Hilton Hart 6:50
That’s exactly right. We call submitting takedowns on ecommerce marketplaces, or sending cease and desist letters, basically a whack-a-mole strategy or a slap on the wrist. It’s not a permanent solution. It’s more of a band aid type temporary solution. So we’ve found that suing and collecting from your counterfeiters is the most effective strategy.
Josh Hadley 7:16
Okay, I love that. Now Hilton, can you explain the term counterfeiters in more detail, right? Because for a lot of our listeners, especially those that are new to the e-commerce space, and maybe they’ve grown a seven-figure brand, just on their own. And like myself, I wasn’t aware of copyright law, design patents, utility patents, trademark law during my first year or two of business, because and that’s why I allowed those counterfeiters to continue to happen. So why don’t you explain in your words, what you see is like, what’s a counterfeiter?
Hilton Hart 7:51
A counterfeiter is someone that’s trying to make their product or their business or brand look like your product or your brand. And they do that by infringing on various types of IP. So like you said, the main ones are trademarks, copyrights, and then the two types of design of patents, which are design and utility patents. And, you know, they have subtypes, and we can go into all of that. But, that’s mainly it.
Josh Hadley 8:23
Okay, let’s dive into all of those different, you know, ways that you could protect yourself from an IP protection standpoint and the recommendations. So I think this will be a two part question, give us a high level overview of the different ways you can protect your brand with IP. And then secondly, let’s discuss maybe some scenarios of you know, when to use a utility pan verse, copyright was designed pen etc.
Hilton Hart 8:50
Sure. So I’ll, I’ll start with trademarks, you know, your brand name would be covered by a trademark, or particularly a word mark. So some text, then you might also have a logo, you know, which is colorful and has a design to it. And so that would be a different type of trademark, a logo, a logo mark. And then from there, you might have taken photographs of your product or made a video or maybe wrote, you know, some large piece of text. And so those past three examples would moreso fit into the copyright bucket. And then next for a design pen that specifically describes and provides you protection over the unique design of your product. So think of something like a Coca-Cola glass bottle, you know, a customer might see that and really think it’s a coke bottle and not something else like Pepsi or whatever. And then finally, you’ve a utility patent which covers and protects the actual function of your product. So you You know, you made a better mousetrap or something like
Josh Hadley 10:02
that? Yeah. Okay. Makes a lot of sense. With the copyright. I think that’s probably the easiest one that would apply to everybody, right? You talked about the photos that you take of your product, right. And so if you create your listing on Amazon, you have your white background image, and then a bunch of secondary images. What we’ve seen with our brand is there’s a good number of competitors, that will literally go steal our secondary images, and go Photoshop their own product into those images. Are you saying that’s something that we could actually go and sue somebody for and be able to collect money from potentially?
Hilton Hart 10:43
Absolutely. You know, that in IP, the answer is, it always depends. But they’re, they’re making, you know, minor edits, or just putting their product in the picture over yours. And it’s, you know, it’s obvious that the work, the picture they’re using, originally came from, from your work or your photograph, you can definitely enforce that. Now, when it comes to trying to get Amazon to help you out in that situation, you know, when they’re the judge, jury and executioner and they make money, whether you sell the product or your counterfeiter does, you need a lot more black and white examples of infringement and and you need to, you know, have like a 99% chance of success, you know, in that takedown process, in order to actually stop the counterfeiter. If, you know, if Amazon’s experts, wherever they are, decide that there’s not enough infringement, or it’s just different enough, they’re likely to not accept your takedown. And that’s where it really helps to go the actual legal route.
Josh Hadley 11:55
Interesting. Okay. I like that. Now, with copyright infringement, I think that one’s important to focus on because with a well, and I think let’s dive into those four different ways to protect yourself, right? You can file a trademark for your brand, really anytime, right? And then a copyright, you can register at any point in time. Correct. And I think copyright’s unique that you get a figurative copyright. It’s not an official copyright, but it is a copyright protected will, the moment you publish or create something, but to get a copy to be copyright registered, then allows you to collect for damages. Is that correct? And tell me about the timing on that. Is there a time limitation to where once you’ve created the product? Do you have a year in order to file and register the copyright? Or could you say I’m creating hundreds of images a month, I don’t want to go copyright register all of these images, that maybe once you see somebody infringing on an image, then you go register it? So it has the potential to sue? Can you kind of walk me through that?
Hilton Hart 13:02
Sure. I do want to point out that I’m not an attorney. So you should definitely talk to yours or talk to ChatGPT for a while. But yeah, so all the IP, and the damages are kind of treated differently. So I’ll focus on copyright first. You’re right, if you never file or you never submit your image to the US Copyright Office and actually get a registration number, you still can protect other people from using your image. That said, the damages that are associated with that infringement before registration are lower, because you know, the counterfeiter. It’s less egregious, right? There’s no registration in order for them to know that your image is yours. They have to do a lot of searching and try to figure out, you know, who owns this image? Where did it come from? So you get actual damages, which I believe are, are the profits that they gain from using your image to sell a product or do whatever, before and that’s before registration. After registration, you can begin to get more damages, which I believe would be statutory. And so off the top of my head, I don’t remember but it might be some fixed amounts, or it could be three times profits or in or it becomes your profits after registration, not theirs. And so, you know, trademarks work in a slightly different way, which I can explain. You can say that you actually don’t need to register your trademark. And it’s actually more protectable than copyrights because it’s a lot easier to find a brand name, you can type it into Google and quickly find, you know, who operates this business and who sells products with this brand name. So I believe the damages for trademarks infringement is greater before registration. And then also you can register your trademark after the infringement occurs. And then the past infringement kind of, in some ways is the damages associated with past infringement before registration can carry forward. That was a lot of information.
