We had a problem. Our patented Smartgrip, which allows any item to grip when knocked but lifts naturally, was gaining steam. Mighty Mug, our first item with Smartgrip, was so innovative that it attracted many imitators, which became a problem we were set on solving. Imitation is a form of flattery and a sign that you’re doing something right. Unfortunately, combating these knockoffs is very expensive, but many times is necessary for your company’s survival. When you create something groundbreaking, others will inevitably try to steal and profit from your idea.
After hundreds of fake Mighty Mugs started appearing on major e-commerce platforms, websites, and even at big retailers like Bed Bath & Beyond and Walmart, my team reached its boiling point. How can someone steal a patented idea and get away with it?
The Financial Burden on Small Inventors Empowers Infringers and Knockoffs
The answer lies in the US’s high cost of patent lawsuits, averaging $2.8 million, which is financially prohibitive for most businesses. As a result, many inventors and small businesses do nothing, further empowering and enabling infringers. We believe strongly in holding wrongdoers accountable and weren’t about to let anyone walk all over us. We were determined to seek justice.
Our lawyer, Don Dinan, informed us about a 337 Complaint with the International Trade Commission (ITC), the highest court of trade in the country. In order to be successful, you have to be a US company, and the knockoffs need to be coming from outside of the US. A 337 Complaint requests the ITC to review existing counterfeit items in the marketplace and sets a course of action for their swift removal from the US. If the complaint is successful, you will get a General Exclusion Order (GEO).
When made aware of a GEO, big companies will instantly recognize that it’s better to either exit the marketplace or seek a mutually beneficial arrangement. They may try to threaten you with the standard threats (PTAB), but every minute that ticks by is working against them, and they know it. Mid-size companies with little experience dealing with a GEO won’t fully grasp the gravity of their situation until their retailers – whom you will put on notice – inform them that this is a “very serious issue.” They will be held liable for any legal actions or rulings against the retailer.
Small companies or China-based sellers on Amazon, Alibaba, and Aliexpress will simply ignore your notices to their own detriment. Their failure to respond will result in their e-commerce listings being removed and their goods confiscated.
The GEO Disrupts the Operations of Infringers
The power of the General Exclusion Order (GEO) lies in its ability to put immense pressure on knockoffs and keep your sales channels clean. Unlike typical legal actions, a GEO isn’t a direct financial win but serves to disrupt the operations of infringers. Once a GEO is enforced, the first shipment receives a redirect notice, meaning it can’t enter the US and must go elsewhere. On the second offense, the goods are seized and confiscated, and anything on retail shelves can be subject to marshal removal.
Here’s an ideal scenario, one that we experienced: your item is knocked off, and the knockoff has placement at a major national retailer. Since major retailers buy larger quantities, more than one container of the knockoff can be in transit at any given time. With a little research on Panjiva, you know which ports they usually land at. Through counsel, you can work with the ITC and US Customs to notify everyone involved. Even the savviest infringers will want to avoid taking that risk as they risk losing all their goods in transit and in stores, upsetting retailers whose sales will be impacted. Additionally, if you decide to sue the infringer and the retailer, the retailer will force the infringer to cover legal fees and any damages. The cost to the infringer could be astronomical, especially if a court finds that the infringement was willful and worth treble(triple) damages.
After removing more than 5,500 infringing items from the marketplace (yes, you read that correctly), we found that major platforms like Amazon, eBay, and Alibaba respect trademarks and design patents because they are easy to enforce. However, they struggle with utility patents, which are often the most crucial IP for small companies. Their reasoning is that reviewing these disputes is a long and tedious process best left to the courts. The General Exclusion Order is an exception to their aversion to stepping in on utility-related issues. Each platform now asks if you have a court order or a GEO number. If you do, you simply insert it, and the infringing listing disappears.
The GEO, along with the use of AI IP monitoring software Red Points, has been key to our strategy for protecting ourselves.
This is my recollection of the process, but it should not be taken as legal advice. For all the legal intricacies, you should consult counsel that specializes in 337 Rulings.
Be Mighty.
Jayme Smaldone is the Founder and CEO of Mighty Ventures, a company specializing in the development and licensing of innovative products leveraging its proprietary Smartgrip technology.
Jayme played a crucial role in the campaign to eliminate the U.S. postal subsidy that granted Chinese shippers a 75% postal discount compared to domestic businesses. His advocacy, alongside the State Department, President, and a coalition of US businesses, led to a more equitable playing field for American companies.
Jayme is also a recognized thought leader, having contributed to OpEd's in The Wall Street Journal, The Atlantic, and Entrepreneur. His expertise and impactful work have earned him a feature on Planet Money's - Postal Illuminati episode., where he discussed the intricacies of the postal subsidy issue.
Hello Jayme,
If you’ve got a minute, I’d love to discuss our IP situation with MantelMount as we are being ‘knocked off’ regularly at signficant expense to our business.
Thank you,
Dan Hughes
CEO/Owner
760-533-3336