By Lisa Readie Mayer
When David Parrish retired from the U.S. Air Force after serving nine years, he got a job as an auditor, and took up low-and-slow barbecuing as a hobby. He spent a lot of time on barbecue websites and online discussion forums, learning tips and techniques from experienced pitmasters. He got so good he eventually became the one offering advice as a forum moderator.
Parrish noticed a lot of discussion threads focused on converting a charcoal kettle to a smoker. There were plenty of suggestions for jerry-rigging a retrofit, but Parrish realized the marketplace lacked a viable accessory product to solve the problem. He set out to create one.
Over months of tinkering, Parrish developed the Slow ’N Sear, a contoured, heavy-duty, stainless-steel charcoal basket with a built-in water reservoir that fits in the base of a kettle grill. The accessory creates insulation between the coals and the grill walls, helps charcoal burn more efficiently, and provides stable temperatures and a moist environment for more than five hours of cooking. When feedback on the prototype from trusted barbecue pros was overwhelmingly positive, he knew he was on to something.
Parrish and his wife Catherine dipped into their savings, mortgaged their house, and took out other loans, investing $100,000 in their new Adrenaline Barbecue Company. He mined his network of barbecue contacts to source a U.S.-based manufacturer, developed a website, filed design and utility patents, and did “the million things you need to do to start a business.”
Their first year, 2015, was “a good year,” fueled mostly by sales on Amazon, according to Parrish. By October 2016, things were going so well he quit his job to devote full time to the company; Catherine Parrish followed suit two months later.
In a stroke of luck, Slow ’N Sear was featured in the April 2017 issue of Men’s Journal magazine, triggering a huge spike in sales for the fledgling, veteran-run company. Soon afterward, Parrish was shipping units to retailers in the U.S., Australia and Canada, and to individuals in 30 countries. The product was racking up positive endorsements from AmazingRibs.com, the Weber Kettle Club and other barbecue forums, gaining exposure on social media, and getting looks from wholesale distributors.
“A lot of people were taking notice and we were cautiously optimistic,” says Parrish, who forecasts sales between $1.5 and $2 million for 2017.
|Slow ’N Sear, Adrenaline Barbecue Company.|
Unfortunately, counterfeiters were taking notice, too. “A company started selling a knockoff of our product on Amazon and eBay,” he says. “They didn’t use our name, but took the photos our customers posted on our site and uploaded them to their reviews page on Amazon. By the time we noticed it, they were already getting sales traction.”
The company’s website lists the street address of a logistics warehouse in North Carolina, but according to Parrish, it is based in China. “The products they sell on Amazon are mostly knockoffs,” he says. “They have the Prime badge and their sales are fulfilled by Amazon, so it looks like they’ve been vetted and certified by Amazon.
“They pay to advertise on my product page as a sponsored product, and their price is $64 compared to mine at $99. A consumer buys it thinking it’s a Slow ’N Sear, but their product and materials are inferior and they don’t include any instructions in the box.
“We are the epitome of a mom-and-pop American company,” he continues. “We mortgaged the house, did everything the right way, we source our product in America, and we have never had a defect or return. We have excellent customer service and outstanding product reviews.
“I’m all for capitalism and fair competition, but this is not fair. American manufacturers largely respect intellectual property and won’t knock it off, but these counterfeiters are really savvy and unscrupulous. We put all the effort in and take all the risk, while they troll Amazon looking for products that are selling well, and just knock them off.”
Parrish says it’s hard to estimate his losses to counterfeiters, both in dollars and damage to reputation, because his sales are still growing. But, he is quick to add, “Our company is very young and we may fail because of this.”
Unfortunately, Parrish’s experience is not an isolated incident. According to a report commissioned by the International Trademark Association and the International Chamber of Commerce, the global economic value of counterfeiting and piracy could reach $2.3 trillion by 2022. The report cites the “rapid globalization of trade,” as well as advanced printing and reproduction technologies, the impact of the Internet, weak law enforcement and lenient criminal penalties as some of the factors that have led to the crisis, and points the finger at China as the biggest offender.
