Smart Parts Lawsuit FAQ:
Okay, what's going on?
-Smart Parts, maker of the Shocker and Impulse paintball guns, is currently suing Indian Creek Designs (makers of the Bushmaster and BKO) for Patent Infringement.
What patent are they supposedly infringing?
-SP has five patents, This One is probably the key one. Read claim 7, maybe claim 8. The rest are here, here, here, and here.
What do you mean "expanded"?
-They added to the patent, to cover a broader area, to cover more than just what the original patent was intended for. Instead of simply patenting the Shocker itself, as the original patent was filed for, the expansion now allows them to make the claim that it covers any paintball gun that uses electricity, a switch (for power or the trigger) and/or a solenoid to fire a paintball.
How can someone expand a Patent?
-There are things in the patent world known as Continuations and Continuations-in-Part (CiPs). They both use a previously filed patent application that is still pending to get a better priority date. This previously filed case is called the parent, and the continuations and CiPs are called children.
How do Continuations work?
-A continuation is typically filed when the inventor wants to further define the material in the parent case. The continuation cannot add new material to the patent.
Continuations are often filed when the parent is too broad to get a patent, but does contain to a patentable invention. The continuation further defines the inventions in order to get allowed. There are other "uses" for continuations, but this is the main one. The other benefit is that anything disclosed in the interim does not count as prior art because the continuation has an effective filing date that is the same as the parent.
How do Continuations-in-Part work?
-Just like continuations, except that new material is added. The CiP gets priority just like a continuation, but not on the new material. This is a very important distinction: even though the effective filing date on the patent may be one date, the effective filing date on any newly added material has a later filing date.
Are there any other ways?
-Yes. Divisions, Re-Exams, and Re-Issues. However, I don't think that they are relevant for the current issue (and I don't know enough about them to pontificate accurately)
How can SP take advantage of this system?
-SP files a patent in '96. The original patent never issues, but they file continuations and/or CiPs on the parent. In the mean-time, they build their markers and allow others to do the same. At the time, nobody else realizes that they're infringing on a patent because until recently, pending applications were confidential (this is no longer the case). So, they continue this process for a while until a big enough market exists, and then they finally allow one of their patents to issue. Now, they have a whole market that is infringing on their patents that they can sue. Sneaky, no?
What can be done to stop them?
-Depends. If the "expansion" to their patent was added in a CiP, then the effective date for those parts of the invention is later than the filing date for the parent, and SP has no case. In fact, if this comes out in the suit, it could invalidate parts of SP's patents. (Wouldn't that be ironic)
If the "expansion" to their patent is a new court intrepretation, not much shy of invalidating SPs patents. The courts have the deciding factor as to the intrepration of a patent despite the fact that they are supposed to be as clean-cut as possible.
In a way, broadening their patent may work against them. The best way to stop SP would be to invalidate their patent. Now that their patent is apparently much more broad, it should be easier to find prior art. If this prior art were to come out in court, it could tip the balance.
So what's all that mean?
-So that means Smart Parts has essentially patented electronic paintball guns. Period, end of conversation.
You said a switch. How about we use a button, not a switch? What about the E-Mag? It uses a little yellow pin. Or the LCD's "key"?
-Won't work. The 'switch' part can mean either the power switch (turning the gun on and off) and/or the trigger switch (used to fire the marker.) The definition of a "switch" is something designed to make or break an electrical connection; a button, key or pin is just a different kind of switch.
Besides which, the patent as interpreted now, includes the very idea of using electricity to fire the gun. It also can cover the use of solenoids, and a solenoid can be interpreted as either a mechanical solenoid, like used to actuate the sear in an E-Mag/X-Mag or Black Dragun, or an air valve solenoid, as used in Bushmasters, Intimidators, Angels, E-Blades or Matrixes.
Can they do that?
-Technically, yes. The individual parts are not patentable, but the assembled parts, when used for a specific purpose, ARE patentable. It's like, say, a GeForce video card: The individual components used to make the board are not patentable (or have been patented by others) but when they're all assembled into a working card, the entire card as an assembly is indeed patentable.
