We look at how exploding hoverboards have shown us that patents can be detrimental to IP protection, and how innovation is hurt by counterfeiting.
- Shane Chen's hoverboard is a prime example of failing patent protections
- Exploding hoverboards prove a huge danger to consumers
- There remain ways for patent-holders to protect their IP
Following their 2015 explosion onto the market, hoverboards are apparently still going strong. Newspapers this week reported on a Catholic nun riding a hoverboard in to vote. Despite the safety risk of the two-wheeled personal vehicles, many are prone to overheating. This has caused hoverboards to be recalled in huge numbers, following injuries, fires and even explosions in some cases.
The Shane Chen hoverboard
The lack of safety standards was due to confusion over the invention of and rights to sell the hoverboard. A flurry of lawsuits ensued, between hoverboard patent owner Shane Chen, Segway and its acquirer Ninebot, CHIC and more. This has caused, as Quartz claimed, the manufacture of a hoverboard to become a “free-for-all”. So copycats jumped on the hoverboard trend, and in great numbers. At peak, there were reportedly 11,000 Chinese factories rolling out fake hoverboard brands, cutting costs by using cheap batteries and motors that did not adhere to legal standards.
Speaking to the Guardian, Shane Chen, hoverboard inventor, expounded on the multitude of knockoffs of on-trend items. He concluding that “the patent system is not working if something is popular”. With unparalleled production capabilities, Chinese counterfeiters can roll out imitation products in mass quantities as soon as a trend starts.
In truth, a US-registered patent serves to benefit counterfeiters. Copycats can follow the published design with ease to produce a near-identical product. As China works to refine its manufacturing capabilities, and its shanzhai production grows, counterfeit products are of an increasingly high quality. In appearance, at least.
Ecommerce rife with fake hoverboard brands
Thus, the problem of counterfeits is one immensely difficult to tackle. Counterfeit electronics are unrestrained by upfront costs of development, marketing or manufacturing costs. And of course, there is no issue of protecting their IP.
As Chen says, he cannot hope to compete with copycat products because of their price advantage. “We explain to consumers, this has to be built safely. It cannot be that cheap. They don’t care. They want it and they want cheap ones”.
Unfortunately, the rise of e-commerce has connected Chinese manufacturers with a global market. This includes western brick-and-mortar retail stores attempting to cash in on China’s booming economy. In truth, stores all over the globe are importing cheap Chinese goods. Once-authentic stores are increasingly dealing in knockoffs due to low culpability, increased profit margins and ease of bulk purchasing.
Western ecommerce sites, too, are rampant with counterfeit products. This is particularly true after Amazon encouraged Chinese sellers to their platform. Unsurprisingly, they soon found their distribution channels corrupted by counterfeiters that mixed in fakes with genuine products. So now, inventors find themselves in direct competition with copycats. Inventors and small businesses are the victims of counterfeiting, and counterfeiters and ecommerce sites have become the unscrupulous profiteers.
Despite ownership claims finally beginning to gain ground, with Chen’s hoverboard patent standing in lawsuits against infringing companies in the US, it’s indisputable that counterfeits reaped the profits of the popular hoverboard. Unfortunately, Shane Chen is just one of many cases of inventors failing to profit from a successful product.
Patents are by no means a futile measure. But, with the interconnectedness that ecommerce has facilitated, patents are not preventative against counterfeiting by themselves.
Dangerous fake products
The counterfeit industry is harmful in a multiplicity of ways - more than exploding hoverboards. Known to support organised crime activity and to have a damaging impact on industry innovation, brand appeal and consumer buying attitudes.
Counterfeit products are also frequently found to be harmful to consumers. This is especially true within electronics products that pose a risk of fire and electric shock, such as in the counterfeit lamp industry. Counterfeit goods do not undergo safety checks, and precise design in electronic items is of crucial importance to ensure of user safety. A study conducted by safety organisation UL found that out of 400 counterfeit iPhone chargers tested, three, just over 1% of the chargers passed basic safety tests. 12 of the chargers tested even posed a risk of lethal electrocution.
So which products should consumers watch out for? The products most targeted by counterfeiters include memory cards and sticks, SSDs, videogame consoles and controllers and sound products. Of the latter a staggering 14% of traded sound apparatus products are fake. Improperly manufactured sound apparatus, can be highly dangerous, as a report of counterfeit JBL bluetooth speakers exploding showed just last week.
And like JBL, within tech counterfeiting, US companies are being hit the hardest. Almost half of all seized counterfeit ICT goods infringe US brands.
The report shows that the next-most affected country is Finland, but it is interesting to note here that the total number of seized ICT products in Finland is relatively low at just 5% of the total number of products. Yet, the value of Finnish ICT products is equal to almost 25% of all fake ICT products seized between 2011 and 2013.
This shows that brands are being affected in different ways. While Finland’s luxury brands are most commonly counterfeited, Japan sees a very high number of low-end products counterfeited. This market knowledge can be applied in devising brand protection strategies, which should be tailored to address the specific counterfeit problem experienced by the brand, in level and commerce type.
Fighting patent infringers and counterfeiters
A brand protection strategy is a growing necessity for companies of every size, and effective strategies should combine IP protection methods. This includes making use of trade secrets where patents may be imprudent, and responding to counterfeits. A focus on China, most often the origin country, is highly recommended.
Companies that outsource production should consider whether manufacturing in China is worth the risk to IP, and even those who produce domestically should consider registering trademarks and patents in China. Otherwise, Chinese counterfeiters cannot be held liable.
Reactive measures are of an equal priority. But, they should be carefully devised to ensure a long-term solution that impacts and discourages major seller, as opposed to manually requesting removal of individual listings which has been likened to a game of virtual whack-a-mole.