Knockoff Products – High Cost to Getting Standards and Conformance Wrong

Knockoff Products – High Cost to Getting Standards and Conformance Wrong

It’s likely you have heard the story of the Bionic Wrench.  If not, it was the creation of an industrial designer who had the misfortune of having it picked up by a large retailer.  After a brisk first year of holiday sales, the retailer decides it would design a reasonable knockoff to sell under its own brand name at a lower cost using a foreign manufacturer to produce it, all at the behest of obscure financial analyst.  Fortunately for the retailer, designing knockoffs of existing mechanical products pose few safety or conformance problems.  That’s not to say there may by patent infringements concerns; but patents of mechanical designs that are based on incremental improvements are difficult and costly to prove giving a large, successful retailer an upper hand.

Knockoffs of electrical products however poise greater challenges to product designers as well as retailers.  That’s because of the need to show compliance with relevant eletrotechnical standards.  In the case of Brand Marketing Group, L.L.C. (Brand), they actively pursued a business relationship with Ace Hardware.  After several years, it was awarded a contract to design and provide 4,000 vent-free gas room heaters.  Brand designed the heater and then contracted with a Chinese firm to manufacturer, test and have the heaters certified for use in the U.S. market.  The Chinese firm hired a local certification body having a global footprint to inspect the manufacturing facility and assure the heaters met applicable safety standard of the U.S. market.  The certification body inspected the facility’s capability to reproduce the heater and provided a test report showing the heaters complied with ANSI requirements.  Satisfied by the certification body’s reports, Brand orders 5000 heaters from the Chinese firm and has them shipped directly to Ace Hardware franchises across the U.S.

After a few weeks on the shelf, a competitor in the vent-free gas room heater arena contacts representatives from Ace Hardware, alleging that, in fact, the heaters did not meet applicable U.S. safety standard.  The competitor understood that Brand’s heaters had been intended for use inside a home.  If that was the case, such use requires the heater to have a critical safety component, a pressure regulator, and to state in its installation instructions that profession installation is required.  Ace Hardware quickly removed the product from its shelves and successfully sues Brand for a $611,000 judgment.  It’s not certain that either Brand or Ace hardware reported an unsafe product to the U.S. Consumer Product Safety Commission.  Brand later files suit against the certification body for negligent misrepresentation.  The certification body files several counterclaims, including claims of fraudulent misrepresentation, concealment and trademark infringement.

During the deposition of the certification body’s chief engineer it was reviled that an ANSI standard for outdoor grills had been used as the applicable standard to test and certify the heaters.  After three days of trial and three days of deliberation, the jury awarded Brand $725,000 in past damages, $320,000 in future damages and $5 million in punitive damages.  All of the counterclaims were dismissed.

It’s not certain if Brand’s lawsuit will stand on appeal.  Regardless, Brand should be looking at its quality management system, specifically its product design controls.  Having robust product design controls would likely have required Brand to document the product design input criteria.  If that had been the case, it would have been clear the product was intended for indoor use, which mechanical and electrotechncial safety standards were applicable, whether installation would require professional knowledge and what would need to be stated in the installation instructions.  Given that a competitor was able to quickly determine the design was unsafe for the intended use, having a basic knowledgeable of competing products would have been of great use during the process of documenting the product design input criteria.  And if design controls worked as intended, it would have been during the verification process, the process used to determine if the final product design met all of its design input criteria, that it would likely have raised concerns with compliance to a standard that may not be suitable for indoor use, saving all parties from harm.

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