Chuck Shirley and Relina DeDios-Shirley were recruiters when they started HIDEit Mounts, a company that designs and sells device mounts that camouflage game consoles and cable boxes. Their online business was growing steadily, but when they did some detective work on a competitor, they discovered they were being copycatted--by one of their own manufacturers. --As told to Yasmin Gagné
Chuck: Our TV was above the fireplace, and to keep things neat, we ran all the cables connected to it through the wall. That worked for us until we bought the kids a Wii, which had so many connections that it had to be put on the mantel. The clutter was driving Relina bonkers. That's when we decided we could do better and make a mount to hold a Wii behind a TV. A $50 trip to Lowe's and some DIY work with a blowtorch later, we had our first prototype, and it worked really well.
Relina: We took our design to a small manufacturer and they made us five mounts for a hundred dollars. We saw the idea had a lot of potential, so we switched to a bigger manufacturer to help engineer and build them for us.
We were doing pretty well. People really responded to the product, and there really wasn't much out there on the market like what we'd made. We started working with our manufacturer to make different types of wall mounts. For example, when the Xbox 360 came out, we wanted to make a mount specifically for it. We came up with a rough drawing, but neither of us is an engineer, so the manufacturer sort of mocked it up and made it happen. The team there was helping us a lot in the early stages.
Chuck: In 2011, we started noticing a business selling mounts similar to ours on the internet. We thought its product was subpar, and we weren't too worried about it. Later that year, though, the company started selling a product practically identical to ours but slightly better looking at a much lower price point. We realized there was no way we could compete.
Relina: We were worried we would go out of business. Both of us were doing this on the side at the time, so we knew that if our company failed we could still put food on the table for our kids, but it was devastating, because making this work was our dream. We felt like we had this million-dollar idea that we had worked really hard on, and it was just slipping through our fingers and we couldn't do anything about it. The other company had taken away our golden ticket. We were so angry that all our hard work would amount to nothing.
Then we noticed something weird: Our competitor's website was blocked on our home computer but not on our phones. They clearly knew our IP address, and they knew who we were to the point of knowing where we lived. But we didn't know them.
Both of us were recruiters, so we decided to do a little detective work using the tricks we had learned in our day jobs.
Chuck: We had Relina's cousin, who lives in Northern California and has a different name from ours, order one of the mounts from the other company, and when it was delivered, she sent us photos of the packing slip and return address. The address turned out to be a UPS box located just around the corner from our manufacturer.
We called UPS pretending that we were trying to ship something to the address we had discovered, and said we needed the box holder's name to make sure our shipment would get to the right person. We learned that the person attached to the address was one of the manufacturers of our mounts--someone we'd been working with since the very beginning. Other things started to come together: When we examined our competitor's online demo of its product, we saw that the hands in the video belonged to a sales manager we'd been working with--he has a distinctive ring he hadn't even bothered to take off.
Relina: We felt totally betrayed, because the three people involved in the scheme had been working with us since the beginning and we had trusted them with everything.
When we confronted them, we were pretty emotional. We called them and said, "How dare you do this to us after we've worked together to start this business." We had a lawyer send them some scary documents and the website was literally taken down later that day. We are just thankful that they had signed an NDA and that we had IP protection. Otherwise, I'm sure we would have been out of business.
Chuck: We had to scramble to find new manufacturers. Our business was so young that until then we didn't realize you couldn't just rely on one manufacturer to make everything for you. Shifting our work to multiple manufacturers was expensive and hurt our bottom line, but we just had to do it.
The toughest lesson from the whole ordeal was that a handshake isn't worth anything anymore. We're really trusting people, and we got taken advantage of. If we hadn't done the detective work, we would not be in business today.
Q: What creative things do you do to retain talent?
A: Part-time employees get a video game of their choice every 90 days.
Q: If you were to start another company, what would you do differently?
A: Hire slower; fire faster.
Q: What will you soon use as a substitute for human labor?
A: Artificial intelligence.
Q: When did you first start paying yourself a salary?
A: 4 years in.
How to Survive a Copycatter
Adidas and Payless. Mattel and MGA Entertainment. Uber and Google. The history of IP disputes--and subsequent lawsuits and settlements--is as long as it is complicated. To avoid ending up in the annals of famous IP battles, follow these tips.
Don't trust anyone. Russ Tarleton, a partner at Seed IP, a Seattle-based intellectual property law firm, says that when business owners start out, many inadvertently put IP in the public domain. Founders should be careful not to share their ideas with other people, including friends and potential partners, until they have consulted an IP attorney.
Safeguard your supply chain. It's important to make sure you aren't relying on just one partner to make your product. Once the Shirleys found out that their manufacturer was stealing their design for their device mounts, they had to scramble to find a different one to keep fulfilling customer orders. Now, they rely on several manufacturers to make the mounts, so if one doesn't come through, they will still be able to meet production goals.
Catch a thief. Without legal protection, it can be difficult to prove that a design was stolen, Tarleton says. If IP is protected and a copycatter is caught, your lawyer can send them a cease-and-desist letter. If the scammer ignores it, their behavior could be considered "willful infringement," resulting in their having to pay even greater damages.