In the Wild West that is today’s e-commerce landscape, there is only one way to describe the current patent enforcement system. It is a disaster that is slowly but surely killing the American Dream. Large online retailers such as Chinese giants TEMU and Shein have established a business model in which they steal the intellectual property of entrepreneurs and small and medium-sized businesses to make significant profits. Even popular retailers like Shopify, Etsy, and eBay benefit from a glaring lack of patent enforcement. With no reasonable legal recourse for this little guy, small businesses pursuing true innovation find themselves exploited, manipulated, and snubbed. All of these companies say they are doing their best to combat counterfeiting, but our experience proves the opposite.
My sister and I developed Nightcap when she was only 16 years old. My sister came up with the idea in her dream and created the first prototype of the product using a scrunchie and his mother’s pantyhose. We filed for (and received) a patent on her innovative solution to the scourge of alcohol addiction and made her way to Shark Tank herself, where she was interviewed by Shark and business icon Lori Grenier. and concluded the fastest contract in the program’s history. . In just his two years in business, NightCap has amassed nearly half a million followers on social media, and in 40 countries he has generated over $2 million in sales. But three years later, we found ourselves in shark-infested waters again. But this time the shark came for blood.
The first time I saw a copy of our product on Shein was in May 2023. Appalled by the blatant disregard for our patents, and frankly concerned about how the $1.99 price would affect the sales of his $11.99 nightcap pack, he immediately got to work. However, I soon reached a dead end.
undermine the American dream
These e-commerce sites intentionally create so-called “passive” platforms that only remove patent infringement upon court order. If you have never tried to apply for a court order before (I have not), obtaining a court order can cost tens of thousands of dollars, even hundreds of thousands of dollars. This expense is often unattainable or suicidal for most small businesses. .
Even worse, sellers of infringing products go so far as to create these listings across multiple platforms, knowing that removal would require a separate court order on each platform. While this may be a reasonable expense for a small business to incur once, there is no realistic way for him to spend $50,000 over and over again obtaining court orders. Still, these sellers are free to continually list new products. This is an incredibly expensive game of whack-a-mole.
Many of these e-commerce websites are able to price their products very low because they have no overheads. Business owners like us can invest all our time and money into marketing and building our product and brand. All they have to do is bid on the keywords that our products use. That way, they will focus half of your incoming traffic on cheaper alternatives. Third-party platforms can’t be bothered because selling on their platform is profitable. They’re making money either way, it doesn’t matter where it comes from.
These sites stole my sister’s ideas and our efforts, not to mention the last five years of our lives. And there was nothing I could do about it. I knew that if I couldn’t change the situation, I had to change the system.
The internet is almost limitless and companies like mine are dealing with a huge problem of counterfeiters and drop shippers listing our products on every conceivable platform. These platforms steal patented products and concepts and list them for a fraction of the price, reaping the revenue that should go to the creators and entrepreneurs behind the work. These listings based on stolen intellectual property create price competition and reduce profit margins for the brands we know and love.
Ask any entrepreneur about this issue, and you’ll quickly find yourself embroiled in a passionate and desperately fatalistic conversation. “TEMU promotes similar products at a fraction of the price, which deters potential customers from even considering our product,” says Busy Baby, a silicone placemat that also appeared on Shark Tank. said Beth Benike, founder of . “It’s heartbreaking and scary,” Benike said, expressing concern about safety standards for counterfeit products.
As if child safety wasn’t a big enough concern for the U.S. government to take action, current patent enforcement completely stifles innovation and entrepreneurship, the very foundations of the American Dream.
“You can’t get back the sacrifices you’ve made over the years,” said Lerin Lockwood, founder of Lion Latch, another clever product seen on Shark Tank. “What’s the point of being an inventor if you appear on national TV, get talked about on social media, get a big break, and then TEMU goes on strike right away?”
Who wins in this current system? The factories, the drop shippers who just bid on the entrepreneurs’ keywords, and the e-commerce platform executives who don’t care at all because they make money either way. Who will lose? An entrepreneur who has dedicated his life’s work to brands and ultimately to consumers.
How do I fix this?
There are already existing models that can solve this problem, and they work very well. Amazon, the platform on which we sell his NightCap, has introduced a neutral patent evaluation platform. This is a great option to ensure patent enforcement. To secure the future of small businesses in this country, this process must be replicated at the government level.
Here’s how it works:
- Establishes an e-commerce patent enforcement division within the USPTO.
- Enact legislation requiring all e-commerce platforms that generate a certain amount of annual revenue in the United States to participate in this category.
- All patent disputes escalated on the platform will be sent to this department.
- The department would hire third-party lawyers or judges to oversee and review disputes and determine outcomes.
- The decision must be sent to and enforced by the platform.
- The IP owner will receive a code that allows them to remove future offending listings without rejecting them, unless challenged by the accused seller.
Such a system would remove patent enforcement responsibilities and obligations from e-commerce platforms, which have nothing to do with patent enforcement. All they have to do is remove the listing or maintain the listing based on a third party’s decision.
This makes it much cheaper for small and medium-sized businesses to enforce their intellectual property. In Amazon’s program, each party donates his $4,000 and the winner gets his money back. It is far more sustainable for small businesses to participate in this than to litigate and obtain a court order. Infringers also have the option of not participating at all, and can have their listings removed at no cost to them.
I can’t speak for Amazon, but since they’re not making any money off this program, I’d be happy to let the government take over, and let the US Patent and Trademark Office deal with this issue. Probably.
A single decision would allow IP owners to remove infringing listings on any large platform and, assuming the removal is not appealed, would only require them to incur the cost of patent evaluation once .
It’s time to stand up. Let’s apply these ethical practices across all platforms and restore incentives for entrepreneurs and small businesses to innovate instead of maintaining the current system that allows them to be robbed repeatedly and unceremoniously. Let’s not sit idly by and watch the American Dream falter.
Michael Benarde is co-founder and president of NightCap. The opinions expressed in this article solely represent his personal views.
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