How To Protect Your Business From Copycats
This article originally appeared in my column at Forbes.com:
In response to my article Bad Business: Indicted or Not You are Going to get Caught, a reader asked “What is the best way to protect my company from copycats?”
For instance, she mentioned Sky Zone Indoor Trampoline Park (www.skyzonesports.com), the first all-walled indoor trampoline park.
Sky Zone is a Los Angeles company that opened its first site in Las Vegas in 2004 and now boasts 27 sites—3 company owned and 24 franchise locations. The company patented its idea carefully and has been highly successful, bringing in $15.8 million dollars last year. However, as the concept has grown in popularity, Sky Zone has faced an array of imitators trying to steal their idea. The struggle of defending its patent is taking a sizeable toll.
In fact, the company notes a particular park has been taking Sky Zone ideas—such as trampoline workout classes and dodgeball courts—and has copied the programs precisely, one by one, and simply slightly altered their names. What can they do?
“Recently I wrote a piece comparing the value of patents for small companies to owning a used car—you might get a lemon, you’ll probably pay too much, etc.,” he said. “While I intended it as a cautionary piece to help guide small business owners in how they pursue patent protection, I touched only briefly on a problem that is all the more important because it can’t be avoided no matter how carefully you plan: enforcement of your intellectual property rights.”
Hanging a patent on your wall looks great, Nick says, but formal intellectual property rights, for all the expense and trouble of getting them, are only as good as your ability to enforce them against infringers. And that is where the problems arise.
For example, a trademark infringement suit often requires a formal survey of consumers. But this is not your friend with a clipboard at the mall. You’ll need an “expert witness.” Plan on $50,000-$80,000 just for the survey if you want it to stand up in court, Nick reports. Total cost of the trademark infringement lawsuit? If you want to win, he says to figure on $150,000 and two years of your life. And patents are virtually impossible for a small business to enforce. Most patent litigators worth their salt won’t touch a case for less than $250,000 and they will tell you to plan on twice that amount. Nick also says you shouldn’t expect an attorney will take a case like this on contingency—the expenses that the lawyer would have to bear make this a very rare occurrence.
To continue reading please visit my column at Forbes.com.