Gadgetory

Once you have the product out in the market, someone can just purchase it and reverse-engineer. It's as easy as, like… it's just a walk in the park with all of these manufacturers. So we knew that Xiaomi was going to do Pressy. We knew before they launched that it's going to be exactly like ours. They ended up manufacturing millions of units. All of our contract, and I'm talking about a contract for millions of dollars, just disappeared in a day. Counterfeits cost US businesses as much as $600 billion in 2017. These knock-offs can put entire companies out of business and leave their original makers to go on to watch their ideas succeed without them. Independent creators are nearly guaranteed to run into these copycat issues, sometimes before they even ship their product. And if they can't learn to coexist alongside these knock-offs, they won't be around for long. Kickstarter really changed my life. I was just finishing university. In a matter of weeks, let's say, after we launched, I ended up having a company with 10 employees with a nice cash flow from the Kickstarter. Pressy's this tiny button. It's a physical button that you plug into your headset jack, and you can customize the action that the button performs. So, for example, I can set it up so when I hit a long press, it will toggle my flashlight. Or you can set it up to be a camera shutter, it can be an emergency button, it can launch any app, it can initiate a phone call, so you can do about 10 tasks. You have to preset it in the application that comes with Pressy. But then you have easy access to your everyday actions. Nimrod had the core idea for Pressy in 2013 and decided to crowdfund it through Kickstarter, which, while it helped jump-start the company, also left him vulnerable to copycats During the campaign, we saw a lot of websites that are trying to sell Pressy using our photos, our images. So that was the first sign that people are interested in selling this product or copy us. We saw a crowdfunding campaign for a Pressy version on a site called Demohour, which is a Chinese version for Kickstarter. And this guy ended up beating us to the market with his version. And a few months after it, a Chinese company called Qihoo 360 bought his company and made his item their flagship Pressy. So he was the first. But after it, Xiaomi, the biggest phone manufacturer in China, announced that they're going to do a Pressy. We didn't see it physically. We didn't know the design. They had like a sketch, but the second time we visited the factory for the production, we realized that they are manufacturing in our facility, probably using our own tools that we paid for. Even with the patents, it ultimately wasn't worth legally pursuing Xiaomi. It's a massive company, and suing would cost Nimrod and his small team a ton of money that could be better spent elsewhere. I think that what made Pressy so appealing to the knock-offs is that it was relatively easy to develop, and also Pressy was a huge success on any level. We ended up raising $700,000, which was a huge amount back then. And also we had about 30,000 people buy it. We were all at the major publications, such as Time magazine, TechCrunch, Gizmodo, not The Verge. Nimrod isn't unique. Independent creators often have to navigate the world of knock-offs by themselves, which can be tricky and high-stakes. More recently, though, crowdfunding companies started pairing up with separate adviser-like companies that can help creators address knock-offs and other manufacturing woes. Scott Miller co-founded one of these companies, called Dragon Innovation, which helps convert hardware from an idea to a physical product. Depending on where you build, sometimes the ethics are a little bit different based on culture, and it would often be devastating if somebody took a thumb drive with all of your database for how to build the product and got that six months ahead of when you were going to launch. And typically in a device, there's three different systems. There's electrical, mechanical, and software. Mechanical is really tough to protect. Anybody with a laser scanner can basically re-create it in CAD pretty quickly. Electrical is a little harder to protect. But if somebody's motivated, they can actually take an X-ray machine and X-ray all of your traces and be able to re-create the printed circuit board or figure out what components you've selected even if you wipe off the silkscreen. And then the third system, software, is the one that I always choose to protect because, in some ways, it's the easiest to rip off if you can copy it, but it also is where most of the IP lives. Some companies like Apple choose to protect their brand by deeply integrating their hardware and software. You can buy a fake iPhone and it will look the part, but it won't run iOS. But still, some gadgets don't run proprietary software and instead want to innovate on design. That's not the easiest idea to protect. Take Max Gunawan, for example. He's the creator of Lumio, a light that folds up