The Coalition Against Illicit Trade, a European organization dedicated to solving the issue, reports that counterfeiting and trade in illicit goods “affects a huge range of industries – and poses a significant danger to consumers’ health, (damages) businesses, and costs governments billions in lost revenue.”
Counterfeiting has long been the bane of the luxury goods industry, with fake designer handbags, sunglasses and jewelry peddled on the sidewalks and in back-alley shops of New York and other cities. But since the advent of Internet marketplaces, the practice has accelerated and is becoming rampant across all price points and product categories. The barbecue industry is no exception.
Maverick Housewares, makers of barbecue thermometers and accessories, has been particularly hard hit by theft of its intellectual property. Some two-dozen counterfeiters have sold knock-offs of its remote thermometers on Amazon, according to Darren Keller, vice president Operations & BBQ. “Our business is definitely hurt by this,” he says. “We are down 12% over last year as a direct result.”
Besides the loss of sales, the company has spent $500,000 over the past five years, according to Keller, defending the five patents it holds for remote food thermometers. It also has fielded complaints from brick-and-mortar dealers who say their sales of Maverick thermometers are down because consumers can buy copies for less on Amazon.
|Model ET-71OS Remote Wireless Cooking Thermometer, Maverick Housewares.|
Keller says that Maverick has had to defend its patents against legitimate competitors in years past, but in those cases, as soon as the offending company and its attorneys and retailers were made aware of the infringement, the products were pulled and the practice discontinued. Today, Keller says, attempts to directly contact the manufacturers and online sellers of counterfeit goods are thwarted by the lack of transparency regarding the companies’ true addresses and contact information.
Appeals to Amazon to ban the counterfeiters from selling on its site have essentially fallen on deaf ears, according to Keller. “When our attorneys write cease-and-desist letters to Amazon, Amazon says it will pass the message along to resellers, but nothing ever happens. They don’t do anything about it, and we don’t get very far.”
“We all have similar stories,” says Todd Johnson, owner of A-MAZE-N Products. The former contractor was inspired to create the first of his patented smoking accessories while remodeling a house.
“I had been trying to come up with a way to cold-smoke meat, fish and cheese,” he recalls. “I was looking at this pile of sawdust and put a scoop of it inside a piece of screen and said, ‘Wow, I’m on to something.’” That light bulb moment led to the A-MAZE-N Smoker, a lightweight, portable, stainless-steel mesh tray for holding all-natural A-MAZE-N Dust sawdust to generate smoke in any type of grill. Johnson grew that one product into a company offering a wide variety of smoking accessories.
Like any business owner, Johnson expected competition. What he did not expect were the dozen or so companies that started selling imitations of his patented products about a year and a half ago. The counterfeiters were pretending to be authorized A-MAZE-N resellers, going so far as to use the company’s photos and word-for-word marketing copy on their sites. The fakes were being shipped from China direct to customers without packaging, instructions or customer support.
|A-MAZE-N Pellet Smoker.|
“We have our products made in China, but the finished goods are shipped to us here in the U.S. and we hire an organization that employs handicapped people to package them,” Johnson says. “We handle all the fulfillment and shipping ourselves. Consumers don’t have any idea (they’re buying) a knockoff, so when the fake product doesn’t work or is poor quality, they’ll contact us or post a negative review.
“We don’t sell directly on Amazon, but we have authorized dealers that sell hundreds of thousands of dollars’ worth of our product on Amazon. We have probably lost 15 to 20% of our Amazon business due to illegal knockoffs. We’re still growing, so it’s hard to quantify, but ultimately, it hurts.
“The American entrepreneurial spirit is still alive and well,” he continues. “I was able to take this little idea and in seven years grow it into a multimillion dollar business with seven employees. Where else can this happen? I just want to protect our assets a little against these unfair business practices. This situation hurts American entrepreneurs trying to make a living.”