Josh Hadley 15:15
It is, it’s a lot of information. But it’s so important for people to understand this. So hit the rewind button if you need to probably slow this down if you’re listening to this 1.5-2x speed, because there’s a lot of information to digest. But now Hilton, on the opposite end, utility and design patents, I believe there is a one year timeframe for people to actually register, right. And if you don’t register, you’re kind of out of out of luck. And I believe that would be difficult to sue somebody for if you don’t even have a patent on something, is that true?
Hilton Hart 15:53
It is. I don’t know the exact timing off the top of my head. But patents are unlike trademarks, and copyrights. And that’s a major factor. I do want to just point out to the previous point, it costs like $55 to register some images with the copyright office. So there’s no excuse and you can submit hundreds of images, just get them all registered at once. So you everyone’s got to go out and do that. It’s super easy. You don’t even really need an attorney. But But yeah, you also need to register your patents as well as early as possible.
Josh Hadley 16:30
Okay, makes a lot of sense. Now, Hilton you talked about, there’s a couple of ways I want to take the direction of our conversation, but you talked about first taking down people on Amazon. And right now Amazon’s kind of playing that judge, jury and executioner all at the same time. And guess what, you’re probably working with a lot of people overseas that have limited legal backgrounds to the best of their knowledge. And they’re not really doing it justice. At least that’s what we have found very distinctively on Amazon, I can’t tell you the number of times we filed takedowns on products or competitors that have been blatantly infringing us, wherever a US based attorney that I’ve spoken to is like, yes, you would win this in court all day and night, yet you go to Amazon, and they’re now rejected. Sorry, we don’t see that there’s any, any copyright infringement on this. So knowing that, you know, part of what you guys do, in addition to helping Sue counterfeiters, you also help sellers, to actually, you know, file these takedown notices on Amazon as well. So, what would be you know, can you kind of walk us through the steps that you guys follow in order to file takedowns, specifically on Amazon? And what, you know, how do you find success with those?
Hilton Hart 17:54
Gotcha, um, well, the most important thing is that you kind of gather evidence of the infringement, because if you submit a takedown and the listings are gone, you know, you basically can’t do anything going forward if you didn’t keep proper records of what happened. And you know, that might be really useful in the future. If that seller business entity continues to infringe, you might want to take some more action. So what we like to do is gather the evidence of infringement first, submit the takedown, see what Amazon does, or the other e-commerce marketplace, see what the infringer does. And then, you know, from there, if you have enough infringement, and it would be financially viable to file a lawsuit, you can do that. So we kind of do it in that order. What’s really unfortunate is we see businesses sign up with these takedowns companies that only do takedowns. And, you know, they wipe out all the infringement, all the counterfeiters, take the trademark out of their product listing, maybe stop using some of the images, but yet, they still have that competitor there who’s selling the same product, and is right there alongside them on Amazon. And it really doesn’t have the same effect. So you want to keep good records, gather evidence of infringement, submit the takedown, and then save, you know, the optionality of suing that seller later.
Josh Hadley 19:21
I like that. Okay, so that makes a lot of sense. So, a filing takedowns on Amazon is yes, important, but then making sure you’ve documented things. So if they make slight changes to it, where they become technically compliant, and they keep growing, you still have the optionality to sue them and go back in time for what they did in the past, right? But you’ve got to have, I think you mentioned like you want to purchase their product, right? Take photos of it. You want to take screenshots of their Amazon listing and just kind of document what things look like at what date and time before you actually send Those cease and desist letters or IP infringement claims on Amazon. Is that true?
Hilton Hart 20:04
Exactly, you have to do that first. And you really have no idea what Amazon or the Mark E commerce marketplace is going to do. We see design patent takedowns, just get rejected at a very high rate. And so you’re going to need that evidence. If you’re going to want to stop that seller from infringing on your design ban. Or, you know, if someone’s spelling your trademark slightly differently, you’re gonna have to go the legal route. So you really need that evidence before you submit a takedown whether it’s successful or not.