like a book. His device doesn't have a custom app, so lots of people have ripped off his design, although they're not executed perfectly. So this is the Lumio lamp, a product that I created about five years ago. So it's simply a light with a very nice sort of like warm quality to it. It's portable. And when you open it, it instantly lights up. But beyond that, I also designed this with magnetic cover so you can open it all the way 360, and it becomes a hanging pendant lamp. So neat. So imagine summer, al fresco dining, and this lasts 12 hours. Speaking my language. And you charge this with a Micro USB, and it will give you 12 hours of continuous light. I went on Shark Tank 2015. Now that's when all of the knock-offs starts to pop out. Even though it pains Max to see these knock-offs on sale, he's obsessed with them. He tracks them through Google and is always keeping an eye on what's coming out and when. There's a delay when you open it, like it's not, it doesn't turn on. Yours is like a rapid. The surprise is not there, so little things like that takes the finessing. Oh, gosh. That has sound. They added something creative there. And this one, for some reason, it's not turning on. More sounds. So are the sounds from like the same company? That is actually a good question. I procure all of this from different sources, so there is a possibility that it's actually a distributor that purchased it from the same manufacturer. But it's from a different source. That one is trying to get to your color, but it's still not there. Yeah, and I think it's the same with the cover and also the pages. So, there you go. There you have it, you have a sea of Lumio knock-offs. Max used Lumio as a design object and because of that, he sells it in specific curated retail stores, like the MoMA design store, that cater to his ideal buyers. He's only taken legal action when a copycat tried to encroach on that retail space. What can you do? Do you have patents? What are your patents? So I do have patents, right? And, of course, I do the standard cease and desist. What do your patents cover? So it's a design patent. So you get the protection, but when you're trying to enforce it, it's a whole different thing. It sucks up a lot of resources, like legal fees. There's a chance that you might win, but it's also a risky proposition. Have you ever taken a company that's made a knock-off to court? As a matter of fact, I'm in the process currently. I cannot speak much about it, but yes. So why, in this case, were you like, “I’m willing to spend the money to actually go to court here?” Because it's exactly what I said earlier. They encroached into my territory, and I'm not, it's no bueno, it's not good for me when a company starts to try to reach out to my retailers or the areas where the target market is. My advice for a new creator just getting started would be just get as far along as you can before you launch a Kickstarter, and it will serve many purposes. One is it will help prevent you from getting knocked off because you'll have a head start and can move quickly, which is often the most important thing you can do. But also, it'll give you confidence that your design is solid. You've been able to sort of poke the corners and make sure the questions that are important have been answered. So how much money do I really need? How long is it going to take? What's my design maturity? So the further along you can get before launching, the better off you'll be on many fronts. I try to take an agnostic approach, although I trust and verify. That's the best that you can do. And I never take it personally. It's just business. On that front, it's seriously, or else it will eat you up alive. Knock-offs are a reality of building any product, whether it's a gadget, sneakers, or even a fidget spinner. But how a creator reacts matters. A good attitude always helps, but so does having a strategy to respond to a copycat. Patents, while not a surefire fix, can make things easier, especially if someone thinks they're going to pursue legal action. No one likes having their idea ripped off, but there are options to respond and ways to keep your business alive, just like Max has. Pressy shut down shortly after it began. Nimrod thinks the closure happened because of a combination of software issues, copycats, and, well, headphone jacks. Instead, he know works in the toy business making a spinning top called Limbo that spins for at least four hours, and Boogie Dice, which roll on their own based off sound. Looking back and having this opportunity to tell a story and and say that a company like Xiaomi ripped my product off, yeah, it's flattering, and I take it as a big milestone in my life that I'm proud of. And it's better to laugh about it rather than cry. Hey, thanks for watching. This is the first episode in our new series about all of the challenges that independent creators face. Let us know what you thought in the comments below and make sure you subscribe to see all of the great videos The Verge makes. All right, bye.