Patent System is not the Fire that Hoverboards Need to Put Out

by Winthrop & Weinstine, P.A.
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One of the hottest toys during the 2015 holiday season was the hoverboard, and doesn’t that seem about right for this year.   I saw my first hoverboard earlier this summer — a guy was walking and holding hands with his girlfriend, as she glided alongside him on the hoverboard.  If I were to make a top 10 list of the oddest things I encountered in 2015, that would certainly be on the list.

As of Wednesday, October 21, 2015 at 4:29 pm, hoverboards were certain to be owned by every Marty McFly there was.  But perhaps, what was not anticipated by the Back to the Future film along with the failure of the Chicago Cubs to win a World Series, were the fires (bringing new meaning to the “hottest” toy), the injuries, the lawsuits, and the legislation that would soon accompany these popular gifts.  As one article in the Washington Post stated, “thanks for ruining Christmas, hoverboards”.

Not only are some of these devices fraught with product liability issues — in particular, the cheaper knockoffs — they also are presenting some patent issues and may be the focus of the next great patent war.   Razor sells the product above for $600, but some knockoff hoverboards can be purchased for around $200 (the ones that seem to catch fire the most).  Earlier this Christmas season, Razor sued Segway for patent infringement regarding the popular holiday gift, but they aren’t the only lawsuit.  The number of lawsuits between different companies over these devices is enough to make your wheels spin.   The Wall Street Journal recently published an article about these lawsuits &  transactions involving hoverboard technology, and according to that article, Inventist (founded by Shane Chen) licensed patent applications to Razor.  Segway sued the Chinese company Ninebot, then Ninebot bought Segway. Inventist sued Ninebot over some of its patents, and then Ninebot sued Inventist for some of Segway’s older patents.

The article suggests these lawsuits as evidence that the patent system has done its job – allowing someone to profit from inventions with costly R&D but easy to copy once made.  But the purpose or job of the patent system is not the ability to make a device or even to profit from your invention, it is to have inventors make a public, enabling disclosure of their invention in exchange for the right to exclude others from making, using, or selling the claimed invention for a limited period of time.   This is an exclusionary right, which is rare for legal rights (think of the way this is worded as opposed to your First Amendment rights). It confers no right on the inventor to themselves make, use, or sell product covered by the claimed invention – just to exclude others from doing so.  It’s not intended on rewarding an inventor; it’s purpose is public disclosure.

The WSJ piece essentially blames the commoditization of patents for, according to the drop head, “why the creator of this year’s hottest Christmas gift is struggling to make money on his invention.”

Amassing a patent trove, lining up a large manufacturing partner and buying a well-known brand sure sounds like a plan for world hoverboard domination. And if it works, a couple of Chinese companies simultaneously will have leveraged the very different patent systems of the U.S., where intellectual property has what some say is too much protection, and China, where in practice it has almost none at all.

Meanwhile, the man with the best claim to have invented the technology in dispute, Shane Chen, will have to settle for whatever hoverboards Razor and his own company can sell until his devices are driven out of the market by cheaper Chinese models or crushed by patent litigation. And that, I think, should make us all wonder whether our patent system is still up to the task of rewarding those who create original but eminently copyable inventions.

Without the patents though, Inventist wouldn’t have the property assets that would be attractive to a larger company like Razor, with more resources to exclude others from selling the devices, greater manufacturing capabilities, and a well-tested distribution set up.  Many of these things, a startup like Inventist would have to develop from scratch – and that can be a costly endeavor.  Presumably by licensing its patent rights to someone like Razor, it ultimately will create a stronger market for its hoverboards and reap some handsome royalties as a result.  Additionally, if they hadn’t obtained patent protection, they would not be able to use U.S. Customs to prevent copycat products under different brand names from coming into the U.S. (although if it had a non-traditional product configuration trademark registration, that might help too).  Further, the U.S. International Trade Commission can rely on patent rights to prevent infringing products from entering the U.S.  Maybe I’m missing the point here, but wouldn’t Shane Chen be driven out even earlier if the U.S. patent system didn’t provide him with protection?  Regardless, a patent does not grant the inventor the right to actually make, use or sell his invention – which may be precluded at least in part by the inventions of others.  I’m just unclear what the desired “fix” is here.

Incidentally, since my brain’s always looking at all IP aspects of products like this, there is a trademark registration for HOVERBOARD for “electrically powered two wheeled scooter for terrestrial human transportation” owned by The Patmont Revocable Trust.   I’ll bet there’s a lawsuit hovering somewhere over there too.

In any event, clearly some of Chen’s marketshare is being usurped by knockoff manufacturers of the devices.  But these devices are often shoddy and potentially combustible.  I don’t see this as the patent system being broken – I see it as at least a chance for Inventist to have some claim to the market before being rolled over by cheaper Chinese models.   I’m hoping we travel like the Jetsons by then.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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