Entrepreneur Michael Benarde first saw the issue shortly after closing a deal on ABC's "Shark Tank."
Benarde's product manufacturer received a suspicious call from someone asking about the cost of producing Florida-based startup NightCap's patented scrunchies. It was the first instance of copying, an issue that would soon explode.
Today, NightCap faces a constant "whack-a-mole" game. It spends hours a week using monitoring platforms and flagging the hundreds of imitators selling knock-off scrunchies. Benarde said it spent more than 10% of operating expenses in 2023 protecting its product.
Dealing with copycats is manageable, but Benarde wants change. He decided to advocate for the dozens of startups, "Shark Tank" alumni and otherwise, struggling with the problem. The ease of selling counterfeit products online is stifling innovation and entrepreneurship, he said.
"Once your product starts getting popular, people are going to try and do it," Benarde said.
The companies get publicity from "Shark Tank," close sales and then get noticed by sales tracking platforms, Benarde said.
Copycats seek out these well-performing products and imitate them, selling the knockoffs on e-commerce platforms like Shopify, eBay, Etsy and Temu. Amazon has a built-in system for dealing with these imitators that doesn't require legal recourse—but it's the only one. Even Amazon has struggled to regulate this. Inc. profiled the issue in 2019.
In February, sister publication Colorado Inno wrote about "Shark Tank" alumnus and birdfeeding product startup HummViewer facing knockoffs.
Here's the issue: It can cost hundreds of thousands of dollars to take legal action against an entity with fewer concerns of failure. Even when the knockoffs are penalized, copycats lose less because they have no employees or brand name, Benarde said. And it can be difficult to chase down a copycat in another country.
NightCap has patented its product in the U.S., but enforcement would cost thousands. And with the ease and rate at which these imitators pop up, it isn't feasible to incur so much cost for any one infraction, Benarde said.
Woodrow Pollack, an intellectual property shareholder for Shutts and Bowen, sees issues like this daily. It's always a budgeting issue, he said. But 3D printing, efficient manufacturing, the internet and e-commerce platforms have made it easier to sell counterfeit products quickly, he said.
Patents should still be competitive and given with reason, but Pollack sees solutions coming from a collaborative effort from the companies to remain competitive, regulator engagement and e-commerce platform efforts.
"If you're a startup company or a small company where what makes you valuable is your innovation, you need a system of rules and laws that gives you some adequate protections for your innovation so that you're not penalized by going to market with your innovation," Pollack said.
That's why Benarde is speaking against the copycats and hoping to catch the attention of legislators and companies. The company authored an opinion piece about the issue in May for Fortune. He also plans to meet with officials and attend conferences to draw attention to the issue, he said.
"We are doing well in business, but it's very difficult to scale bigger and grow past the knockoffs because there's only a certain amount of people who will buy your product because it's your invention and you're the brand name," Benarde said.