Counterfeiters are biting into Brad Barrett’s entrepreneurial dream, as well. Ten years ago he invented and patented GrillGrates, hard-anodized-aluminum grilling grids that sit on top of or replace a grill’s existing cooking grids. The grids prevent flare-ups, distribute heat evenly, improve sear marks, and capture and evaporate meat drippings into flavorful smoke.
The products have amassed a huge fan base among competitive barbecuers and backyard enthusiasts alike. But, Barrett says, that success is increasingly at risk of being eroded by at least two Chinese companies producing counterfeit grates.
“The knockoffs are half the price of my official GrillGrate, but they are of significantly inferior quality to what we’re making,” according to Barrett, who manufactures in the U.S. “They’re selling raw, unfinished, aluminum parts, but consumers are not aware of the difference. Their product is so inferior that when people have a bad experience they post a bad review, and I worry it will potentially ruin the entire category.
“It used to be that it would take a while to grow a successful product before another company would notice and try to copy it,” Barrett says. “But now with sites like Amazon, all that is accelerated. We are little guys against the Goliath Amazon.”
|GrillGrates for the Big Green Egg XL and Big Joe Kamado Grill.|
It’s not just small, entrepreneurial companies getting ripped off by counterfeiters; larger grill and accessory manufacturers are targeted, as well. Bobby Brennan, co-owner and CEO of Kamado Joe, says his company was not even aware it had been victimized until Chinese customs detained two of its containers for supposed trademark violations.
To determine what was going on, Brennan hired private investigators who traced the issue back to 2012, when Kamado Joe’s China-based supplier of a small grid-lifter accessory stole a graphics file of the brand’s logo and used it to apply for the Kamado Joe trademark in China. Kamado Joe owned the trademark in the U.S., Canada, the U.K., and a number of other countries, but mistakenly hadn’t filed for it in China, according to Brennan.
To build his case, Brennan spent between $20,000 and $30,000 a month for nearly four months on investigators, attorneys and translation services in China, on top of a $200,000 bill to U.S. attorneys. After presenting a mountain of evidence to the Chinese trademark and customs offices proving the prior existence of Kamado Joe’s trademark and patents, the offending company dropped its case.
“This is a big, supposedly reputable factory that makes products for others in the barbecue industry, but they just don’t care,” Brennan says. “At HPBExpo, they exhibit products that look suspiciously like ours and copy our color, dimple pattern, cooking system, and distinctive cart design. There is a level of respect about intellectual property among peer companies in the U.S., but Chinese manufacturers can be unscrupulous.”
While the counterfeiter still holds the trademark in China, he can no longer export to the U.S., according to Brennan, who has since filed for an invalidation of the trademark in China, and filed a case in the Georgia courts where Kamado Joe is based. He also has hired two employee watchdogs at the manufacturing factory he uses in China, and has assembled a legal team there to protect his company’s intellectual property and trademarks.
“It’s an ongoing battle and the very expensive burden falls on the patent and trademark holder,” Brennan says. “Don’t be naïve; if you want to create a brand, you have to defend it and budget for it.”
Based on A.J. Khubani’s experience, that budget allocation better be hefty. The inventor and founder/CEO of TeleBrands, the company behind “As Seen on TV” cooking, home, and garden products, says in over 30 years in business, he has spent “hundreds and hundreds of thousands of dollars” to defend his patented products.
But that pales in comparison to the battle he is currently facing over Star Shower, an innovative outdoor light that projects thousands of shooting-star laser lights onto a house as a hassle-free alternative to traditional, holiday string lights. Khubani says Star Shower was the fastest-selling product in the country when it was introduced, with patent-pending status, in 2015. But by the 2016 holiday season, cheap imitators flooded retail shelves and Internet sites.
To track down the perpetrators, Khubani hired detectives to find and visit every facility in China manufacturing the fake lights. He has filed preliminary injunctions against them, hoping the court will order the manufacturers to stop shipping the infringing products (his seven patents were officially issued in early 2017). “If they don’t, we’ll have to go to trial, and that could cost millions,” Khubani says.
