Few events can devastate a business more than a lawsuit for infringement of intellectual
property such as copyrights, trademarks, dress rights, and patents.
Businesses can rebuild after earthquakes, fires, floods, war, and death, but
an infringement suit can not only wipe out an entire company, but prevent any
possibility of recovery.
Every day you can see large companies being sued for hundreds of millions of dollars
in IP (intellectual property) infringement lawsuits. The big ones just shrug it off, but
for a small or medium-sized company it can mean bankruptcy.
Schutt, a hundred year-old sporting goods company was forced out of business because they
had made a football helmet that infringed one, or several Riddell's patents. A jury awarded thirty million
damages to Riddell and drove Schutt into bankruptcy. What is even more incredible is that Schutt
company management knew for a long time they were infringing Riddell, and still continued to go on
manufacturing without trying to address the problem.
There was a time when many large corporations used to ignore and scoff at the individual inventor,
because they knew that a patent suit costs thousands of dollars and the little guy couldn't afford
to sue them; besides, they could always settle cheaply if they got in trouble.
Those times are no more. Today there is plenty of capital available for anyone wanting
to sue. There are even investment houses and banks investing in patent litigation
cases where they may choose to fund the plaintiff or the defendant, based on their idea who
has a better chance of winning. They will then hire a high quality legal team, regardless of
the cost. Of course, their payoff will part of the award.
What about the little shop printing tee shirts who copies some design from a
trademarked item and doesn't even realize that they did anything wrong? Hopefully
the retailer who buys the product will run a check on the goods and make sure that
they are not infringing. Otherwise the retailer will be as liable as the maker.
Most large retailers do this routinely with their vendors, but some still manage to fall through the
cracks, like in a court case between Nike vs. Walmart where Walmart was selling shoes made
by a third party who copied a feature used on the shoe design, for which Nike had a design patent.
It is interesting to note that Nike sued Walmart, the seller, and did not even name the makers
of the shoe. The law makes no distinction between seller or maker of the infringing goods.
In a landmark trademark infringement suit Adidas was awarded $305 Million from Payless shoes
for copying some parallel stripes. The most amazing part was that Payless used a two and a
four-stripe pattern, to deliberately design around the Adidas three-stripe pattern, and were still
found guilty, because the jury felt the consumer may be deceived into thinking they
were buying Adidas!
Why are we going to such length to talk about infringement? Because it is at the core
of the licensing idea. What you are purchasing in a license from Peeps is security that
you will not infringe Peeps. Non-infringement and freedom from being sued by the licensor is
the sole purpose for the existence of licensing agreements, and really about the only reason
why anyone should license.
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