Background Information: Eric Prum and Joshua Williams “invented a Ball Mason jar fitted with a custom lid that converts into a cocktail shaker” that hit shelves in West Elm stores in November 2012. In a year, the product, priced at $29.95, made $1 million dollars in sales – very profitable for a start-up company.
Competition: Customers have been recently complaining about the product, not knowing that it’s actually a knowoff product. Home essentials has produced and marketed the “Original Mason 16-ounce Cocktail Shaker”, which sells at Bed, Bath & Beyond for $19.99. The product is very similar to Prum and Williams’ Mason Shaker, but theirs used the original Ball Mason Jar.
Patent Infringement: In order to protect their new creation, Prum and William patented the cocktail in March 2012 – before it was officially on shelves for customers to purchase. Unfortunately, patents take 29 months on average to be approved. During the time that the product is on shelves and the patent is being approved, it does not have much protection. Larger companies take advantage of this because even if they are sued for infringement, they can reap the benefits of selling a similar product and pay the lawsuit later.
On Dec. 14, 2013, W&P’s attorney notified Home Essentials that it was potentially infringing on its product.
Unfortunately, Home Essentials made the case that their product is not eligible for a patent and so there’s no harm in selling something similar to it especially if it will be a cheaper alternative for customers. Home Essentials has been well-known for copyright and trademark infringement lawsuits, having four in the last 10 years.
Further Issues: Many start-up companies can’t afford the cost of lawsuits, which can be as much as $1 million dollars. In this case, the lawsuit could equal the amount of total sales the company has made. For small companies, a lawsuit can result in a settlement or maybe even an acquisition by that larger company.
Ethical Violation: Start-up companies face enough issues in terms of determining a cost-efficient production process, positioning that product in the market, and gaining new customers. Often times small business start up with the owners’ personal contributions and so they have already taken on huge risks by investing so much time into creating the business not knowing if it will succeed in the long run. The last thing that a start-up needs is a larger company to steal its customers. In this case, Home Essentials seemed to provide a knockoff that was less quality and so customers who associated that product with W&P have an altered perception.
It is unfortunate that the patent has yet to be approved and although W&P claimed that their revenue hasn’t been affected, there is a high possibility that customers will choose the less expensive alternative. Since Home Essentials sells the product in Bed, Bath & Beyond, W&P has lost a potential marketing outlet, which could have made them even more money since the store is known for selling high quality household products at an affordable price. It is definitely an ethical violation for larger companies to take advantage of vulnerable start-ups who may not have the funds for a patent and are still in the process of building their brands.
- Wait until patent is approved before taking any further action.
- Continue to build the brand.
- Make sure customers are aware of knockoffs.