“I don’t know if the Chinese manufacturers will even honor the injunctions, but I’m hoping at least U.S. retailers and Amazon will,” says Khubani. “Patent enforcement is very difficult and expensive, and the Internet has made it even harder. It’s much easier for someone to knock you off today,” he says.
Chuck Adams, CEO of The Companion Group, a leading manufacturer of innovative, problem-solving tools, accessories and other products for outdoor cooking and living – everything from smoke- generating accessories to pizza-making gear to mosquito-repelling products – agrees. He says his company’s brands, Charcoal Companion, Steven Raichlen Best of Barbecue, Pizzacraft, Not In My Backyard, and Patio Companion, have had trademarks and patents knocked off “at least 50 times” over its 30-year history.
In one instance, the company noticed sales of its bug zappers dropping and couldn’t figure out why. The ensuing investigation included ordering 20 bug zappers from different resellers on Amazon. They discovered nearly every one was fraudulent.
“The counterfeiters attach to our page, giving the impression they’re delivering our product, but they offer it at a cheaper price and have Amazon fulfill it,” Adams explains. “This hurts in terms of lost revenue, but it also hurts our brand. Consumers unwittingly buy it thinking it’s our product, but when it turns out to be very inferior, they give it a bad review on our page and say it is not as described.
“Before we caught on, we had 20 to 30 one-star reviews,” he says. “We knew something was up because, typically, we get great reviews, especially about our customer service. If there is a problem, we respond immediately, fix it, make it right, and use it as an opportunity to build a stronger relationship with the customer.”
Adams says that, in another instance, someone was counterfeiting Charcoal Companion Steak Buttons, individual mini steak thermometers that indicate rare, medium or well doneness, using the company’s trademarked name. “They were selling them to a major retailer,” he says. “In that case, the danger for the culprit is that you can include the retailer in the lawsuit, so you get action quickly. But the real problem is online. This kind of thing happens all the time on Amazon.”
|Steak Button, The Companion Group.|
Amazon – a Blessing and a Curse
“Amazon is a necessary evil for small, entrepreneurial manufacturers,” says Barrett, who estimates his company does about $500,000 in annual sales on the site. “You can sell a lot of product real quick, but the hazard is someone is always right behind you knocking you off illegally, and Amazon looks the other way.”
“Amazon was a great place for us to get started,” says Parrish, “but it’s very frustrating. Amazon says it’s very tough on counterfeiters, but in reality, it enables them. It’s very onerous on the manufacturer to make a claim. We have to buy the product in question, provide a lot of documentation to show a violation of trademarks and patents, and still we get no action.”
“We value our relationship with Amazon, but we are frustrated by them,” agrees Keller. “They don’t play by traditional rules.” Manufacturers complain, for instance, that the site does not honor MAP pricing, and products are sometimes selling at prices cheaper than brick-and-mortar retailers can buy wholesale.
Another beef for manufacturers such as Barrett, is that even though his company is the original manufacturer and patent holder, it is considered a third-party seller on Amazon because it ships directly to consumers. “Meanwhile, the knockoff has an Amazon Prime badge, attaches to our page like a parasite, and seems like the preferred seller,” Barrett says.
“Initially our feeling was – we need to stop Amazon now,” says Adams. “But Amazon is not going away.”
Indeed, as the online retailer captures more and more of the world’s consumer dollars, the situation is only expected to get worse. A company press release reveals it has 300 million active user accounts worldwide. According to “eMarketer Retail Report,” Amazon’s sales were up 23% worldwide last year, and membership in its Amazon Prime subscription service increased 52% in the past year, with members spending an average of $1,300 annually on the site (vs. $700 for non-Prime members). The number of sellers using its Fulfillment by Amazon service increased 70% in 2016.
For $39.99 a month, anyone can set up a virtual store to sell products on Amazon (there are additional selling and fulfillment fees). It provides options to manipulate exposure on product searches by allowing sellers the opportunity to attach to specific pages, secure “Buy Box” positioning, and buy keyword advertising. The Fulfillment by Amazon service makes it even easier for sellers by handling product exporting and warehousing, as well as consumer order fulfillment, shipping (free with the Prime badge), and returns.
