Hoverboards and Lawsuits

Hoverboards are undoubtedly the hottest new gadget to hit the market. Thanks to social media, these “handle-less Segways” have been indirectly endorsed by a bevy of celebrities-- from NBA superstars, to the biggest pop and rap stars. “We haven’t paid a dollar in marketing fees, so it’s great,” said Matt Waxman, co-founder of PhunkeeDuck – one hoverboard brand not shy of celebrity praise. A PhunkeeDuck hoverboard will cost you about $1,500, but PhunkeeDuck is facing stiff competition from competitors saturating the market with knockoff brands, and—worse—lesser quality boards.

A higher quality hoverboard will cost you anywhere from $600-$1500, but the market is flooded with lower-quality boards that cost as low as just $300. If you’ve been paying attention to hoverboards lately, you’d know that the $300-$400 hoverboards are the ones that have been catching fire and exploding. One incident where a kid’s gift caught on fire caused a class action lawsuit against Swagway and Modell’s. A man purchased the $400 Swagway model from Modell’s and claims that the board caught fire just 45 minutes after it was plugged in for a charge. Despite the threats to the hoverboard market, nothing has prevented it from being the most sought after gift of the holiday season. Christmas was a huge day for the boards. Viral videos of holiday hoverboard crashes, and the hashtag #HoverboardFail may have given the hoverboard a bit more social media steam and boosted the demand a bit more.

Hoverboard fires have caused a few problems. Manufacturers have overlooked safety considerations in the interest of maximizing their supply ahead of the holiday shopping season, and the number of fire-related incidents has increased. USPS “grounded” hover boards because of the potential risk of a fire in the sky; others have followed suit, leaving most of hoverboard shipping to be done on the ground. Airlines have banned hoverboards from planes, and retailers like Amazon, Target, and Overstock, have even removed certain brands from their digital shelves. The class action lawsuit filed in the U.S. District Court for the Northern District of Indiana claims that Swagway LLC and Modell’s Sporting Goods, Inc. failed to warn customers of the risk that hoverboards could burst into flames. According to NBC Chicago, Michael Brown of Chappaqua, New York, filed the suit on behalf of all consumers who purchased a Swagway hoverboard from Modell’s, saying that he purchased the hoverboard as a gift for his children but the device ultimately caught fire, causing a blaze that damaged his home. According to the lawsuit, Swagway hoverboards are sold on Modell’s website and are also available at Swagway.com, Amazon.com, Target.com, Walmart.com, newegg.com and pedirect.com, although some of their models had to be pulled from the shelves. Indiana-based Swagway said in a statement to NBC News at the time that “safety is on the forefront for Swagway” and the removal “is not specific to Swagway, but includes 97 percent of the other branded hoverboards that were also selling on their site.” The lawsuit seeks a trial by jury along with compensatory and punitive damages. Many hoverboards are being sold by little-known companies or brands that buy them from Chinese factories, making it more challenging for consumers to know what model to trust – and even more challenging to file a lawsuit because it’s difficult to uncover which company’s may be considered liable for damages. The U.S. federal government has launched an investigation and the threat of product recalls are a real possibility.

This class action suit isn’t the only legal threat to the market; there’s also a lingering patent-war. The parties involved each claim to be the first to make the product or claim that they should be allowed to continue making their product on the grounds that the patents at issue are too broad. Hoverboard popularity lead to this patent war and it all started with Segway. In September 2014, Segway filed a complaint against the Beijing-based Ninebot, alleging that the company had infringed on earlier patents. Segway tried to ban Ninebot from exporting its products to the U.S. saying that the company had copied its iconic 2 wheeled upright scooter. Half a year later, Ninebot acquired Segway, and both brands continue to operate under their different names; they resolved the suit by simply buying Segway. The founder of Ninebot has previously said that the primary reason he bought Segway was for its patents. September 2015, Segway filed a lawsuit against Inventist for allegedly infringing on 5 patents to build Solowheel and Hovertrax. According to Segway’s lawsuit, Inventist’s products are violating patents on a “personal transporter with a balanced motor.” The suit pays special attention to US Patent 6,302,230, which covers the Segway’s unique method of transportation, “particularly to balancing vehicles and methods of transporting individuals over ground having a surface that may be irregular.” According to the complaint, “Inventist has knowledge of the ‘230 patent, or has acted with willful blindness to its existence.” Similar claims are made for other patents. The lawsuit seeks damages, attorney’s fees, and permanent injunctive relief preventing Inventist from selling any of the allegedly infringing products.

Shane Chen holds the patent for a “two-wheeled self-balancing personal vehicle.” Hovertrax, made by Inventist, was licensed to Razor USA. Razor says that the licensing deal with Inventist gives them exclusive rights to sell hoverboards in the U.S. On November 27th, Razor sued hoverboard manufacturer Swagway for infringing on a patent it owns for a “two-wheeled self-balancing vehicle with independently moveable foot placement sections”, which is essentially what hoverboards are. Razor is seeking supplemental and compensatory damages from Swagway. It also wants Swagway to turn over to Razor all products that infringe on the patent. This isn’t only the case with Swagway-- Razor is also suing popular hoverboard makers IO Hawk; Razor is fighting to be the sole distributor of hoverboards in the U.S., and this is arguably what their exclusive licensing deal should’ve granted them. The lawsuit comes only weeks after Razor reached the licensing agreement. Joalene Jolivette, head of sales at Inventist, says that one reason for the deal is that Razor has more resources to sue the biggest importers of hoverboards in China. Razor has spent $1 million inside of a week dealing with cutting off the supply of some knockoffs into the states. Jolivette also says that Segway’s suit was retaliation for Inventist’s suit in April against Ninebot in which Inventist alleges that Ninebot copied its Solowheel.

Lingering class action lawsuits and patent litigation are making the hoverboard business a very messy business. It’s unclear who has the clear edge in the patent war. All parties involved have compelling arguments, but who has the biggest edge is a question not easily answered; that’ll be up to the judge to decide. The consumers don’t seem to be affected by the drama surrounding hoverboards. Even with all of the fire-related incidents, the class action lawsuit and the patent war, demand still seems to be steady, increasing even. My guess is that “hoverboards” will follow suit of any other hot commodity and remain hot until something better comes around and makes them obsolete.

By Mario

Copyrighted 2016. Content published with author's permission.

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