Is your idea safe?
Mark Publicover expects to spend the next decade in court fighting rivals that allegedly ripped off his invention.
(FORTUNE Small Business) -- When Mark Publicover sees his kids bounce against the safety net that wraps around their trampoline, he beams with paternal pride - the device, invented 11 years ago, was his brainchild.
Today nearly all of the 1.2 million trampolines sold in the U.S. each year are outfitted with enclosures that prevent children from flying off like stray Ping-Pong balls. Publicover is proud of his invention, but his San Jose-based business, JumpSport, commands less than 1% of the market for enclosures - a market he says was stolen from him by competitors.
Publicover is not alone. According to the U.S. Patent and Trademark Office, applications for new patents rose 5% in 2007. At the same time, more inventors are seeing their ideas ripped off. A study by IP Law360, a newswire for intellectual-property lawyers, says the number of patent-related lawsuits rose 6% last year. Publicover waged a five-year lawsuit against copycat manufacturers.
Andy Gibbs, CEO of Patent Café, a consulting firm in Sacramento, sympathizes with JumpSport's owner, but his story doesn't surprise him. He's seen thousands of inventors fall into the same trap, mainly because of naiveté and failure to invest in the best patent and licensing professionals. The question, he says, isn't whether the patent is still pending when the product is issued - "a pending document is just as strong a deterrent" - but whether the company is paying for advisors who are experienced in dealing with sharks.
The more worthy an idea, the more likely it will attract copycats - and inventors should spend accordingly on protection.
"If you create something of value, " says Gibbs, "then it represents a market that will be economically beneficial to huge corporations. And they will go after it."
Publicover knew his idea could be worth millions - in 1996, Americans purchased more than 600,000 trampolines - but he invested only about $30,000 in his first patent, which he created with the help of a lawyer recommended by a friend. Gibbs says that inventors looking to sell to big retailers should spend at least $100,000 on patent attorneys and litigation specialists to craft a bulletproof patent document and distribution plan.
"If you don't have that cash," he says, "don't even start."
When JumpSport was still a fledgling, the company was more concerned with going on the offensive. In 1997, Publicover sourced production to Hedstrom, a trampoline manufacturer based in Ashland, Ohio, and then poured all his funds into a single advertisement. His gamble paid off: Later that summer Publicover received a call from Sam's Club, Wal-Mart's (WMT, Fortune 500) members-only warehouse store.
"At the time, Wal-Mart was running an ad campaign saying it was supporting small businesses," he says. "It seemed interested in helping the little guy."
Around the same time, a company called JumpKing, based in Mesquite, Texas, started to sell a similar product called a FunRing, but Publicover says that a manager at Sam's Club told him that the competing enclosure was unsafe. According to Publicover, executives at Sam's Club ordered about 200 of JumpSport's enclosures for a market test, then asked for 6,000 more, an order he admits he failed to get in writing. Publicover built up the inventory and waited for Sam's Club to formally request the products. The call never came.
"After a few months we went from elation to devastation," says Publicover. "They were selling JumpKing products in their stores - with our test models and signs still on display." (Wal-Mart has denied any wrongdoing, and a spokes-person for the company declined to comment on this accusation.) Publicover purchased his rival's safety net enclosure and took it home, where, he says, "it instantly broke apart."
Over the next few years his company's foothold in the marketplace began to slip. Hedstrom, his original manufacturer, issued a similar product in 1998. Publicover lacked the funds to sue either Hedstrom or JumpKing at the time. Once his patents finally came through in 2000, Publicover believed he could collect damages for copycats sold after that date, but it wasn't until 2001 that he could afford to hire Legal Strategies Group, based in Emeryville, Calif., on contingency and bring suit against eight manufacturers and retailers, including Hedstrom, JumpKing, and Wal-Mart.
After the trial started, Publicover says he watched Wal-Mart's litigation team tear his patent to pieces. In the end, his company won about $600,000 (after paying its legal fees) in infringement damages against Hedstrom and JumpKing. Both companies maintained that their products did not violate any patents. Wal-Mart was not found liable but was banned from selling the copycat products. In court, Wal-Mart's lawyers argued - and the jury agreed - that JumpSport introduced almost no evidence concerning direct or induced patent infringement.
"For some big companies," argues Gibbs, "patent infringement is just an everyday cost of business. If they don't want to pay a company $200,000 to license a product for sale, they'll happily obtain a similar product and spend $100,000 on an infringement lawsuit and still come out ahead. They know that only 20% of suppliers will raise a suit in the first place - it's worth the risk to them to walk on inventors."
JumpKing, which hit hard times, was sold to new owners after the Consumer Product Safety Commission deemed its enclosures unsafe in 2005 and ordered the recall of 296,000 of them. But Publicover continued his campaign against JumpKing, Wal-Mart, and the other defendants. In 2006 his 15-employee business appealed the 2003 decision, but to no avail. The case was just another battle in an endless legal war for Publicover, who has spent more than half of his nine years as a business owner either in court or preparing for it.
Publicover believes that copycats owe his business, which had sales of $13 million last year, $50 million. The CEO anticipates spending the next ten years cobbling together lawsuits and waiting for the courts to call up his case numbers. He's optimistic about JumpSport's future, but he sounds tired.