The lawsuit blues

When Zircon filed suit against Stanley Works for patent infringement in January, it brought more focus on an ongoing problem in the American tool industry.

The nation’s major tool manufacturers spend millions of dollars each year to protect their patented items against direct knockoffs and all-too-similar models. These products often are peddled at flea markets and on e-commerce sites like eBay, and with an increasing number of tool companies popping up around the globe each year, patent infringement only promises to become a larger issue going forward.

“This is not a recent thing. For the last 10 years, this whole subject has been growing for both retailers and manufacturers,” said Karen Wilson, corporate marketing officer for Longmeadow, Mass.-based Hyde Tools. “With competition so tight, we need to make filings almost daily for legal protection.”

“It’s definitely an issue, especially as manufacturing spreads to the Far East,” said Chris ?Fassino, channel marketing manager for DeWalt, which has a full staff of attorneys who deal with gaining patents and protecting them. “There are a lot of knockoff products making their way into industrialized countries.”

Hector Hernandez, director of research, development and quality control for Long Beach, Calif.-based Alltrade Tools, agrees that the issue has grown exponentially since the beginning of the 2000s -- especially with the rise of small companies selling on the Internet. “From our perspective, we look at patent protection as an integral part of our business,” he said. “We spend quite a bit on developing items and patents, and we find a lot more people copying our designs directly or mimicking them.”

Unlike most infringement cases, the Zircon vs. Stanley case grabbed headlines because it involved two major manufacturers, including one of the biggest names in tools. Campbell, Calif.-based Zircon filed suit Jan. 7 in a California district court, seeking preliminary and permanent injunctions and damages from New Britain, Conn.-based Stanley Works for what it said was infringement of Zircon’s CenterVision stud finder technology.

“Zircon has always taken great care to respect the proprietary rights of others and expects its competitors to do the same,” Zircon president John Stauss said at the time. “We have also vigorously defended our intellectual property in the field of stud finders for over 25 years.”

Stanley Works issued this statement from Ted Morris, the company’s assistant general counsel: “The patent that Zircon claims Stanley is infringing was specifically analyzed prior to manufacturing and marketing these stud sensor models, and a design was arrived at that did not infringe …. Based on everything we currently know, the lawsuit appears to be without merit.”

Lawsuits like these get started when one company develops a product that another company says copies -- or, at the very least, too closely resembles -- one of their own patented technologies. Protecting against this type of infringement can cost anywhere from several hundred thousand dollars to millions of dollars a year, depending on the size of the company and how many products are protected.

There are two cost factors in the equation. First, a company has to go through the time and expense to apply for a patent when it comes up with a new technology, which can include securing utility patents, design patents, copyrights and registered trademarks. Not only do they have to patent the technology in the United States, but often in other countries as well. Then, if that patent is infringed, the company has to pay to go after the offending party with a cease-and-desist order.

“We have a full staff of patent attorneys responsible for getting patents and taking care of this kind of thing,” said DeWalt’s ?Fassino. “It’s expensive both to gain patents and to enforce them, but we pride ourselves on and are known for our intellectual properties, and it’s important for us to protect that reputation. It’s a long, expensive process, but one that we’re not going to back away from.”

According to Hernandez, it costs about $10,000 to get a tool patented, and if someone knocks the product off, a company can spend between $350 and $600 an hour in lawyer’s fees to shut down the offender or -- worst case scenario -- to try a case in court. “I’ve seen bills for $20,000 to $30,000 on one item, and all that adds to the cost of a product because it has to be recouped somewhere,” he said.

Alltrade has sued some U.S. manufacturers over the years, but most often, the companies will try to work the situation out to avoid going to court. The quicker you can settle it, the better, Hernandez said.

The home improvement patent infringement issue reaches beyond tools. Last month, PPG Industries filed a trademark infringement complaint against competitor Sherwin-Williams over the use of the phrase, “The Color of Inspiration.” PPG says it has used the phrase in connection with a paint color selection and matching system used at Lowe's stores. However, Sherwin-Williams had registered the phrase as a domain name, according to the suit.

Another issue associated with patent infringement is that it can hurt a company’s reputation. Just because you didn’t make the product, it can still be associated with your company if the product and packaging is similar enough to the original. And if the quality of the knockoff is inferior, that negative association can damage your credibility.  

“You would hate to see a copycat of your product that didn’t live up to the quality people expect from DeWalt,” ?Fassino said. “These products sometimes have the same name, and even if you had the real thing right next to it, an uneducated consumer might not be able to tell the difference -- except, of course, with the price. If you see a pair of Calvin Klein jeans for $20, they’re probably not Calvin Klein jeans, so the same thing applies here.”