The Glassybaby Syndrome or Why Every Company is an IP Company

By Louis Carbonneau

Ever heard of Glassybaby? According to a recent Seattle Times article, “[Glassybaby] is a compelling small-business success story: After a seven-year battle with lung cancer, young mother develops colorful and inspirational product, hires local artisans, donates 10 percent of sales to charity and sells 20 percent stake to billionaire Jeff Bezos.” For those who prefer financial statements, Glassybaby creates handcrafted glass candleholders (see picture below) that sell for $40. Started as a hobby, Glassybaby grew organically to record revenues of $4M Last year. It currently has 4 stores and employs 65 employees, at least half of which are local glass blower artists it supports.  By now, you just feel like hugging these guys, don’t you?

Photo: The Seattle Times

Now Glassybaby is not what you’d call a technology startup, right? So you certainly wouldn’t think of it as a company whose faith depends on its IP strategy? Yet, Glassybaby IS an IP company, just like most companies out there. It just didn’t realize it until a company called Northern Lights introduced a line of Chinese made knock-offs (allegedly of inferior quality)a few weeks ago that sell for $6.49 a piece, a 85% discount! Glassybaby is now suing Northern Lights for trademark infringement around the overall shape of the candleholders (which makes this more of a trade dress case in reality). According to the legal pundits who were interviewed by the Times, Glassybaby would better use its product to light a few candles of its own, as the odds in court clearly don’t favor it.  And the pity is this is its only product!

In the same Times article, the founder is quoted saying: “I have put my heart and soul into my business and I intend to protect it”. Well, that is precisely the problem; so many business owners put everything they have into creating a product or service that is unique, just to realize too late that under the current competition framework, this uniqueness is not sustainable overtime absent some enforceable rights. And it is this rearview mirror approach to intellectual property that becomes the kiss of death to so many small businesses. Strangely, this downward spiral to oblivion is fed by many investors who keep pouring their (and their clients’) money into ventures that have no clear path to maintaining a sustained competitive advantage. Even Jeff Bezos! As the saying goes: Innovation without protection is philanthropy! While it is perfectly laudable to give 10% of sales back to charity, giving 90% of those to your competition will not pay the rent for very long…

In a recent issue of Pointers, we emphasized on why every company needs to have an IP strategy.  So let’s look here at what options Glassybaby had at its disposal when it started. In most countries, there are essentially 6 ways[1] to protect one’s intellectual property:

i)                 Utility patents (inventions)

ii)                Design patents -aka industrial designs- (shape or ornamentation of an object)

iii)               Trademarks (names, logos, and trade dress in certain countries)

iv)               Copyrights (artistic, literary works, etc.)

v)                Trade secrets (confidential processes, data, customer lists, etc.)

vi)               Contracts (NDAs, employment agreements, licenses, etc.)

In most cases, a product or service will rely on a “bundle” of IP rights. For instance, if Microsoft wants to fend off pirated versions of Windows 7, it will claim copyright infringement (the copying of the binary code),  trademark infringement (the reproduction of the brands and logos), trade dress (the overall look and feel of the packaging), utility patent infringement (those inventions embodied in the product), trade secret misappropriation (to the extent the code was decompiled to extract source code), design patent infringement (assuming those exist on the overall shape or ornamentation of the box) and breach of contract (violation of the EULA), etc.

Now, clearly Glassybaby didn’t have all of these options when it started. But could it have done something differently early on to avoid its current predicament?

To its credit, Glassybaby did some of the basics: it obtained the domain name, filed a federal trademark for the name “Glassybaby” and even tried to register a trademark on the overall shape of the candleholders, which was –rightly so- rejected based on the total absence of distinctiveness of the “mark”. On the other hand, it probably didn’t have any claims to utility patent protection here. As to trade secrets, glassblowing is an old art[2] and I doubt there is much left that hasn’t been shared. Finally, I am assuming there is little copyright protection available on a very plain design for candleholders and that whatever contracts needed to be in place (NDAs, etc.) are indeed present, but it is largely immaterial here.

Where does that leave us? Well, there are two ways to look at it; the first one is to conclude that Glassybaby has essentially created a commodity, and commodities don’t enjoy much IP protection[3]. The second way to look at it, with 20/20 hindsight, is to ask what was available to Glassybaby here to make this barrier to entry harder for competitors. If you look at press articles about Glassybaby, you see that there is almost a cult following around its articles. They are almost like little pets (referred to as “glassybabies”) with different names and personalities. People who buy them do it either for the cause it represents (money going back to charity) or for the pride of owning a “collectible” item. In other words, Glassybaby has a lot of “stickiness” in terms of its ability to sell something very simple at a multiple of the actual price of a competing product (who said “Apple”?); it just didn’t succeed over the years in turning this advantage into protectable IP. One way it could have done this would have been through a much more aggressive branding strategy. Glassybaby is a sexy name and it should have been developed a lot more to create some notoriety around the name. Second, it could easily have predicted the introduction of cheap knockoffs at some point. The writing was on the wall. So there was a way to preempt this to a certain extent by building that brand around buying the “original” item, to justify why it deserves to be much more expensive. Think Louis Vuitton, Gucci, Prada, etc. Third, I would have developed a tagline (and trademarked it) emphasizing the donation (i.e. feel good) aspect of the purchase to add one layer of differentiation with other similar products. Fourth,  I would not have limited myself to the original candle holder design (unprotectable) once the franchise business was launched and would have added some more fanciful designs that could expand the brand while enjoying some easier trade dress or design patent protection. That is more a business diversification strategy than anything else, but it would have allowed Glassybaby to move from being a one trick pony to have some part of its product line that is not completely at risk when the first containers of Chinese knockoffs hit the US. Finally, I would have developed the packaging of the “glassybabies” a lot more and created some highly distinctive “jewel box” where trademark, design patent and possibly trade dress protection would have been combined to create an IP thicket.  This way, if a competitor wants to copy the whole packaging, Glassybaby has a much stronger case under the various IP laws and it could also hit it (under tort law) with claims of unfair competition.

Of course, all of this is easier said than done, and some of those steps require some additional investments. But most of these things were not rocket science or beyond Glassybaby’s means. In any event, it goes to show that even so called “low tech” businesses should understand they are indeed IP companies and start thinking early on about how they will create a sustainable competitive advantage, including via creative IP strategies. Otherwise, they may not be around long enough to blow another candle!

[1] For the sake of this general article, we do not discuss chip designs, breeders’ rights, rights under the DMCA, etc.

[2] Actually, the original Murano glass artists were experts in preserving their trade secrets and, for generations, no such artist could leave the island of Murano in Italy without effectively signing his own death warrant.

[3] Ironically, one can argue Glassybaby has painstakingly handcrafted products that look like they have could have been mass produced, whereas Northern Lights has a line of products, including some with intricate designs that look like they could be handmade!

[Louis originally presented on this topic at the ICAP Patent Brokerage Summit on IP Strategy & 15th ICAP Ocean Tomo Auction.]

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