Josh Hadley 20:37
Okay, now, that kind of brings up an interesting point, I would love to hear kind of what your experience has been submitting takedowns on Amazon, it sounds like design patents aren’t overly successful right now, at least Amazon’s not willing to accept them. I don’t know what utility patents are like and copyrights, it’s all over the place. But would you mind kind of going through the different types of infringement, right, go through trademark copyright design patents, tell us what your experience is work specifically on Amazon, getting those takedowns filed? And what your acceptance rate typically is with those. And if you get rejected, what do you do next? You keep doing it? Do you keep filing until it gets across the right person at that desk? Or does that kind of jeopardize your own account where Amazon’s like, alright, you lose your privilege of filing takedowns if you keep sending this? So I know that’s a loaded question. But I’d love to hear you dive into that,
Hilton Hart 21:36
you know, submitting takedowns through, I guess we can mainly talk about Amazon, you’re gonna want to submit takedowns through brand registry, that’s a lot better than they have a form that you don’t need to use brand registries to submit takedowns through. So trademarks and copyrights, they’re more straightforward. You know, submitted through brand registry, the acceptance rates are pretty high. But you know, it depends on the infringement and the IP involved. So I’ll say that they’re higher than the patents, then you have design pens, they’re they’re still easier than utility patents for the the marketplace, analyze the infringement, because trademarks, copyrights, and design patents. All the analysis for infringement is based on an ordinary observer test. And so someone even without IP training, and theory should be able to decide to some degree if there’s infringement, I mean, you’re just looking at, you know, the brand owners product or their IP versus, you know, the potential allegedly infringing product. So unfortunately, though, somehow Amazon just really doesn’t like design pens. I don’t know why that is. And then finally, good luck with utility patents. And they want to steer people towards their apex program. I forget what the acronym stands for. But basically, I don’t know if your viewers know how that program works. But both sides, the brand owner, IP owner, and the infringer both put up money, or they’re required to, and the winner of that submission or claim gets their money back. And so in some ways, if you can get your counterfeiter to lose, I think it’s $5,000. That can be pretty powerful. But you need to keep in mind that, you know, they might have made a million dollars infringing on your patents, so maybe I wouldn’t recommend that scenario. And then to your very last question, yeah, if your submissions are not being accepted, you need to be very careful, because if you just bombard them with rejected submissions over and over again, they actually keep track of that it’s a metric, and then they might stop accepting, just like totally black and white, of obvious infringement. So you don’t want to jeopardize your brand registry account. I mean, maybe you don’t want to piss off Amazon. And so you gotta be careful. And that’s why it makes a lot of sense to you can do the takedowns that you know, are going to be successful. And then when you have those rejections, you still have the option to go the legal route later.
Josh Hadley 24:23
Okay. Yeah. So I guess that would be my question then is, if you get rejections and you’ve got other attorneys or other people that are like, yeah, that’s blatant infringement, whether it’s trademark or copyright, at what point is it worth, you know, if Amazon’s rejecting them, what do you do? Do you just let that seller keep selling and then for how long? Can you file a lawsuit kind of like walk me through that kind of decision process that you think a brand owner should go through? If they’ve got somebody Amazon’s refusing to take it down? But you’re very confident that there is infringement going on.
Hilton Hart 25:03
Well, if you’re going to go the legal route, you want to make sure you at least don’t lose money suing the counterfeiter. So, you know, picking the right attorney, the right litigator is very important. We really like to hire attorneys for that kind of litigation on contingency. Because it makes them financially aligned with us. And we know that if they stop a counterfeiter and collect money from them using a settlement or a judgment, they’re gonna get paid too. So I’d recommend finding a contingency fee attorney. From there, you kind of need to, or maybe before that, it doesn’t really matter. You need to look at these, these accounts, and you need to figure out, you know, does this person have money that I can actually collect? A lot of people don’t think that you can collect from someone an infringer in Asia or, you know, China specifically is where we see a lot of infringers and counterfeiters, but you actually can, you can collect from their assets in the US. So you kind of need to work backwards and figure out, you know, do they have bank accounts in the US? Do they use payment processors like PayPal, you know, how much money is in their Amazon account, you can look at, you know, how much seller feedback, they’re getting to try to work that backwards, you know, are there products priced highly, that’s gonna cause there to be more money in their account, assuming their volume ties? Well, you want to look at the infringement. The actual product listing where they’re infringing on your IP doesn’t have a lot of reviews, that might be a proxy to determine that that listing is doing a lot of sales, and then therefore, there’s a lot of damages, and you can collect a lot of money. So that that’s kind of the analysis that you’d go through for a single infringer. And then from there, you want to decide how many infringers are there? Are there 50 or 100? Well, you know, now your damages potentially are 50, or 100 times greater. And if you sue those 100 counterfeiters in one single lawsuit, it’s more likely that you’re not going to lose money, trying to collect money from them with your legal fees and expenses.
Josh Hadley 27:11
Now that makes a lot of sense. Where would somebody go? You know, I think your first point is, you know, find a contingency based attorney, if you feel like, you know, this competitor or group of competitors is selling enough volume? Where would you find contingency based attorneys? Or do you have any recommendations there?
Hilton Hart 27:32
Um, well, I, you know, I’m biased, and I’m the guy to go to. But, you know, if you look in the Northern District of Illinois, this exact kind of lawsuit is very popular there. So, in theory, you just need to find an attorney that’s comfortable with this kind of litigation and explain the success that you can have by suing counterfeiters. And then basically give them a couple of those cases to basically copy. So that’s what we specialize in. We file cases all over the country, mainly in Illinois, Florida, and Texas. And yeah, that’s our thing.