SP cannot patent a battery, they cannot patent a switch. They cannot patent electricity. But they CAN patent the use of a circuit board controlled by a battery, activated by a switch, which runs a solenoid, and used to fire a paintball gun.
Isn't that extremely broad?
-Yes. The original patent was for the Shocker electropneumatic paintball gun, among the first production electros. However, the recent expansion of that patent broadend it out to include any electropneumatic paintball launching device.
So what does that mean?
-If the suit goes through, SP will have precedence; in other words, official, court-mandated acknowledgement that ICD's markers were indeed infringing on the patent.
So ICD will have to pay off SP?
-More than that. Chances are SP will demand royalties on all electronic ICD products made to date. That would include all semiauto Bushmasters, all Defiants (made for Bob Long by ICD) and all BKOs.
That doesn't sound so bad.
-Doesn't it? What if SP asks $100 per marker made? There's no limit to what SP could demand, if the courts side with them. How many guns has ICD made, 20,000? If SP only asks $50 a gun, that's a million dollars that ICD would have to cough up. How many Defiants did they make? 10,000? There's another half-million. BKOs? They've been selling well, but they're pretty recent, call it between 2,000 and 7,000. There's another hundred to three hundred and fifty thousand.
Meaning ICD might have to come up with nearly two million dollars to pay for guns they've already made.
Okay, that's pretty steep, but it's not the end of the world. Another $50 per gun isn't too bad.
-That assumes ICD can afford two million, and that assumes SP will only ask $50. There's no reason they couldn't demand $75, or $100, or $200 per gun.
Oh come on, it wouldn't go that high.
-Why not? Put it this way; the Bushmaster is a direct competitor to the Impulse, in price and performance. SP can claim that each Bushmaster sold equals a lost sale of an Impulse. Let's say that SP makes a $100 to $200 profit on each Impy, which is not unlikely, and through the courts can see that ICD sold 20,000 Bushies. $100 multiplied by twenty thou is two million dollars.
On top of that, the current rumor floating around says SP might ask $1 million for the license to produce electronic markers. So in our SWAG example, ICD might have to come up with $2 million to pay for guns they already made, plus another $1 million to buy the rights to continue making Bushies and BKOs.
They can't afford that?
-I doubt it. Contrary to popular belief, not many of these paintball manufacturers make a couple of million a year. Several might have sales around a couple mill each year, but after payroll, utilities, advertising and other costs, the profit margin is considerably lower than that.
Yes, they're making money, but even Tom Kaye or Bud Orr couldn't pull $3 million out of the bank to pay the fees. It's very likely it would absolutely break ICD and they'd go bankrupt.
Is it really that bad?
Yes and no. The recent event was that a judge approved SP's right to sue ICD over the infringement. We don't know what's happening, we won't know how it'll turn out until it's over.
Why are they just suing ICD? What about Bob Long, WDP and Kingman?
-Very good question. First off, SP has sued WDP, twice, in fact. Once in '97 and again in November of '02. We're not yet sure what those are/were for, but we're looking into it.
Second, Kingman, like WDP, isn't an American company. It's somewhat easier to file suit against an English company than a Taiwanese company.
There's speculation that ICD was "first on the list" due to the fact Jerry Dobbins, the owner, has been ill and unable to help run the business on a day-to-day basis. Go after the weak ones first, in other words, and get the precedent set. Then go after the ones with money- like WDP.
Will WDP and Kingman be affected, if they're not US companies?
-Not directly, but they would when they try and import a marker that falls under the SP patent into the US. In other words, they could sell them with no difficulties in England, but if they tried to import Angels to the US, they'd be legally subject to the licensing fee.
So what happens if ICD loses?
-SP then systematically goes around threatening the makers of other electros and demanding their past royalties, their licensing fees and setting up to accept royalties from future production.
AGD would have to pay for all the E-Mags and X-Mags made to date, W'Orr would probably have to pay for any and all W'OrrBlades, Bob Long would have to pay for all the Intimidators. Kingman would have to cover the E-Spyders (and they've sold tens of thousands) and so on.
