A few summers ago, inventor Josh Malone found himself spending hours every week filling up water balloons for his eight children to throw at one another. Convinced that there had to be a more efficient way to build up a water balloon arsenal, he used his mechanical engineering expertise to develop a product called Bunch O Balloons. This device allowed him to fill dozens of balloons at one time and became an immediate hit with his family. After filing for a patent in 2014, he soon launched a Kickstarter to turn his time-saving tool into a business operation.

Although Malone raised more than $900,000 from the crowdfunding campaign, he also attracted the attention of competitors. By the end of 2014, Telebrands (a company best known for creating the As Seen on TV logo) had begun selling a similar product called Balloon Bonanza. Malone quickly sent a cease and desist letter to Telebrands but it had little effect since his patent wasn’t approved until June 2015. Once he received approval, however, the lawsuits began. By that point Malone had struck a partnership with the toy company Zuru to bring Bunch O Balloons to market. Zuru subsequently took charge of the legal challenges against Telebrands, which according to executives has cost the company $10 million so far.

“The problem with patent litigation is that it never ends until one of the parties is exhausted financially,” said Malone. “We are fortunate that we have sold enough product to be able to fund the litigation.” By Zuru’s estimation, Bunch O Balloons generates about $125 million in annual sales. Despite this success, though, the company will likely remained entangled in patent lawsuits with Telebrands for years to come. And while these legal complaints may not bankrupt Zuru or Malone, it could stall the momentum of Bunch O Balloons’ growth. That’s what happened to LoggerHead Tools, a company that earned a $6 million settlement after Sears infringed on one of its products. While it may have won the legal battle, the company is still struggling to regain its market share. So while creating a blockbuster product is the dream of many inventors, the patent struggles that follow success can be an absolute nightmare.

Questions:

1. Why do patent disputes tend to drag on until one side runs out of money?
2. How can a patent dispute hurt the growth of a new product?

Source: Ruth Simon, “This Water-Balloon Battle Threatens to Soak Everybody,” The Wall Street Journal, November 15, 2017.