Josh Hadley 28:17
I love that. Okay. And another really important thing that you talked about is in, because I’ve spoken to a lot of attorneys over the years for our brand as well. And one thing that I’ve heard a lot of from a lot of attorneys is that sorry if that seller is overseas, good luck in anything from them. Right. But what you mentioned, and I’ve heard about this strategy from others as well, is that even if they’re located in Asia, you can still sue them and collect money from them, especially if they’re suing, if they’re selling on Amazon, us, they’re gonna have a US bank account, right? And you can freeze those assets. Correct me if I’m wrong? Can you kind of walk through? Like, how would you actually collect money from somebody that’s based in Asia? Because there’s no way you’re gonna be able to send them a cease and desist letter? Right? And typically, they’re never going to reply to any emails. They’re just like, I’m protected. I’m over here in Asia, you can’t touch me. And I think you have a really good I don’t know, call it a ninja hack. But it’s all within the laws of the US that you could actually do this. So can you kind of walk me through? How are you actually collecting from somebody that’s an overseas seller.
Hilton Hart 29:32
So the most critical part to the legal strategy is what’s called a temporary restraining order. And it becomes permanent. So the temporary part’s not that important. But what that does is a federal judge will actually grant you the ability, like you said, to freeze and restrict the disbursement of funds from your infringers e-commerce accounts or payment processor accounts. And so you know, when someone’s based in Asia and doesn’t really respect your intellectual property or US law, that’s pretty critical in terms of collecting money from them. So you, you get that court order, it’s actually a surprise court order, you don’t need to notify the counterparty at all in advance. So you get that court order, you send it to Amazon, for example, they will give you the email addresses of all the people that are infringing on your IP, they’ll tell you, they’ll freeze the money in their accounts, you’ll need to serve that order to PayPal, for example, as well for payment processors. And so yeah, they give you their email address to serve them after the freeze is in place. They tell you how much money is in their account, they tell you how many sales those alleged infringers made. So that way, you know, you’re not relying on the counterfeiter to tell you how much profit or revenue they’ve done using your IP. And so then from there, you’re able to actually settle with them. And if they choose not to settle, you can obtain a judgment, which allows you to collect the money that you froze. And, you know, suing sellers in Asia is actually a lot easier than you would think, you know, once you have leverage over them. They’re very unlike us based companies. They’re not litigious. They like to work out deals and settle. So, you know, you don’t really have to worry about really protracted litigation and expensive legal fees and things like that.
Josh Hadley 31:30
Interesting. So you’re saying that, I guess if you were to file a lawsuit, right, in order for Amazon to freeze their account, you’re going to need to name Amazon in that lawsuit, or no?
Hilton Hart 31:45
No, you don’t have to name Amazon, what you name a list of effectively Amazon accounts or e-commerce accounts. So would they call these cases Schedule A cases because Schedule A is a list of the 100 Plus defendants. And so that’s where you put, you know, there, a link to their Amazon store, or maybe, you know, provide a table in the lawsuit of the merchant IDs to identify.
Josh Hadley 32:11
And then the judge would then give you some type of order to go tell Amazon that they have to freeze their account. Exactly.
Hilton Hart 32:20
So you take that order and then schedule a list of defendants, and you bring that to Amazon, and then they just do a simple database query and, you know, toggle something in their software to freeze the money.
Josh Hadley 32:32
Interesting, pretty straight, pretty straightforward, then, and then you’re finding that those overseas sellers are once they kind of get served, right, because that you’re gonna get their real email address at that point, you’re finding that the, you don’t have to continue through going through the court process, you’re finding a lot of people are settling outside of that.
Hilton Hart 32:54
Yeah, you know, about half, if I had to guess, around half of the defendants in our clients’ cases, choose to settle. And it makes sense, you know, they want to regain access to their account. They want the money that’s in it. So you know, someone might settle for more or less than the money that’s in their account. And that’s a factor, they don’t want to strike against their account. They don’t want to start over from scratch, they don’t want to lose their reviews. So you know, you do have significant leverage over these, these, these counterfeiters. And in the situations where they don’t settle, you know, that does happen. And there are serial counterfeiters that create new stores all the time, which they’ll do so you take the money in the account that you identified the account that chose not to settle. Yeah, and it’s really expensive for them. And it, it’s like a gut punch, you know, so they’re gonna know that they’d rather infringe on some other brand rather than yours, you know, a brand that’s only doing takedowns not taking thousands of dollars from them whenever they infringe.
