Intellectual Property Rights makes fools of otherwise sane business people. A successful building materials producer went to China for production, and pulled out when they found their producer was attempting to go around them with direct sales to standing customers. In brief, USA company Bond selling to Lowes has Xiamen Hwaart produce for Bond in China so Bond can sell to Lowes. After a few years Bond realizes Xiamen Hwaart is trying to sell Bond designed goods directly to Lowes, cutting out Bond. So Bond foolishly sues under
"intellectual" "property" "rights".
Bond claimed that while setting up its exhibit for the annual tradeshow, its president Cam Jenkins discovered the exhibit for Xiamen Hwaart Composite Material had several pallets containing large boxes bearing the Bond logo and the marks of several licensed subsidiaries. Bond previously did business with the Chinese firm but said it ended the business relationship in 2012 after learning Xiamen tried to "circumvent Bond to sell our products directly" to Lowes in violation of their business agreement. The boxes bearing Bond's mark at the 2013 tradeshow "were clearly labeled with descriptions and pictures of products" bearing Bond's various trademarks and Bond item and SKU numbers, according the lawsuit. "These products are unauthorized, and appear to be exact knock-offs of Bond products in every detail, because they were unlawfully made by Bond's former manufacturer to Bond's specific, proprietary designs," the complaint said.
The reporter covering the stories has no idea of how the world works, so he claims Xiamen Hwaart "must pay" $7.5 million judgment. It will never happen.
What is foolish about all of this is there is an alternative. Assuming the bona fides were performed, and Xiamen Hwaart was the best supplier in the world (and not just a decision made with "China fever"), then Bond contracts to have X (X = Bond's USA supply demand) produced for Bond, and Bond authorizes Xiamen Hwaart to make as much Bond product under private label or any liable Xiamen Hwaart desires, at say, 5% overage. This works just like a royalty, except it is under contract law, not intellectual property law. Bond manages the markets it knows, and encourages Xiamen Hwaart to discover all of the market it can worldwide. At 5%, Bond is making riskless net probably superior to its operational net.
Bond stays in the business of collecting and distributing market feedback on the product and ever product improvement, plus new product development, where the profits are, and Xiamen Hwaart makes money producing goods and finding product worldwide for Bond-designed goods.
Objection one: How can you trust Xiamen Hwaart? If you did your bona fides, and understood int'l trade, then you can trust them because both sides agreed.
Objection one-A: They are cheating presently! How can anyone ever trust them? No, it was only after Bond had foolishly ended the relationship out of fear that Xiamen Hwaart kept selling Bond. Had Bond made the right deal, China Hwaart (again assuming bona fides were done) would honor the rigth deal.
(This is where Hong Kong agents are so valuable. They instruct American on how the world really works.)
Objection Two: How can you track whether or not you are getting your 5%? You can't really. Word gets out, or you can get proactive and look for blips in trade data (are you studying your HTS at USITC?) But this is American's weakness, our strength is out contacts, where China to this day depends on relationships. There is an ancient practice in the West called "occult compensation" which gets to this, we lost that with our hyper-legalism.
The result of the news wire report of the $7.5 million judgment lets all of Bond's customers know they can get perfectly good Bond-grade products at a lower price going directly to Xiamen Hwaart. The lawsuits never disputes that the product was perfectly good, it only claims it was unauthorized. Now Bond is in a funny position. Their business will be impacted, but they cannot know exactly how come. they've lost control of their market.
We misallocated billions a year in preventing problems that do not occur while inhibiting innovation all in the name of intellectual property rights. Here are five kinds of piracy we fight that do not matter:
1. Bad copies with merely "confusingly similar" branding "Kelvin Klein" blue jeans, of shoddy workmanship.
2. Good copies with no "intellectual" "property" "rights" violations... a scarf everything thinks is Hermes, but it is not.
3. Excellent alternatives but not the same: a $30 "Rolex" "copy watch" on Nathan Road in Hong Kong is an excellent value and a good watch, as long as it has the Seiko movement with which most are made. But is is not at all a Rolex. It just says so.
4. Bad copies with real logos, often say Prada or some such garment, with accurate logo.
5. The real thing with the real logo, production overruns, unintended or not. The article above seems to be #5, Bond design made to Bond specs in Bond livery.
No one needs to pay a penny to defend against any of this... one through four are sold to people who would never bee your customers anyway, so why sweat what does not matter? Five is the one that would matter, but refusal to work with reality or foolishly hiring an attorney is counter-productive.
No doubt Bond paid attorneys to get a contract with the chinese, and no doubt Bond paid the usa attorneys to do the IP case, and the usa attys will refund what Bond paid them when the Chinese pay the atty frees they "must pay". In short, Bond is out what they paid the lawyers, and will get nothing, and now that the world knows perfectly good Bond product is available from Xiamen Hwaart, well, why mess with Bond, who apparently tend to turn business problems into legal problems? Who wants that?
People hire lawyers to avoid legal problems, and get expensive and time killing business problems. Business and law have nothing to do with each other, and lawyers are state actors , not business people. Why we teach in usa to turn all business problems into legal problems, I don't know. But if and when an associate threatens legal action, welcome that, but suggesst first a meeting to discuss the problem, and see if it can be worked out on business basis. You are already ahead by attempting to mitigate.
If anyone still or otherwise proceeds against you in law, go
pro se. Do not retain an attorney. If and when you are served with papers, draft your own responses and hire a neighborhood will and probate lawyer for form and timing of response paperwork. Once the case starts, require all communications be in writing, refuse to speak on the phone or in person with the other side. In the law it is mostly the deal at the end, so play rope a dope and wait for the end.
Lawyers constantly threaten to "haul you into court." It's not their court. Ignore any such threats. If an when a judge's order summons you, then obey that. The trick in court is simply never, ever mess with the judge. Otherwise, it is you versus the attorney, and in fact your rights pro se are superior in a court than an attorney. Just do not mess with the judge.
Let your opponent spend $90,000 while you spend $1500. The result will be pretty much the same.
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