Didn't SP already "threaten" E-marker manufacturers?
-Apparently yes. We're told that SP contacted all the major electro manufacturers about two years ago, and offered them licensing terms. They were, naturally, uniformly declined since the patent, at the time, was not broad enough (the expansion hadn't been filed or hadn't completed the process) and really only covered the actual markers- the Shocker mainly, and later the Impulse.
And since electros like, say, the Automag, operate wholly different from either of them, there was absolutely no reason to pay royalties on an noninfringing design.
There's been speculation that the rumored $1 million licensing fee and $75 per gun royalty are therefore "punitive"- as in 'you could have taken our offer then, now you're going to pay for it.'
Is that all?
-That's not enough? We're talking tens of millions of dollars from companies that probably cannot afford it. Those fees will result in higher costs to you and me, the average consumer.
-Increased costs of production are always passed on to the consumer. If AGD has to pay another $100 per gun to make the X-Mag, and has to recoup their million-dollar license fee, they will pay it by raising the cost of the gun by the same amount.
In other words, the cost of every electro out there, from the $300 Black Dragun to the $1,900 Dragon Intimidator will cost more, guaranteed.
What about the Impulse and Shocker?
-Good question. SP will have the power to force other makers to raise their prices, so SP could, theoretically, leave the prices on their line alone, or even drop them slightly- they'll be awash in cash, after all- meaning you might have a choice between a $800 Bushmaster or a $450 Impulse.
However, with SP's monopoly, they could raise prices on theirs as well. Instead of that $800 Bushy, you might have to go for a $750 Impulse.
What's wrong with that?
-If you like the Impulse or Shocker, that's fine. Also assuming you don't mind paying more. But it's well established that both markers are no longer- if they ever were- "top of the line". The Shocker is overly bulky and has horrible gas efficiency, combined with a relatively slow rate of fire. The Impulse all but requires the addition of an LPR in order to be tournament-ready, and there's some common, known problems with threads stripping out of the body due to the use of lower grade aluminum.
Also, it will have the effect of severely restricting the development of new markers. It already costs a bloody fortune to design and manufacture a new gun, but it can be done for under half a million. Now triple that- in addition to half a mill in development, you have to pay another million in licensing just to be allowed to produce it.
It's hard enough as it is to bring something to market without massive additional costs like that.
What about existing guns? We going to have to turn them in?
-Oh no. Anything already sold or already "in the pipeline" is fine. If you already have a Bushy or a Timmy or a Dragun, you won't pay anything more, nobody's gonna take it away, they won't become "illegal" or anything of that nature.
It will only affect later production (and the companies that have to pay retroactive royalties.)
The one upside is that resale values of used markers will increase. The downside is that the cost of new markers will ALSO increase.
So they're not going to ban electros or anything, right?
-Of course not. The suit has nothing to do with the use or sales of the markers. It only has to do with one manufacturer supposedly producing a line of paintball guns that may or may not infringe on the patent of another manufacturer.
Even if SP wins and ICD goes bankrupt, there's still literally millions of electros already out there in peoples' hands and on store shelves that will be totally unaffected. Buy 'em, sell 'em, trade 'em, shoot 'em. No worries there.
What about conversions? Like the RaceGun or E-Blade kits for 'Cockers?
-Good question. No one knows. It's likely that'll be a gray area. It's possible that the kits won't be affected, but any mass-produced completed guns will. Meaning you'll probably be able to get E-Blade kits, and you'll certainly be able to get 'Cockers (being wholly unaffected by the suit) but you won't be able to buy prebuilt W'OrrBlades, for example.
Isn't one of the people at Smart Parts a patent attorney?
-Yes. According to this document from the FTC, two individuals currently associated with Smart Parts were involved in an "invention submission" business, which the Federal Trade Commission shut down for "deceptive practices".
What's "prior art"?