Josh Hadley 34:01
Yeah, man, I love that. I think that this is like such a mindset shift. Everybody always talks about like, you know, filing takedowns nobody’s talking about like, let’s make this permanent. And actually, can this become a revenue stream of your business, right? Because there are a lot of more litigious companies where their IP strategy is actually to generate revenue for the business. And so I think for our listeners, like if you can flip your mindset and say, it’s not just about protecting your own brand and sales, it’s about you know, if you have a lot of counterfeiters, this could actually be a revenue generating opportunity, so to speak, going back with your brother’s example is a 10x return on an $8,000 investment of his right. So I love that aspect. Hilton. Hilton, I would love to maybe we’ve gotten into the nuts and bolts here. I would love to maybe spend some time working on maybe some case studies. You don’t necessarily have to share numbers, but just to get our listeners’ minds going some case studies to say, hey, here’s what happens when you only file takedowns. And that seller continues to operate similar to what you said, like, they just removed the brand name from the product. And that other business competitor made millions of dollars. And eventually that other one went out of business versus other more egregious ones.
Hilton Hart 35:25
Oh, yeah, that’s so when brands only do takedowns, it’s really important. Unfortunate. What typically happens is you sign up with a company, like core search are red points, and you’re paying them a couple $1,000 per month for the rest of time to play whack-a-mole. And really, what if you only use that takedown strategy? You’re training your infringers to just keep tweaking and modifying their listings, so that they’re just out of reach of being ever able to truly take those listings down. Whereas, you know, Had you taken legal action, strong legal action, at the beginning of time, you know, they might have just altogether decided to not, you know, sell that product at all and compete with you at all. So, you know that that’s one example. I can go through, I’ve actually, in addition to my brother’s toy company, I have my own very small ecommerce business where I’ve sued counterfeiters. And I can walk you through that if you’d like. Yeah, I would love to hear it. So I found this brand that had been countered that was being counterfeited. And it looked like the owners of the business were no longer really operating the company at all. And so I got in touch with them. And I found out they had a ton of inventory. And I mean, they couldn’t compete with the counterfeiters, they were selling their products, the counterfeiters were selling the product, for a third of what the US based company was able to sell theirs, the counterfeiters were using a trademark, it’s called Brochette Express. And it’s this basically this device that it looks like a cube or three dimensional rectangle, where you put a bunch of meat in it and vegetables, and you put these metal skewers down through it, and then it enables you to put a knife through the cube and start cutting kabobs or rochette’s. So it was a really cool product, but they just were eviscerated by the counterfeiters. So for whatever reason, they decided not to continue to operate the business and I bought it, I bought the intellectual property, I bought all their inventory. And then you know, the next step, of course, was to clean up the marketplace. So I knew takedowns don’t work, like we talked about. And so, you know, I followed the exact legal strategy that we talked about, I went onto Amazon, I found all the product listings that were using Brochette Express for a very close variation of that they needed to be products that were you know, very similar to the authentic product that the brand sells. Then I found a ton of instances of counterfeiters, infringers using actual brands images, you know, they might not also be using the trademark as well. It could just be you know, you have a mix of infringer, some use both your trademarks and your copyrights. Others use only one. So I compiled this massive list, I think it was hundreds of counterfeiters into a spreadsheet. Like we talked about, I took screenshots, I ordered one product or I tried to in every situation that I could, well I ordered one product to my warehouse, we took pictures of the shipping labels, the products, documented everything. And then you know not to bore you —
Josh Hadley 38:50
Keep going, keep going with this. I like this keep going. I love the details.
Hilton Hart 38:55
So we filed the case, I think it must have been to two or 300 infringers in the Western District of Texas, down in Austin, where I’m based. We got a new judge, but he kind of understood the legal strategy. And you know, we just went from there. So we took that list of infringers, we gave it to the court, they reviewed the evidence, they looked through all the screenshots, all the images of the product. And they gave us a court order. So we immediately took that to Amazon, eBay, Wish, Walmart and all you know, I think maybe even Etsy, Newegg, I mean, everyone, and so the marketplace has complied with that, that court order and the subpoena. They gave us the infringers’ email addresses. So that allowed us to serve the defendants, you know, because you have to do that. It wouldn’t be fair to just freeze someone’s assets and they don’t know why it happens or what’s going on. And then from there, I worked with my attorney to just negotiate, you know, fair settlements. And then, you know, many infringers had some money in their accounts. And the ones that didn’t settle, we obtained a default judgment. And so what that’s called is if a defendant doesn’t appear in a lawsuit, the judge just says, Well, look, this, this guy didn’t even try to defend himself. So I mean, he’s effectively guilty unless he appears ever in the future. So you take that judgment, and you bring it to all the marketplaces that I described, and payment processors as well. And, you know, you just take the money in their accounts. So a lot of information. But what’s really nice about that, is that the money that we earned in that lawsuit exceeded the price that I paid to buy that business’s intellectual property and their inventory. So in some ways, like, I got the, I made some money in the lawsuit, and I got the inventory for free, which is amazing.
Josh Hadley 41:02
Amazing. And then are you still selling that product now? And how’s it doing, now that the printers are?
Hilton Hart 41:09
It’s doing okay, I, you know, it’s a very small percentage of the brand can only generate a small percentage of my income. So I focus on Edison and doing these lawsuits. Yeah, it’s alive. I think we actually, we had to do a second lawsuit recently. But there were fewer number of defendants, and it was a new group. You know, there’s just so many people in Asia and all over the world that are getting into e-commerce. And so you’re always gonna have, you know, smaller new amounts of infringers to take care of? Yeah, but yeah, it was, it was wild, it was a wild ride. And I got to experience it as an actual brand owner, just like my brother did, to helping other brands do this, but.
