Wednesday, November 10, 2010

David Vs. Goliath - the anti-American actions of H&K against US toy companies

ARCADIA, CA – November 3rd 2010

There’s a strange game afoot with the venerable Heckler and Koch. In the past year, the German firearm company has been on a wholesale crusade to protect anything that even remotely resembles their line of products. The strange thing is that H&K isn’t going after another gun manufacturer copying their weapon designs. This isn’t corporate espionage, where blueprints are secreted away in the dead of night and briefcases are exchanged in airports and shady bars. The target in their crosshairs: toy stores and paintball shops. What makes the matter worse is that no law is actually being broken on the part of the defendants. The actions being taken by H&K can be considered Un-American, extortionist, and detrimental to these small businesses that and their hard earned profits, almost reminiscent of organized crime behavior consistent with RICO statutes.

Paintball guns are well known in this country, and in the past decade the sport of airsoft has been picking up steam in the US. Similar to paintball, airsoft guns are replicas made to look close to real firearms that fire large plastic BBs and are used for training, simulation, and play.

Airsoft has been a boon to local police departments, SWAT teams, and US military personnel for their ability to practice tactics, methods, and maneuvers in a safe yet realistic manner. “The worst that can happen with proper eye protection is a sting and red mark where one is hit,” says David Diblee, A former US Army soldier and two tour veteran of the Iraq War.

On (a public listing of dockets and cases), one can find H&K as plaintiff in thirteen separate cases of trademark infringement against US companies, namely distributors of paintball and airsoft supplies. Representing H&K is Continental Enterprises, a company (not law firm) that specializes in intellectual property and trademark law. The sudden rush against the Airsoft industry is spearheaded by a Ms. Darlene Seymour Esq. , legal counsel to CE.

There’s a long established history about CE and their exploits. There’s the example of CE going as far as protecting the copyright of a local high school mascot (so even parents couldn’t print out fan t-shirts on game day), or sending a cease and desist letter to a beverage review website that was going to post a picture of the Monster Energy drink they were reviewing (Which clearly falls under fair use) There’s a website devoted to their less than stellar practices called the “Trademark Extortionists Hall of Shame”, where they colorfully describe CE’s “only source of income is trademark extortion.” They make profit by latching onto the success of small American start-ups and entrepreneurs.

Trademark Protection or Trademark Extortion?

Companies like CE solicit a company with a well established brand. Representing said company, they scour for “trademark infringement” of a brand. They find would be offenders, and shotgun out cease and desist letters, demanding payment from the alleged infringers to avoid lawsuits. If the small company pays, CE splits this profit with the company they represent. For the branded company it’s no investment on their behalf, with nothing but profit to gain. This would be well in line with upholding copyright and trademark law, but in fact CE has little disregard to the letter of the law, and is twisting it into a form of predatory extortion.

This isn’t an isolated event, but rather a disturbing trend with large corporations and their intellectual property. In 2008 Professor Kenneth L. Port, of William Mitchell College of Law, wrote a paper titled Trademark Extortion: The End Of Trademark Law. In his paper he outlines the procedure and reason companies are bending their interpretation of copyright law.

“......Today, trademark holders are using this course of conduct to expand their trademark rights, not just to object to truly objectionable uses. That is, some trademark holders send thousands of cease and desist letters….. [these suits], if prosecuted to a trial on their merits, the trademark holder/plaintiff would likely lose because they are not always meritorious claims...Their objective is to raise the cost of market entrance or continuation for the competitor.”

The cost of “market entrance” for a competitor equates to astronomical legal fees for any small business willing to stand up to the funds, resources, and legal team on retainer for H&K. Raising the entry price to start one’s own business is the antithesis of the American dream.

CE sent out various cease and desist letters warning that they would file suit if these airsoft distributors didn’t pay a settlement fee and stop all sales of their products. They claimed H&K’s unalienable right to the iconic design and appearance of their line of products, such as the MP5, G36, USP series of weapons. Because these airsoft companies sold toys that resemble these weapons, they were damaging HK’s image and profiting from their hard earned design. This argument falls short on various grounds.

No Legal Footing

The most amazing thing is H&K’s hands are covered in blood from being disingenuous. In 2004 H&K was contracted by the US Delta Force to create a new weapons platform. They created the HK M4, which was a modified version of the Colt Armory’s iconic M4 rifle. They made some changes, such as the gas cycling system using a piston, and an elongated Picatinny rail for scopes and flashlights. However, everything else, from the trigger group, grip, receiver, stock, and bolt assembly, was a 1:1 scale copy of Colt’s design. Colt Armory filed suit on multiple grounds, claiming infringement upon the name “M4” and copyright of the design of the guns parts.

Colt lost the case. The only change they were able effect was to change the name from “HK M4” to “HK416”. H&K won, because the M4’s function dictates its appearance, and functionality does not claim uniqueness and protection under IP and copyright law. Just like something as a shovel or a toaster can’t be copyrighted, they are shaped around how they function.

