It was the kind of public exposure that most entrepreneurs can only dream of. First, Emma Cohen’s company, Final Straw, took off on Kickstarter, ultimately raising $1.6 million on the crowdfunding site. Then, she landed a coveted chance to present her reusable, collapsible straw on ABC’s Shark Tank. Two groups of impressed Sharks made her an offer.
That’s when things started to go wrong. Very wrong.
Despite filing a provisional U.S. patent application, Cohen suddenly found cheap copycats of her straw being sold all over the world, most often on the site Alibaba.com. Worse still, Cohen was receiving complaints about the inferior knockoffs from customers who mistakenly believed they were buying her product. The problem was amplified by Instagram influencers, some of whom featured Cohen’s name and product but linked to the copycat companies.
Unfortunately, this is an all too common occurrence for entrepreneurs who publicly expose their unprotected intellectual property in order to secure coveted startup funding from shows like Shark Tank and sites like Kickstarter.
The Dilemma for Entrepreneurs: Fund or Protect
The premise of Shark Tank and similar shows is that entrepreneurs, many of whom have invented new products, are allowed to present their business ideas to a group of successful investors, entrepreneurs, and private equity funders. If the investor likes the idea, they will offer the inventor or entrepreneur an investment in exchange for equity in the company. The entrepreneur can then opt to accept the offer or not.
Related: Tips to Protect Your IP as a Small Business or Startup
Unfortunately for these inventors, the sharks are not the only ones who see the new invention. It airs for the entire world to see. Sometimes these inventions are patent-eligible. If they’ve chosen a name, there may be trademark issues involved, and if they have already created other content, like designs or marketing collateral, there may also be copyright issues.
The Issue of Public Trademark Information
Sadly, the problem isn’t limited to public exposure via Shark Tank or Kickstarter. Trademark applications are publicly available, and copycats, particularly in China, will troll these applications on the USPTO website. Suddenly, entrepreneurs may see knockoffs of their products appearing on ecommerce sites like Alibaba.com, or counterfeit trademark filings in foreign countries.
Alibaba and other online sites have mechanisms for reporting and taking down knockoff products, but it can be a little like playing that arcade game “Whack-a-Mole.” Just as one vendor is located and reported, it may pop up under a different name or a separate listing. It’s an exhausting process to keep up with, and it can be challenging to protect an invention.
Cohen employs a team of sixteen contractors, including three who focus solely on fraud. She also employs two full-time attorneys and has estimated that the cost of protecting her Final Straw company from knockoffs and fraud has exceeded $2 million.
Sophistication and Fallout
These knockoffs and counterfeit sites are becoming increasingly sophisticated. The imposters may create domain names or URLs that, at first glance, appear to be legitimately connected to the actual product source or the company, but what they’re actually selling are counterfeit products. They may even “scrape” content and logos from the original product website and use them to populate the counterfeit site.
People are often misled into believing they’re buying an authentic product for a fraction of the price. Unfortunately, knockoffs are usually cheap in terms of quality. The product breaks and then the entrepreneur gets blamed for it because consumers don’t necessarily realize that what they’re buying is a fake product.
Why Paranoia Might be an Inventor’s Best Friend
The problem isn’t just with Kickstarter or Shark Tank. Startup companies often create Instagram accounts and post sneak peeks of products that they’re in the process of inventing or prototypes that they are developing. Social media is increasingly ubiquitous, and nobody really thinks about snapping a picture and throwing it up on Instagram to create product buzz. But once the post is public, assume it is permanent and can’t be removed. Since the U.S. has switched to a first to file patent system, others may see these posts on social media and can file patent applications on the product — even if they aren’t the entrepreneur who developed the initial prototype.
Before you take advantage of an opportunity such as Kickstarter or Shark Tank, or decide to promote your product publicly in any media, make IP protection a priority. You absolutely have to have protections locked down before you make any kind of public disclosure about your product. That can include filing a provisional or full patent application for your product or obtaining copyright and trademark registrations. These moves can also help you secure funding. Many investors prefer to invest in an entrepreneur who has been thoughtful about protecting intellectual property.
Related: Is Your Startup Making These Mistakes With Your IP?
Take Your Cue From Doc
Remember the film Back to the Future and Doc Brown, who had developed his time machine but was paranoid about anybody discovering it, keeping it under a tarp in his garage? Entrepreneurs should be equally paranoid about publicly disclosing or promoting their new invention — no matter how proud they are of it.
You have to assume, unfortunately, that there are bad actors out there monitoring sites and looking for a great idea they can steal. A little paranoia can go a long way and is probably an inventor’s best friend today.
Be more like Doc: keep your invention under a tarp in the garage until it’s safe to bring it out in the open.