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Protect Your Business From Knock-Offs

By Ilana Diamond
"Knock-offs" are a fact of life these days. Protecting your company may not be the first thing a start-up considers, but it probably should be.

As fast as your company can create successful products, competitors can begin copying them just as quickly - sometimes within months or even weeks. In my opinion, the best way for a small company to combat knock offs is to stay ahead of them. Stay close to your customers, and find out what they like and don't like about your products. Improve constantly. Be first. Compete with your own products, before the competition can. At Sima we regularly ask our customer service staff what questions people are calling with...what problems they have with our products, what extra features they are asking for. Some of our best products have come from consumer suggestions.

Some people say that the solution to knock offs is to protect all of your products through patents and other legal means. While a patent can be very useful for certain products, there are several things to consider before spending the time and money to pursue one:

1). Patents take time to issue, especially utility patents. The patent office is overloaded, and we have had products for which we filed a patent, introduced the product, sold it through its lifecycle, and discontinued it, all before the patent issued. That is not unusual for technology related products where life cycles can be short.

2). Even if you get a patent issued in time to protect your market, you need a budget to defend it. A patent is only worthwhile if you intend to pursue infringers, and that takes time and money which many start-ups don't have. On the plus side for more established companies, the profits from a successful product can be used to protect your Intellectual Property. In my experience, you may only need to prosecute one infringer to get others to either agree to stop or to pay you a licensing fee.

3). Many patents can be circumvented, allowing a competitor to produce a similar product which doesn't infringe your patent. If you are investing in patent protection it is also important to think broadly about how your technology might be relevant in the future.

I made a mistake like this about 15 years ago when Sima developed a hands-free cell phone product. It attached to a mobile phone and broadcasted the phone conversation to an unused channel of a car's FM radio. The conversation could then be heard over the car speakers allowing hands free conversations while in a car. Sima holds a patent on that product. Today, millions of FM transmitters are sold for use with iPods and other MP3 players. It is exactly the technology that we patented, but used for music not voice. Unfortunately, our patent was written when digital music and MP3 players were yet to be invented, so the technology we developed is unprotected for today's main use.

As a small company you need to know how and where you are adding value to your customer. If someone can copy your product and cut you out, you can either spend your time and money fighting them, or you can figure out how to add enough value so it doesn't make sense for your customers to cut you out. In my experience, the second option is the better long-term strategy.

Questions? Comments? BigIdeaCES@CNBC.com