Manufacturer Sues Retailers: Chilling Effect?

On May 16, 2014 the makers of the Hana Mod sued Illvapes and 10 other unnamed e-cigarette retailers.  The suit alleges trademark infringement because the retailers are selling imported Chinese clones of the company’s popular advanced personal vaporizer.

e-cigarette news gavel imageThat is the interesting turn in this case.  China is a notoriously difficult country in which to enforce intellectual property rights.  The company would be highly unlikely to yield anything from going after the alleged counterfeiters themselves. Instead, they focused on the more easily reached US-based merchants selling the knockoffs directly to consumers.

Clone devices are a huge issue within the vaping community. The debate rages between the original inventor’s right to profit from their hard work and the benefit consumers get in being able to purchase very inexpensive versions of otherwise unattainable gear.  This article is not about picking sides in that particular debate.

Rather, the affair has got me wondering about what sort of waves this action might make throughout the industry.  The move seems to be unconventional at best.  After all, Apple didn’t sue Joe’s Phone Shack for selling Samsung phones.  I’m not even sure retailers could be held liable without some sort of ruling from the ITC but I’m not a lawyer so I have no idea how this whole thing works out.

Let’s just assume that retailers can indeed be culpable and this lawsuit successfully moves forward.  First off, there’s the short-term impacts. Most e-cigarette vendors are small businesses operating on shoestring budgets. Would they be able to stay in business after bearing the cost of mounting a legal defense?

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Now, take things a little further. Say that the defendants either settled out of court or lost the case outright.  They then will stop selling the Hana clones. Now that company will be able to sell their original devices a little better protected from overseas factories.  This is good for the company and they will be rewarded for their innovative work as they should.

Here’s the problem.  That essentially will open up the flood gates.  Sure, maybe some other original device makers finally get their due. Of course assuming there’s a way to stop the Chinese clone makers is a bit of a stretch.  That’s not really the problem, the problem is this stuff won’t be contained to the current clone wars (I was totally waiting to be able to use that one).

Everyone that has a claim for something related to the industry will start to take pot shots at vendors.  One of the early creators of variable voltage devices threatened legal action a couple years back, but as far as I’m aware never followed through.  With the Hana case, now that might change as that person can start going after any shop that sells a variable voltage device.  I’m pretty sure that’s all of them.

Maybe that one won’t pan out, but here’s a real one for you.  Imperial Tobacco owns the original Dragonite patents that’s a pretty big hammer with which to hit the vaping industry, no?

Even if Imperial sticks to squeezing money out of companies that can afford it, those aren’t the only patent and trademark claims in the industry.  Anyone with some resources can file claims against retailers, you know just like the software patent war that’s going on in the tech industry.

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While I’m all for the creators of original mods to get their due, seeing businesses sued at the retail level makes me highly uncomfortable.

I’d love to hear your thoughts in the comments below.

Steve K

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