Josh Hadley 41:54
I think that is the ninja hack of all hacks to go acquire another brand, and use it at a lower amount than what you’re going to collect from, you know, if you start off with this IP infringement strategy. So I think that is fascinating. I love that, Hilton. And I’m interested to learn just a little bit more about what happened after you filed the lawsuit. I would love to get in maybe to the nitty gritty there of you fought you filed this lawsuit against 200-300 people, or competitors, right? You go to the judge, who then says, Yeah, we see this as infringing? Do they go one by one and say, this person’s infringing? This one isn’t? Like, are they going through that whole list of 200-300? Or are they just saying, yeah, it seems legit. Here’s your order to go tell Amazon or eBay, or Etsy or whatever, that you now need to get their personal information there, you know, how much money is in their account? Can you walk through that a little bit more?
Hilton Hart 43:01
Well, we like to only sue, help our clients sue infringers that we know we’re going to be successful. And so we typically always get, we’ve always gotten a TRL, the court order that freezes assets for every one of our clients. So, I mean, in theory, you could file one of these cases, and the judge could say, “hey, you know, 10% of these infringers, these defendants are not infringing.” But in that situation, it’d be pretty dangerous because the judge might just deny the entire TRF and ask you to dismiss those 10 defendants and refile. So that wouldn’t be a good situation. So we’ve been able to avoid that. It might sound like all this is like I’m making it sound really easy. But a lot goes into picking the defendants and choosing who to sue, and who to pursue outside of litigation. So typically, the judge goes through the evidence, or their clerk does one by one. And then they just grant you a blanket court order over all the defendants in the lawsuit. So the defendants actually have after you, you have two weeks to serve the defendants. And then another hearing is held. It’s called the preliminary injunction. And so that hearing actually makes the asset freeze the temporary restraining order permanent, if you’re successful, but the defendants have an opportunity to appear at that hearing to two to four weeks later to object and, you know, they have an opportunity to tell the judge, you know, hey, I don’t I don’t think I’m infringing. I spelled Nike with a Y. You know, so I’m like that.
Josh Hadley 44:46
Interesting. Okay, so you get the order, you then take that to the marketplaces. Right? And then you have basically two weeks to serve them right. And, again, if somebody’s located overseas, you’re not serving them by having somebody go to their doorstep, you’re able to serve them digitally through the email address that you get from the marketplace, I guess. And that works.
Hilton Hart 45:10
Yes, one of the most critical parts is that email service in these types of lawsuits is allowed. And the reason for that is because these defendants are operating businesses online, and therefore they should be able to accept communication over the internet. And then the next thing is that they’re, they’re based in China, their addresses and identities are unknown anyway. And so you know, it would be extremely difficult to actually send them a letter in the mail. So one time actually a judge asked us to follow through with Hague service. And that was a nightmare. It cost us like $100,000, just for one lawsuit. Well, his business fronted and paid for all that. That’s what we do. And so we literally had to pay for investigators to travel all around China, and try to verify if the addresses that Amazon gave us were true. And it was just, it was such a massive waste of time, it was embarrassing. The judge ultimately realized that it was totally unnecessary. But just to tell you how insane this was, our investigator would go to a building and go to, you know, floor to suite number seven. And instead of it being some ecommerce business, it turns out to be a preschool, you know, and the guy who claims to be operating his business, there’s nowhere to be found. Or, you know, sometimes the address would lead to just a field with no buildings in sight. And Amazon’s not verifying this, even though they say they do. Or you know, even a floor on a building that doesn’t even exist, the building’s three floors high and the address that we got from Amazon’s is sixth floor, the sixth floor. So yeah, luckily, you can serve by email, and we get to completely avoid Hague service or service. fine now. Yeah.
Josh Hadley 47:07
That’s wild. of those people. Did anybody show up in court? Right? Where can they appear? Or was it kind of a blanket like you got the default judgment against all 300 of these? Or, you know, what’s been your experience overall? Like? Are you seeing these overseas sellers actually show up when they do get served? Or are you saying 99% of the time? They don’t respond? They don’t show up? What are you saying?
Hilton Hart 47:35
Um, I’d say, maybe 70% or 80% of the time the defendants actually try to negotiate. Okay, a very small percentage, low single digit, actually go to the preliminary injunction hearing after their surgery to try to object to the asset freeze. And I mean, an even smaller percentage of those defendants are actually successful. So that’s not something to worry about, you know, it really depends on is your evidence strong? Is this a good case, and, you know, we only try to do the good ones. So that’s an important part. And then, you know, a percentage of the defendants, maybe 20-30% of the defendants that tried to settle, ultimately choose not to, and they say, Fine, take the $5,000 in my ecommerce account. And so then we’re able to, because we’ll obtain $100,000 judgment against each defendant. And so we can take up to that amount. And then finally, sometimes we obtained that judgment, and then the defendants like, oh, my gosh, you just took all my money, this is actually a real thing. And then they, they tried to vacate the judgment, which means like, effectively undo it, and then negotiate after the judgment. And so you know, we’ll come up with a fair settlement with them, they may pay us a little bit more than we collected from them, because they want their account back. Or we might return some money. Because, you know, the amount of sales that they did didn’t justify exactly how much money we took from them, or, you know, we learned to a greater extent exactly what their infringement situation was. And so we figure it out after the fact. Love it. Yeah, it’s a very fluid process. And this takes like nine to 18 months to collect the money and do all those negotiations. But the nice thing about the legal strategy is you get to freeze the assets within probably two to three months of starting the process.
