Patent Fight Erupts Over Kids’ Fad; Amid a Bracelet-Crafting Craze, a Legal Battle Has Begun Over a Tiny Plastic Clasp

September 11, 2013, 7:51 p.m. ET

Patent Fight Erupts Over Kids’ Fad

Amid a Bracelet-Crafting Craze, a Legal Battle Has Begun Over a Tiny Plastic Clasp

SARAH E. NEEDLEMAN And ADAM JANOFSKY

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Rainbow Loom says it has sold more than 1 million bracelet kits. Rainbow Loom’s creator, Cheong Choon Ng, has been mired in legal disputes over his bracelet-crafting kit.

Just 6 millimeters wide, a plastic C-shaped fastener enables kids around the U.S. to connect loops of colored rubber bands to form bracelets. Now, that clasp is at the center of a legal dispute among the entrepreneurs and retailers cashing in on the hottest crafting craze in years. In August, the founder of three-year-old Rainbow Loom—a rubber-band jewelry-making kit that is a blockbuster seller this fall—sued rival Zenacon LLC, claiming it copied the “distinctive trade dress” of Rainbow Loom’s “unique” C-shaped clips with its competing FunLoom product.The fasteners are key to rubber-band bracelet crafting because they’re used to connect bands that have been woven together with a loom. The looming technique, which dates back to the 1800s, creates looped knots called Brunnian links.

Rainbow Loom’s creator, Cheong Choon Ng, says he was angry enough to sue because FunLoom “works exactly the same as Rainbow Loom,” and because he’s responsible for creating a market for rubber-band craft-making.

“I made this famous,” says Mr. Ng, who says he’s sold more than 1.2 million Rainbow Loom kits so far. “I worked on it for three years and now everyone wants to come in.”

Rainbow Loom also filed a lawsuit last month against another rival kit maker and Toys “R” Us Inc., which sells the competing kits. That same month, Rainbow Loom inked an exclusive contract to sell its products through national crafts chain Michaels Stores Inc. for one year.

Steven Verona, whose company Zenacon makes FunLoom, denies the allegations. “Is a loom something new and novel? It isn’t. It has been around for hundreds of years. Same as rubber bands,” he says.

Furthermore, the C-clip in FunLoom’s kit is superior, Mr. Verona says, given that it is larger and therefore easier for children to handle, plus it can hold more elastic bands.

And while both kits have looms—or plastic rows with pins to hold the elastic bands of various colors—Mr. Verona points out that his company’s loom has a design that eliminates “flaws” such as sharp edges, and has an extra row of pins.

Both Rainbow Loom and FunLoom starter kits are sold for around $14.99, plus the cost of rubber-band refills.

“We’re hoping to resolve this amicably and have healthy competition in the marketplace,” says Mr. Verona. “The better product will be the one that wins.”

The allegations of copycatting and patent infringement illustrate a growing challenge for entrepreneurs with a sudden blockbuster in the era of 3-D printing technology, fast manufacturing capabilities and more affordable e-commerce technology, all of which enable rivals to capitalize on nascent trends while they’re still hot.

The number of patent lawsuits filed in the U.S. reached a record high of 5,189 in 2012, up 29% from 2011, according to data from PricewaterhouseCoopers. It counted 270,258 patents granted last year alone.”In this day and age you have to be so vigilant,” says James White, an intellectual-property lawyer in Chicago who delivered more than 50 preliminary injunctions against knockoff products on behalf of Oakbrook, Ill.-based Ty Inc., the maker of Beanie Babies. “If you have a fad product that’s easy to copy, the more tightly you have to regulate your enforcement program.”

And an enforcement program is what 45-year-old Mr. Ng seems to have in mind. He came up with the idea for Rainbow Loom in 2010 after struggling to join his daughters, now ages 12 and 15, in making bracelets out of tiny rubber bands. His fingers were too big to stitch the colorful elastic bands together so he found a small, wooden scrub board in his basement and added rows of pushpins to it.

Using dental hooks to stretch and link the rubber bands together, he discovered that he could create all sorts of geometric patterns, which impressed his kids. He later cut up old credit cards into small, C-shaped pieces to make clips that could securely fasten the ends of the rubber bands.

Mr. Ng, who emigrated to the U.S. from Malaysia in 1991 and lives in a Detroit suburb, applied for a patent on the Rainbow Loom kit, including its C-clip, in 2010. In November 2012 he quit his day job at Nissan Motor Co. where he worked as a crash-test engineer, to focus on building Rainbow Loom. The U.S. Patent and Trademark Office officially granted him a patent in July.

Eleven-year-old twins Gwen and Phoebe Child of Yardley, Pa., got into weaving rubber-band bracelets last spring after seeing their classmates take up the craft.

“Pretty much everybody in our grade was wearing about 20 of them up to their elbows,” says Gwen, adding that she and her sister aren’t sure which loom product their classmates used and they “don’t really care.”

Retailers don’t seem picky about the brand either. “It’s about who can get it to you fast enough,” said a spokeswoman for Berlin, N.J.-retail chain A.C. Moore.

“It’s selling like gangbusters,” says Andrej Suskavcevic, president and CEO of the Craft & Hobby Association in Elmwood Park, N.J.

Instead of taking victory laps, however, Mr. Ng says he is suing to protect his product against sellers of copycat items and because he intends to expand his business. He now has 12 employees who work out of a 7,500-square-foot warehouse 3 miles from his home. “I can make this company become popular for longer,” he says.

As part of the Toys “R” Us lawsuit, Mr. Ng is also suing LaRose Industries LLC of Randolph, N.J., the creator of Cra-Z-Loom, another kit for making rubber-band bracelets.

According to the complaint in that lawsuit, which was filed Aug. 19, Mr. Ng is seeking to stop Toys “R” Us from selling Cra-Z-Loom, plus unspecified damages.

Toys “R” Us spokeswoman Kathleen Waugh said in an email that the company doesn’t comment on pending litigation.

LaRose Industries filed a countersuit on Aug. 28 against Mr. Ng’s firm, Choon’s Design LLC, alleging that “Choon’s actions were not motivated by a legitimate business purpose, but were instead maliciously calculated to procure a breach of contract, and were otherwise fraudulent, dishonest and illegal.”

A spokesperson for LaRose Industries couldn’t be reached to comment.

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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