Even with a patent, water balloon invention Bunch O Balloons hurt by low PTAB standards.
Josh Malone has eight kids. On hot Texas days, he joins them for a water balloon fight to cool off.
Dad is normally in the rear with the gear. He is the family reloader, filling and tying water balloons to supply his kids with the ammunition necessary to keep the backyard action going. It was during one of these skirmishes that Malone figured he could replace himself if he created a harmless weapon of mass destruction. He thought of several ways and then, like so many inventors before him, obsessively tinkered until he finally invented one that worked. It screws onto a garden hose and has dozens of long tubes. Attached to the end of each tube is a self-sealing balloon. You just turn on the hose and when the balloons are substantially full, you shake them, they fall off and the kids launch another attack. Leonardo da Vinci would be proud.
He named it Bunch O Balloons. Malone knew then that he had a winner, and building a company based on his invention became his American Dream. He filed a provisional patent application in February 2014. Things went quickly at the United States Patent and Trademark Office; his first patent was issued about 18 months after the application was filed.
Patenting proved he was the inventor and had an exclusive right to his invention. More important, the patent could be collateralized to attract investment to build his start-up.
A Consumer Sensation. Then…
Investors look at upside potential and downside risks. On the upside, a patent’s exclusive right meant that if Bunch O Balloons took off, Malone would be able to keep competition at bay long enough to establish his start-up and return the investment. On the downside, a large company with deep pockets, existing customers and solid distribution capabilities could steal the invention and massively commercialize it—thus flooding the market and killing his start-up. But patents mitigated this risk. In the worst case, Malone’s investors could take control of the patent and return their investment by defending it against the same infringers who killed the company.
He manufactured an initial batch of products and ran a crowdfunding campaign on Kickstarter. This campaign was a hit, generating 598 orders on Day 1 and bringing in nearly $1 million overall. Within a couple of days it triggered national media coverage in Sports Illustrated and Time, and on “Good Morning America” and “Today.” Bunch O Balloons went viral, with 9.6 million YouTube views. This would mean everything to his growing family.
Orders kept pouring in during the next few months. Malone was contacted by several ethical manufacturers seeking to license his invention. With business picking up fast, he partnered with a company called ZURU, which is now marketing, manufacturing and selling Bunch O Balloons. He achieved the American Dream. But that means nothing under the current American patent system.
Potential investors, customers and ethical businesses regularly watch Kickstarter. But there are others. Infringers also monitor crowdfunding sites and other locales where a potential new product draws heavy interest. Bunch O Balloons accused Telebrands of knocking off the product a few months after Malone launched his Kickstarter campaign.
Deck is Stacked the Wrong Way
Today, the U.S. patent system favors infringers. In fact, it is a CEO’s fiduciary duty to steal patented technologies, massively commercialize them and then never talk to the inventor unless the inventor sues. In the vast majority of cases inventors cannot access the courts because contingent fee attorneys and investors have largely left the business, so in most cases the infringer gets to keep the invention free of charge.
Much has been written about how, in the America Invents Act of 2011, Congress stacked the deck against inventors by creating the Patent Trial and Appeal Board in the USPTO. The PTAB turned property rights upside down by immediately invalidating the property right already granted by the USPTO and then forcing the inventor to reprove the validity of the same property right.
Under the leadership of Michelle Lee, the deck was stacked even further by setting PTAB evaluation standards much lower than the court. Lee’s decision to set these low standards weaponized the PTAB for the mass destruction of patents—and a weapon of mass destruction they certainly are. The vast majority of patents evaluated by the PTAB are either invalidated or neutered. Big infringing corporations know this.
So when Malone sued Telebrands for patent infringement, the company responded by filing a PTAB procedure called post-grant review. The court did not stay the case, pending the outcome of the PGR, and ordered a preliminary injunction against Telebrands. Telebrands appealed the preliminary injunction to the United States Court of Appeals for the Federal Circuit
During the pendency of the appeal, the PTAB rendered its verdict. Malone’s patent was invalidated as indefinite under Section 112. The claims state that the balloon must be “substantially filled,” which, according to the PTAB, is not defined: “… the Specification does not supply an objective standard for measuring the scope of the term ‘filled’ or ‘substantially filled.’”
But how else can you write the claims? You could use grams of water if a balloon was a solid structure, or perhaps if all balloons were exactly the same. But manufacturing processes that make balloons are not accurate processes. The thickness of the balloon’s wall varies greatly from balloon to balloon and even in the same balloon. Yet Michelle Lee’s PTAB invalidated the patent that Lee’s USPTO had just issued. (Five other patents have been issued to Malone; one even refers to this very PTAB proceeding as prior art, yet it was still granted by the examiner. I kid you not.)
The case is not over. Moreover, two additional PGRs have been filed against Malone on other patents, adding $1 million to his costs. Already, he has spent multiples of what he earned in his Kickstarter campaign and probably everything he’s made in this entire American Dream. And he’s got years left of litigation and millions more to spend.
Patents can be invalid in multiple ways by different branches of government and under different standards. Often these branches and standards disagree with each other, as is the case here. Today, nobody can know if a patent is valid until the United States Court of Appeals for the Federal Circuit or the Supreme Court says it is.
But this is the world inventors live in. If you invent something marketable, you will pay for it with years in court and millions of dollars. Nobody respects patent rights. They don’t have to. It is better to steal them and litigate the inventor into oblivion. Josh Malone is fortunate to have a partner willing to fight with him and accept considerable financial burden. But most inventors cannot even open the courthouse doors.