Michael's doesn't have an exclusive, the Rainbow Loom is sold at Learning Express.
It seems you're all for others getting rich off of somebody else's ideas / investments. Why innovate, just sit around and watch what others do and then rip them off.
Have you had a product with which you experienced these events, or are these questions hypothetical?
Look up "superknife", an example of someone who DIDN'T go after IP thiefs, continued to improve the product - and got run over by Home Depot and Lowe's.
Then look up "SuperSoaker Lawsuit", an example of someone that took on an IP violator - and one.
This article is the typical screed of the uncreative person, who does no research - but just works off of someone else's ideas. Kind of like criticizing a WSJ article out of context.
What do you mean "run over by Lowe's and Home Depot? Superknife is still in business doing just fine. It offends you if, Like Jefferson and Franklin, real men aren't rent-seekers?
And the Supersoaker people won (not one) a lawsuit over back royalties on agreement in place, not over "ipr" infringement, a contract that can be in place without the "ipr" regime.
http://en.wikipedia.org/wiki/Super_Soaker
You have neither your facts nor your premises straight.
Superknife was sold by its original inventor for pennies on the dollar because of knockoffs sold by the big box stores that were made in China and violated the IP.
The reason Super Soaker's inventor won his lawsuit was that he was able to use the IP protection so that his invention was valuable...and licensable.
And if you read the details of the Rainbow Loom lawsuit (linked in the WSJ article) - you'll discover that not only did Zenacon cite that they were authorized to sell the Rainbow Loom on the Zenacon website, and not only did they buy the rights to all the websites that sounded like Rainbowloom.com (rainbow-loom.com, etc) - they used original Rainbow Loom photos - including photos of the inventor's children - in their advertisements.
Patent and copyright laws are there for a reason - Jefferson and Franklin were both, ahem, somewhat involved in their creation and use - and the reason is to protect talented, creative individuals from theft and abuse of their ideas. And we all benefit from it.
You are privy to the details of the superknife deal, and the motivations of the players? You judge a violation of IP, when no one else considered it? Doesn't a court case determine if IP is violated?
Do you simply impose a narrative on the stories you read?
I'll stand by what I said on the WSJ article.
If we benefit from the laws, why do they keep changing them? If we benefit from the laws, why is there zero evidence thereof? Read Patry, Kinsella, Bodrin & Levine, Lear, people who actually have "IPR" and expertise in the field. No evidence of any benefit, plenty of evidence of harm.
You merely re-assert the "laws are there for a reason" but cannot warrant the claim.
I think you need to spend less time speculating and actually get out there and produce something, so you can see what harm IPR does to our economy, and how the IPR attorneys are rent-seeking parasites on our freedoms to produce.
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