Amazon also offers affiliate programs, so if a blogger, reviewer or other influencer writes about or reviews and recommends a product, they can include a link to order it directly from Amazon, and get a percentage of any resulting sales.
|Jeff Bezos, chief executive officer of Amazon.com.
Photo Courtesy: ©2017 Len Edgerly. www.flickr.com/photos/lenedgerly.
According to Bloomberg.com, by simplifying and streamlining the process for legitimate sellers to set up shop, Amazon has made its site vulnerable to counterfeiters. The only recourse has been for legitimate companies and patent holders to monitor the site, identify counterfeiters and ask Amazon to take those pages down. Victims say, however, that Amazon’s response – if it ever comes – is painfully slow.
A Forbes.com article, “How Chinese Counterfeiters Continue Beating Amazon,” cites the company’s “extremely high rate of employee turnover (the second highest rate of all Fortune 500 companies)” as one of the major reasons for its inaction or delayed response to reports of counterfeiting. The situation allows “scammers and counterfeiters (to run) amok, selling knockoffs on their marketplace with near impunity,” according to the article.
According to Bloomberg.com, these delays give counterfeiters time to rack up sales before closing down one online “store” and reopening another under a different name. The report says the shady game is akin to “whack-a-mole.” A report on CNBC blames this continual shuttering and reopening of “stores” for the escalation of counterfeiting on Amazon.
How Products Are Targeted
According to Keller, resellers consult Amazon’s metrics to identify products that are both selling well and getting positive ratings by consumers. “They say, Let’s get in on the party,” he explains. “Anyone with a computer can sit in their kitchen and buy 100 of our real thermometers, sign up for Fulfillment by Amazon, use Amazon’s warehouse, and become a reseller. Even if the reseller earns only a small markup, it adds up to big money in China.
“But now, Chinese factories are also using those metrics to target products to counterfeit,” Keller adds. “They buy our product online, take it apart and copy it exactly. A manufacturer might get one good year of sales on a new product before they come and knock it off.” Some U.S. companies, including Kamado Joe, have had product designs and tooling stolen by their Chinese manufacturing partners.
“There is a pervasive knockoff culture in China; that’s the business model,” Barrett says. To mitigate his risk, his company fulfills all its own consumer orders. “We don’t want our products in Amazon’s warehouses,” he says.
Barrett believes GrillGrates first ended up on his counterfeiters’ radar at trade shows, specifically the HPBExpo and the National Restaurant Show. “Chinese manufacturers are trolling trade shows,” he says. “At the last Expo, a woman walked by my booth recording with an iPhone. Another guy was taking photos from across the way with a tripod. Then they go back to the factories and copy the product. I think that’s how we got ripped off.”
Others relate stories of grills being disassembled on the show floor, each part photographed before being put back together. “We call the last day at a trade show knockoff day,” says Johnson. “That’s when they come to my booth and examine the new products. Ninety days later we see the copies on Amazon.”
Why is this happening? Bloomberg.com reports that Chinese workers earn an average annual wage of $8,655 U.S (56,360 yuan), but more than half the working population earns the equivalent of only about $2,000 U.S. each year. With the yuan-to-U.S.-dollar exchange ratio about seven to one, it’s not difficult to see why such illicit activity is tempting for both individuals and factories.
According to an article in Forbes, the U.S. buys $483 billion in goods from China and sells China about $116 billion in goods in return, resulting in a $367 billion trade deficit. While the article states that, “Currencies are the natural trade re-balancer,” it explains that with China, it doesn’t happen because “they outright dictate the exchange rate… China sells us goods. We give them dollars. China takes our dollars and buys U.S. Treasuries, which suppresses U.S. interest rates and incentivizes borrowing, which fuels more consumption. And the cycle continues.”
|On the top is an example of Adrenaline Barbecue Company’s actual Amazon storefront, displaying the Slow ‘N Sear. On the bottom, a knockoff under a different name is also displayed, however, the counterfeit is listed as ‘currently unavailable’ and has a lower rating.|
Until something happens at a higher level to break this counterfeiting culture, individual companies will continue to work hard defending and protecting their products and businesses from unlawful competitors.
