Fighting back against IP pirates

Jan. 1, 2020
Steve Rogers is my hero. No, not the alter ego of Captain America, but the CEO of K&N, the California-based manufacturer that literally invented the reusable high-flow performance air filter.

Steve Rogers is my hero. No, not the alter ego of Captain America, but the CEO of K&N, the California-based manufacturer that literally invented the reusable high-flow performance air filter and leveraged the product into one of the most recognized brands in the performance aftermarket.

Like most ground-breaking products, especially those with established brands, K&N became the target of countless knock-off products. Some were legitimate competitors that were attempting to capture some of the market K&N created. Others were more insidious.

Several times in my aftermarket career, I have observed as established North American automotive brands literally take it on the chin as knock-off products from low-cost countries infringe on their intellectual property. It’s fairly typical for these knock-off products to use the same part numbering system or a derivation so close that they don’t have to produce their own catalog. They rarely have their own engineering or product management teams but simply “reverse engineer” the more established brands. All that is bad enough, but sometimes they go further.

The more bodacious knock-off artists will often try their best to have their product look like the original, or as the attorneys call it use their “trade dress.” Some make claims that they perform the same or better than the original. In the most extreme instances, the knock-off brand might even make claims that the original brand’s advertising claims are false.

Such was the case with Spectre Performance, an importer of Chinese-made cotton fiber and cotton gauze air filters similar in appearance to K&N’s air filters.

Like many other CEOs whose brands have been confronted with this sort of blatant competitive threat, Steve Rogers filed a suit. Like many CEOs before him, that action got the attention of the competitor generating attempts to reach settlement and avoid the uncertainty and expense of a trial.

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I’m not familiar with the specifics of the K&N/Spectre settlement negotiations. However, my previous experience in similar cases has seen them start with righteous indignation claiming no violations of any sort have occurred. This is typically followed by the respondent’s legal team offering to stop doing what they said they never did in the first place. Then both parties sign a settlement in which they agree not to disclose the terms of the agreement. Maybe a small amount of inventory gets destroyed and/or a small settlement is paid and both sides issue dueling press releases claiming vindication.

That’s not what happened in the case of K&N and Spectre.

Instead of taking the path more typically traveled by his fellow CEOs, Steve Rogers decided not to compromise in a settlement. Even though, no doubt, his legal team and some of his fellow executives suggested that a settlement was the better form of valor, Rogers clearly wasn’t willing to compromise. A jury trial ensued. After seven days of testimony by 14 witnesses, and the introduction of hundreds of exhibits, K&N prevailed.

The jury reached a unanimous verdict that Spectre had intentionally engaged in various forms of false advertising and awarded K&N $7.3 million in compensation. They found that Spectre had intentionally made false claims about the filtration, fuel savings, airflow and horsepower capabilities of its products. They had even advertised some of their parts as being approved by the California Air Resource Board (CARB) when they were not. Even with Spectre’s counter-claims that K&N falsely advertised the horsepower capabilities of its own products, the jury found in favor of K&N.

It was full and complete retribution for a North American manufacturer with the guts to go to the mat.

Let me be clear, there is nothing wrong with fair competition where someone makes a good product that costs less. However, if we don’t vigorously defend our patents and trade dress, then the off-shore intellectual property pirates win. More CEOs need to be like Steve Rogers and resist the temptation to just settle. And in doing so, they too can be like his alter ego Captain America and defend us all from the IP pirates.

Steve Rogers is my hero. No, not the alter ego of Captain America, but the CEO of K&N, the California-based manufacturer that literally invented the reusable high-flow performance air filter and leveraged the product into one of the most recognized brands in the performance aftermarket.

Like most ground-breaking products, especially those with established brands, K&N became the target of countless knock-off products. Some were legitimate competitors that were attempting to capture some of the market K&N created. Others were more insidious.

Several times in my aftermarket career, I have observed as established North American automotive brands literally take it on the chin as knock-off products from low-cost countries infringe on their intellectual property. It’s fairly typical for these knock-off products to use the same part numbering system or a derivation so close that they don’t have to produce their own catalog. They rarely have their own engineering or product management teams but simply “reverse engineer” the more established brands. All that is bad enough, but sometimes they go further.

The more bodacious knock-off artists will often try their best to have their product look like the original, or as the attorneys call it use their “trade dress.” Some make claims that they perform the same or better than the original. In the most extreme instances, the knock-off brand might even make claims that the original brand’s advertising claims are false.

Such was the case with Spectre Performance, an importer of Chinese-made cotton fiber and cotton gauze air filters similar in appearance to K&N’s air filters.

Like many other CEOs whose brands have been confronted with this sort of blatant competitive threat, Steve Rogers filed a suit. Like many CEOs before him, that action got the attention of the competitor generating attempts to reach settlement and avoid the uncertainty and expense of a trial.

PAGE 2

I’m not familiar with the specifics of the K&N/Spectre settlement negotiations. However, my previous experience in similar cases has seen them start with righteous indignation claiming no violations of any sort have occurred. This is typically followed by the respondent’s legal team offering to stop doing what they said they never did in the first place. Then both parties sign a settlement in which they agree not to disclose the terms of the agreement. Maybe a small amount of inventory gets destroyed and/or a small settlement is paid and both sides issue dueling press releases claiming vindication.

That’s not what happened in the case of K&N and Spectre.

Instead of taking the path more typically traveled by his fellow CEOs, Steve Rogers decided not to compromise in a settlement. Even though, no doubt, his legal team and some of his fellow executives suggested that a settlement was the better form of valor, Rogers clearly wasn’t willing to compromise. A jury trial ensued. After seven days of testimony by 14 witnesses, and the introduction of hundreds of exhibits, K&N prevailed.

The jury reached a unanimous verdict that Spectre had intentionally engaged in various forms of false advertising and awarded K&N $7.3 million in compensation. They found that Spectre had intentionally made false claims about the filtration, fuel savings, airflow and horsepower capabilities of its products. They had even advertised some of their parts as being approved by the California Air Resource Board (CARB) when they were not. Even with Spectre’s counter-claims that K&N falsely advertised the horsepower capabilities of its own products, the jury found in favor of K&N.

It was full and complete retribution for a North American manufacturer with the guts to go to the mat.

Let me be clear, there is nothing wrong with fair competition where someone makes a good product that costs less. However, if we don’t vigorously defend our patents and trade dress, then the off-shore intellectual property pirates win. More CEOs need to be like Steve Rogers and resist the temptation to just settle. And in doing so, they too can be like his alter ego Captain America and defend us all from the IP pirates.