Josh Hadley 49:34
Interesting. Love this. Hilton, I could ramble on with you and ask you questions for the next hour about this entire strategy. But I think that we will kind of start to wrap things up here just because there’s so much that goes into all of this, but I think what you shared is super valuable to our listeners. The overall takeaway that I want our listeners to understand, is that you Just sending the takedown notice is not enough. And to me, as I’ve been going through this, I need to go back and look at all the people, we’ve sent IP takedown notices to start documenting them, because man, we, we could have a very large list at this point. And what we’re finding is that to your point, once we do the takedown, then they’ll go modify their product, they still stay in the same category as us, they just modify it just enough to where it’s not infringing, the Amazon will accept it, and then they’re there. They’re free, so to speak, right. But if we were to slap them and you know, actually get money, I think that it would allow us to stay a lot more competitive, it would remove a significant amount of competition from the marketplace. And I think that is what every Amazon seller is struggling with right now. increased competition, it’s a race to the bottom. Overseas sellers. You know, sometimes it’s for money, money laundering purposes. They’re just trying to sell anything, even if it’s at a loss, so they get cash into the US. And that’s about it. So, I love this. I could harp on it more and more. So, Hilton, is there anything else that we haven’t talked about that you think we really need to share with the audience?
Hilton Hart 51:16
I’ve got some notes here. I just want to make sure you gotta follow Molson Hart on Twitter. So like, you know, he’s my brother. But he, in my opinion, is one of the best, if not the best e-commerce follows on Twitter. You’re gonna learn all about a lot about what we talked about today. I think you can learn about manufacturing in Asia, building warehouses in the US. He speaks Chinese, and I found the business we talked about today with him.
Josh Hadley 51:53
Awesome. Great. Well, it sounds like we’ll have to have him on the podcast.
Hilton Hart 51:58
Maybe. You guys would talk a lot about China, I’d imagine.
Josh Hadley 52:03
Well, Hilton, this has been awesome. As we wrap things up, I love to leave our audience with three actionable takeaways from every episode. So here are the actionable takeaways for our listeners, number one, create an IP enforcement or protection strategy for your brand. If you haven’t considered registering your trademark, that should be a given. But do that if you’re not registering copyrights for either your product images, or, you know, if you’re actually designing products, you should start doing that now. And to Hilton’s point, he said, You don’t need an attorney to go File copyrights. With the government, it’s actually a very easy process, there’s tons of YouTube videos about it, I promise, even a VA can figure out that, that that process. And then, if you have brand new products, you know, that are completely, you know, entirely new, then look at pursuing a utility patent or either a design patent as well, to provide that IP protection for you. So that’s number one. Action Item number two, is that you should take your IP infringement enforcement seriously, if you see somebody that is copying you, whether they’re using your brand name, or even colors that are similar to your brand. They’re copying your images, they’re copying the actual design of the product, wherever it may be, start documenting all of that even purchased the product, take screenshots of it, and filed those takedown notices with Amazon. But don’t just file the takedown notices. And think that it’s all said and done. Make sure you’ve documented everything, which then would lead to action item number three, is once you’ve got a big long list probably around I don’t know what you would recommend Hill and is it 2050 100 sellers that you would recommend until you actually file at one of these lawsuits. But that would be my third action item is like then go collect money from these people that are infringing on you. And they’re going to stop competing with you most of the time. So I don’t know, what do you recommend? Is there a given number of like counterfeiters that you want in a lawsuit?
Hilton Hart 54:20
Just to have one number 50 plus 100 plus. But you know, counterfeiters on different marketplaces are not considered or not equal in terms of what you can collect. So you can collect more from an Amazon defendant than you can collect from an ollie Express defendant. So maybe, you know, an Amazon defendant’s worth two times as much from a financial perspective in terms of collection. So that would be good to keep in mind.
Josh Hadley 54:46
Makes sense. I love this. Alright Hilton. And it’s time for the final three questions here. What’s been the most influential book that you’ve read and why?