Furthermore, Colt’s M4 and M16 have been around for the past 50 years, and that design has been used, copied, and interpreted by dozens of companies over the decades. The length of time on market and its ubiquity makes it public domain. The same exact thing has gone on with H&K’s weapons. The most well known of H&K’s line, the 40 year old MP5, is currently being copied and sold by 4 separate firearm manufacturers. GSG5 Arms, Vector Arms, Coharie Arms, Redrock Arms all make functioning firearm clones of the MP5. It’s common practice by gun companies to take what’s useful in a competitor and integrate if not copy the design wholesale. It strikes false when H&K and CE go after toy companies instead of real gun companies, who don’t even use the same mechanisms as firearms

One of airsoft companies that responded to my inquiries was , the largest airsoft distributor in the United States. We asked them what the main components of an airsoft gun are. Their CEO Kenneth Woo, was able to lay it out, “you have three main components, the body (outer shell) , the gearbox, and the motor. The motor is the same kind you’ll find in an RC car, the gearbox functions under the same principles of compressed air, like foam dart guns. Nowhere do we use explosives to propel the bb like a real gun. It doesn’t make sense to be sued for copying a design when it’s just the shell that looks the same.”

Since airsoft replicas don’t even function the same way a real firearm does, it rests within the protection of parody and reference, and does not fall under the ‘trade dress ’ and ‘trade function’ argument that CE is accusing companies of.

For example, in another set of suits filed by CE, they represented Jack Daniel Inc. - makers of Jack Daniel’s Tennessee Whisky. They filed suit against t-shirt print shops and bumper sticker makers that parodied the Jack Daniel’s logo or referenced the Jack Daniel’s name. Most of these are small garage operations, who taking advantage of being able to easily cheaply sell online. Parody or reference is clearly protected under copyright law. The mom and pop shops that CE filed suit against weren’t doing anything illegal. This wide ranging and loose interpretation used by CE highlights their for-profit nature, scaring small business owners who might not know any better for the possibility of a payout.

Also, Airsoft and paintball manufacturers have been creating these similar looking items for past 20 years, with no prior legal action from H&K before Continental came into the picture. This falls under the legal doctrine of laches. According to Black’s Law Dictionary, Laches is to neglect to assert a right or claim after an unreasonable lapse of time, thus the plaintiff loses the right to pursue said claim because of negligence. It would be fair to assume that with airsoft guns, having been 20 years in the market, there was more than enough time for H&K to have taken action.

Goliath vs. David, Goliath can wait it out

When small companies are threatened by a huge corporation, it seems easier to pay off and back away out of fear of long drawn litigation, they often settle by paying the settlement amount. That’s what CE wants. However, there have been many right minded CEO’s and airsoft companies, who know their rights and are fighting back.

Even if airsoft/paintball companies fight, H&K knows that with their large legal stall on retainer, they can wait it out, it doesn’t even have to reach trial, and these small companies bleed dry by legal fees and long waiting periods.

For an example we go back to and their CEO Kenneth Woo. While unable to give specifics of the proceedings, he was able to comment on the overall effect it’s had on his company. “We’re lucky we’re big enough to stand up to this kind of bullying. They have no real argument to win on, but the formality of legal proceedings and lawyer fees is hurting us when it shouldn’t occur at all. That’s the most egregious thing of this whole affair. A lot of the smaller airsoft startups here, aren’t going to do as well….they have a much larger monetary burden to bear for legal fees in relation to their earnings.” When asked about reaching a possible working settlement with CE, wherein AirSplat settles while still being able to sell their goods, Woo had this to say: “Listen, we’re not doing anything wrong. I started this company a decade ago from a one man operation and brought it up to a 40 employee staff; I earned every bit of it the American way, through hard work and persistence.”

It’s odd that H&K and CE go after toy companies - the distributors - rather than the actual manufacturers overseas. If they were truly protecting copyright and intellectual property, they would go to the source, but nowhere has there been any filing or claim made against manufacturers in Asia. Why? Large airsoft manufacturers have the monetary resources and lawyers to hold their own, they can defend themselves. Because of this, it would be too expensive for CE to even try, with little to no possibility of a payout for CE or H&K. In the end CE and H&K are going after American companies who make an honest living because they’re the easiest targets.

I myself am a firearm enthusiast, and I like to head out to the range every so often. I know all about how gun companies operate, and are “inspired” by each other’s designs. It only makes sense that good designs sell, which is why they’re constantly piggybacking on each other. But next time I go to a gun show, or flip through the newest issues of firearm magazines at the bookstore, I’ll pass over the H&K items. Tim Ellwood, blogger, law enforcement trainer, and one of the earliest proponents of airsoft in the US, explains how companies like H&K are undercutting a huge portion of their potential profits.

“To a lot of airsofters, this is the way they are learning about what they like to use. When they reach 21 and buy their ‘Real Steel’ guns they will have already made up their minds and buy what they have been collecting and using for years.
It is impossible to buy that kind of brand loyalty, no matter how much you spend on advertising. On the same page though, brands that go out of their way to target these potential buyers and their sport [negatively], will be remembered when the time comes for money to be spent.”

Ideas should and will be protected, but Intellectual property in and of itself cannot be wielded as a weapon against other entrepreneurs in the manner that H&K has in their partnership with CE.

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