True cost of design

When you purchase a product, you are not only buying a material object but the design and innovation that was invested in it. But when you buy a knockoff or counterfeit product, you cheat the creator of the original and devalue the whole creative process.

Now, what happens when you are the counterfeiter or copycat? Be prepared to hear from a lawyer, because companies that invest in patents for their innovative products — from laminate flooring to smartphones — are prepared to defend them.

Patent litigation is basically “corporate shin-kicking,” according to Don Cameron, partner and head of head of the litigation practice group, at Toronto-based Bereskin & Parr.

“Because patents can last for 20 years from when they were filed, they can sometimes have a significant life in the marketplace,” says Cameron. “I have acted for little companies that have kept big companies off the market and for big companies going after little companies who a nipping at the edges of their marketplace.”

Defend design by the numbers

Patents are filed when the stakes are high enough. Cameron noted that one company he litigated for spent close to $1 million to defend a patent. But it was worth it, he says, because it effectively kept a $50 million market to itself for close to seven years.

That is certainly one clear case for going through the patent filing exercise, but who should be thinking about doing this?

“It depends on the industry,” says Miles Keller, principal at the Toronto industrial design firm Dystil. “If you look a small designer-makers, such as a designer who makes really cool breadboards, and then markets them through design magazines — he probably can’t afford to patent it as well as defend it.”

For a tech company with 300 employees that Keller once worked with, however, patents could be everything. “Many companies today derive their value from their patents,” says Keller.

The flooring industry is not immune to patent disputes.

Infringement action

In January 2015, Flooring Industries, the patent and licensing business unit of the Unilin group, according to the Unilin website, “filed an invalidation action against the Dutch part of Innovations 4 Flooring’s (I4F’s) European Patent EP 2 440 724 before the court of The Hague in the Netherlands. Unilin was of the opinion that the Clic4You and Triple Lock technologies, which I4F offers to flooring manufacturers, are infringing several of the Unilin and Pergo locking patents.”

In November 2015, The Court of The Hague fully denied I4F’s claims and instructed I4F to reimburse Unilin’s legal costs for this case. (I4F has the right to appeal the decision.)

There are other ways to protect the intellectual property (IP) of industrial products beyond patents, according to Jonathan Loudon, president of the Association of Chartered Industrial Designer of Ontario and partner at Swave Studios in Toronto.

“There may be aspects of a flooring or a surface like a Caesarstone where the formulation of the material is a trade secret. Maybe it is not patentable — because with patents you have to disclose how you make it. So some building materials, or how you make them, are trade secrets and that can also protect a surfacing material, or any other material, that you sell. That’s their IP.

“But it’s all about what you’re trying to achieve. “

He also feels the design community needs to be honourable and respect the creative process.

“The flooring industry customers are interior designers, interior decorators, architects, people who source the product like facilities managers, a whole set of customers who are designers,” says Loudon. “I would think having no respect for design would be problematic for their businesses — but to what extent?”

Philosophical differences

Susan Wiggins, ceo of Interior Designers of Canada in Toronto, says that “IDC takes the position that original designs must not be copied. Copyright and patent infringement is disrespectful; there should be more laws in place to protect the author of the work.”

Keller agrees, but notes there are still challenges. “In a free market, how do you control fraudulent products? It becomes a philosophical argument to a degree,” he says. “You would hope that the consumer or the corporate buyer would be educated enough to know the difference. You are putting money in the wrong person’s pockets — they aren’t the creative ones.”

But should a distributor who knowingly, or unknowingly, trades in counterfeits be held responsible? “Possibly yes,” says Keller. “There are different ways to look at this. One would be the product ends up being a danger then there should be a liability attached to that.

“We live in a much more design-aware times than 20 years ago, so the idea of originality and creativity is better understood. ‘What does innovation look like?’ Now, everybody wants it.”

Unilin has certainly faced supply chain challenges when it comes to counterfeits, and taken steps to educate the market. In 2012, Unilin and Välinge announced joint cooperation on the holographic L2C label (license to clic) program, after receiving complaints from licensed manufacturers, importers and distributors.

Even after this effort, in November of 2014, Seizure and Forfeiture Orders were issued by the U.S. International Trade Commission (ITC) against multiple companies attempting to import containers of laminate flooring that infringe Unilin’s glueless locking patents.

Loudon gets to the heart of Unilin’s challenge in defending itself against counterfeiters: “Flooring seems like a commodity product — there isn’t a lot of brand recognition except in the interior design community — but in general you can’t see the brand on it so it’s not like a watch where it says what it is on it.”

However, he isn’t saying that going the patent route is not worth it.

“Being able to patent your process or the way you connect two mechanical pieces is a powerful deterrent,” says Loudon. “In reality you’d need money to defend it but if you’re a large company then you’ve got the resources. If you’re a small company, you still own the patent so you can prevent the big players from coming in and taking it from you. Most companies really don’t want to steal patents, that’s not their business, and they don’t want to get known for that, either.

“Patents have value because they protect the value of the company. If you don’t have a patent, then someone can rip you off and then what do you have? Then all you have machinery that can make stuff.”

Funding the market

According to Cameron, “Business has to become increasingly more sophisticated about how they identify their own products so it makes it easier for the distribution chain. I’m told by a few people I know from the RCMP that a lot of this counterfeit stuff is organized crime. It’s not clever industries making it — it’s almost like it’s a ‘legitimate’ crime.

“Someone once said about counterfeits: ‘the only problem is that there is a market for it.’ People are funding the counterfeit market by paying for it. If they stopped, we’d be a lot better off.”

In his experience, Cameron has developed a rule of thumb when it comes to litigation. “Over the past 30 years, there have been close to 100 patent lawsuits filed in Canada every year, with only five or six going to trial.” This represents around 1,000 lawyer letters, so 900 challenges never go beyond the first step, he adds.

“Patents are the equivalent of the wall Donald Trump wants to build to keep illegitimate products out of our marketplace.”