“Our products are innovative and we are vigilant about protecting our intellectual property,” Adams says. The company dedicates one staff member full-time and another part-time to its Amazon business, and they are continually on the lookout for counterfeiters.
Originally, the approach was to buy the product in question, take photos, and prepare documentation to demonstrate evidence of infringement to Amazon. “But that’s a very slow and time-consuming process,” says Adams. “Today, we don’t wait for that process.”
Instead, if the company suspects counterfeiting, the first line of attack is to contact the potential offender directly through the portal on the selling page. “We send them a standard email saying we’re doing an audit on our resellers – ‘We see you’re selling our product and need you to show that you bought it legitimately,’” says Adams.
“There are lots of ways resellers can get your product, such as close-outs or discounted stock when retailers discontinue products. These are legitimate and you can’t tell them they can’t sell it. But if they don’t respond within 24 hours, we will contact them again and say, ‘We believe you’re selling fraudulently and infringing on our trademarks and patents. We will contact Amazon and give you 24 hours to take it down.’ You need to use strong language, and give them a short deadline.”
According to Adams, the tactic has been successful by putting enough concern in the resellers’ minds that they frequently pull the fraudulent product without further action. “They move on to another company that is not paying attention and is an easier target,” he says. “If not, we have documented that the counterfeiters ignored the warning, which helps when presenting our case to Amazon. We don’t use attorneys unless we’re not getting satisfaction from Amazon.
“Of course, having a large company helps,” he adds. “You can come down with a strong hammer, but you have to have enough resources to wave the hammer.”
Small companies without the same kind of financial muscle usually find it more difficult to resolve their issues. Johnson says that when he first noticed knockoffs of his product, his patent attorney emailed the reseller, explaining it was infringing on A-MAZE-N Products’ patents and trademarks and was an unauthorized seller. The attorney also immediately alerted Amazon’s legal department.
“My attorney asked Amazon for the seller’s contact information,” he says. “If you look at a reseller’s listing, very rarely will you see a telephone number or real address, usually just an Amazon distribution center in the U.S. We need this info to send a cease-and-desist order. Why is there no transparency about resellers on Amazon? Consumers think they’re buying from Amazon, but they’re not.”
According to Johnson, when Amazon did not respond, his attorney followed up with a new letter every 30 to 60 days. “Finally, after 11 months of sending letters and threatening a lawsuit, Amazon pulled 11 out of 13 counterfeiters down,” Johnson says. “They had no communication with us at all; it just happened. But I spent $10,000 in attorney fees in the last month alone, and I’m probably in the hole over $20,000 so far. As a small business, they won’t listen to me, so I have to use an attorney.”
He expects to amass further legal bills in patent-infringement lawsuits against two of the other counterfeiters. “I probably won’t collect a dime,” he says, “but hopefully I will get a judgment against them that I can present to Amazon to get action.”
“It appears to me that Amazon is complicit in this counterfeiting activity by not properly vetting sellers, and not recognizing patterns with the same reseller,” Barrett says. “We want them to develop a better vetting system, and to take fraudulent listings down quickly to protect the integrity of the marketplace before it becomes the next Alibaba where it’s just a conduit for Chinese knockoff products.”
Barrett, Keller and other manufacturers have reached out to their legislators for help, without much success. “Our senators and congressmen ask, Are you in litigation?” says Barrett. “They won’t do anything until you are, but litigating Amazon is like them holding your head under water until you give up. We can’t afford to go against Amazon as small, individual companies. How much time can we allow when we are all running businesses? How much money can we devote? But maybe if we get 10, 20 or 100 companies to join a class-action lawsuit, it might work. That’s what’s being discussed in the industry.
“The barbecue industry is full of creative companies making amazing, innovative products,” he continues. “We need to do something because counterfeiters, with Amazon’s help, are killing American ingenuity. It’s imperative that we tell this story.”
Amazon was contacted for this article, but as of press time has not replied.