Hilton Hart 54:54
So this is not necessarily about e-commerce, but I just would pick One Up on Wall Street. I read that years ago. And while it helps, you know, helps you invest in public equities, I thought it applies to business in a number of ways. So some of the points that I really like about it is Peter Lynch’s the, he’s always talking about focus on, on what you know. And so you know, it’s really important, I think, to leverage your strengths. So mine were software and finance, you know, thinking long term, not trying not to cut corners, you want to do things that build your company’s moat, and, you know, extend the runway, don’t just try to get cheap, tiny little wins. You know, and for our business, having a margin of safety, and asymmetric risk and reward is really important. So, you know, if you’re spending money in business, you want to make sure you’re gonna make multiples of that, and with the high likelihood, so we have an extensive system where we appraise these lawsuits. And we look at all the infringers. And we, you know, like I described earlier, you want to make sure there’s money in their accounts, the infringement is strong, you’re, you’re pursuing enough infringers, the attorneys gonna get paid and be happy? And things like that? Yeah, so I really like public equities. But I learned a lot a couple years ago, reading that.
Josh Hadley 56:23
I love that book. I haven’t heard about that one. So I’ve got that on the list now. Alright, Hilton. And question number two, what is your favorite productivity tool, or a new software tool that you’ve recently discovered that you think is a game changer?
Hilton Hart 56:36
So a new one, we started using the software from a company called Predictive Index. And what that they provide is behavioral tests, and cognitive tests, which we give to our employees and prospective hires. So what’s really cool about it is that you can take a job post that you’ve written, and kind of upload it to their software, they’ll analyze it and kind of basically give you like the behavior or the type of person that you’re really looking for, you have to answer a number of questions as well. And so then it gives you kind of like this model. And then what you do is you have all your prospective hires, your candidates take that test, and you try to see who matches up perfectly with the answers to the questions you gave and your job posts. And that’s just been so helpful for us. Because, you know, I’m able to kind of weed out, you know, the, and only end up with the perfect fits, and I’ve saved myself so much time and interviewing, and things like that. So I’m really happy with how my hirings going lately, as opposed to years ago, and I didn’t use that software.
Josh Hadley 57:48
That’s great.
Hilton Hart 57:49
I can say Gmail and Zero Inbox as well, if you’d like me to describe that.
Josh Hadley 57:53
Let’s hear it. Let’s hear it. Okay.
Hilton Hart 57:56
Three, four years ago, I probably could handle a quarter of the emails that I’m handling these days. And I’m only able to do that because of Zero Inbox. So essentially, what’s involved is you create a number of Google Groups, and you have your customers emailing those, and you have automatic labels being applied to those. And so then you’re able to actually decide, okay, I’m gonna knock context switch. And I’m going to focus on one area of my business or emails that came in with, you know, one concern or type of concerns. And so from there, it’s really important that you archive your emails, you don’t just mark them as read and you leave them in your inbox. I’m snoozing emails, you know, if I think someone else is going to handle something later, snooze it into the future. And then I also use auto advance. So after I archive an email or snooze it, it just takes me to the next one in my inbox. And my inbox is only showing me the Google group or you know, the division of my company’s emails that I care about. So because of that, I’m able to get through two or 300 emails a day. I don’t answer them all. But I’m reading every single one that basically my company gets.
Josh Hadley 59:11
That’s amazing. That’s a great strategy. Is that something that you just kind of developed on your own? Or was it like watching YouTube videos learning from somebody else?
Hilton Hart 59:20
Ah, yeah, I saw a couple people talk about it on Twitter. I wish I had the link handy. I’d share it with you guys. But yeah, there should be some YouTube videos or Twitter threads that you know, describe exactly how to do the settings in Gmail, or, you know, it’s applicable to any email client. So I highly recommend that people do that. I’ve tried to get basically everyone at my company to do it. Some people really resist; they just can’t handle archiving and email and things like that. But I basically guarantee you that it’s going to be useful.
Josh Hadley 59:55
Yeah, that’s amazing. Love that tip. Alright, Hilton, last question. Who is somebody that you admire or respect the most in the e-commerce space that other people should be following, and why?
Hilton Hart 1:00:05
I realize I guess I answered that one earlier. But it’s Molson Hart. It’s not just because he’s my brother. You know, he’s, he’s really contrarian. He thinks for himself. He’s a jack of all trades. I mean he was my original mentor, I still consider him my mentor. You can really learn a lot from following him. I’m not just telling people to follow him to get his numbers up. I mean, you’re gonna really learn a lot if you do.
Josh Hadley 1:00:36
That’s fantastic. Well, Hilton, this has been amazing. Thanks for sharing all of your insights with us today. If people want to learn more about you, or they want to even hire your services, to go and sue these counterfeiters and start collecting money from them. How can people reach out to you and learn more,
Hilton Hart 1:00:55
You can submit a form on our website, and that email will turn into an email that goes directly to me. Or you can email me directly. My email address is H H, as in Hilton Hart. So it’s HH@Edisonlf.com. It’s very easy to get a hold of me. If you email me I will, you know, review your intellectual property infringement situation. And we’ll try to help you no matter what, even if, you know, our legal strategy doesn’t kind of fit what you’re trying to accomplish. And I’m on Twitter, but I’m mostly just talking about public equities and things like that.
Josh Hadley 1:01:36
You’re a jack of all trades and a wealth of information. So, Hilton, thanks so much for your time. It was a pleasure having you on the show today.
Hilton Hart 1:01:45
Thanks so much for having me. It was fun.
Outro 1:01:48
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