-Prior art means a patent application or document referenced in a patent, that deals with the subject OF the patent. Meaning if somebody patented the sandwich in 1985, and then somebody tried to patent a "method for holding meat between two slices of bread" in 1990, the sandwich patent would either invalidate the later patent, or would have to be referenced as to how the later patent is different from the prior one.
Is there "prior art" for the SP patent?
-Maybe. There's a 1971 Patent by the US Navy for an electric, air-powered device for launching "dye filled balls" for training purposes. If this patent is still valid- and it may not be- it would be "prior art" for the SP patents. Interestingly enough, SP's documents mention this patent, so it's entirely possible it's not valid for whatever reason.
There's an E-mail going around, supposedly from SP, that says the suit is over some supersecret feed system that ICD was supposed to be developing.
-Near as can be determined, that E-mail wasn't an "official" public press release. None of SP's patents cover a "feed system", and it seems odd that SP would be suing over a system nobody's seen or heard of and hasn't been produced.
There's speculation that the bosses at SP are keeping the rank-and-file employees in the dark as to the true nature of the suit, which is logical since one doesn't want the wrong info to reach the wrong person in a legal battle.
Smart Parts Lawsuit Timeline
Sometime around '94 or '95, Smart Parts contracted a company called PneuVentures to develop an electrically-operated paintball gun.
PneuVentures was literally a garage operation, consisting of, as I recall, about four people. Those four were all various flavors of aerospace engineers or what have you (one of the early SP ads touted the fact the Max Flow reg was designed by the same people that helped design space shuttle EVA suits, or words to that effect.)
PV designed and built the first Shocker. They designed and built the circuit board and firing software, developed the dump-chamber system, sourced the parts, developed the regulator needed to make it all run, etc.
They also patented several parts of it, including the key issue of patenting the gun itself.
The marker was very successful- remember, this was back in the days when any semiauto, even a Stingray, cost $250, and the Automag and Autococker were still the pinnacle of tournament hardware.
Anyway, SP, so the rumor goes, ordered a huge batch of guns from PV. Being a small garage shop, they borrow money and contract out for the fabrication.
However, somehow, SP decided not to pay. Either they couldn't (or said they couldn't) or there was some other wrangling going on, but the bottom line was that PV got stuck with inventory they couldn't contractually sell, and heavy debts they incurred in having it all made.
That forced them into bankruptcy, and SP swooped in to buy up the inventory and the IP (patents and the like) for pennies on the dollar.
SP arts assembling the guns and selling them, and since they got the parts for a pittance, they were raking in a huge profit- on top of the not all that trivial profit that SP in general (barrels and such) was already making. In other words, it turned a reasonably successful business into a thriving company flush with ready cash.
Now, the elder Gardner was a patent attorney, and since the Shocker patent had not yet been finalized (whatever the proper term is) he altered it so that it didn't just cover the Shocker, but the very concept of using electronics to fire a paintball.
Several years later, that patent finally goes through, and by this time, other companies have started making electronically operated markers- Angels, Bushmaster 2000s, Intimidators, etc.
SP, with the freshly-issued patent, starts working on people it sees as "infringing" on it, and issue a bunch of 'cease and desist' orders.
Some people, like Bob Long, fold like a napkin and enter into licensing deals, others, like WDP, ignore it.
SP then sues ICD, makers of the Bushy2K. For several reasons: One, the Bushy is direct competition, in both style and price, of SP's Impulse, and two, Jerry Dobbins, head honcho of ICD, is at the time gravely ill, and the family-run business is focusing on him, not the SP suit. They also don't have the ready cash, thanks to the illness, to fight against SP's millions, and lose the suit.
Emboldended by that 'victory', SP renews it's C&Ds against other companies. Again, some fold and sign licensing agreements, others, like AGD, stop making electros altogether. (Though in that latter case, the SP suit wasn't the entire reason for dropping the E-Mag.)
With almost everyone else either shut down, or already locked in licensing agreements, SP finally goes after their biggest competitor and sue WDP.
WDP digs up the guy who actually invented the Shocker, and gets him to testify. That fellow brings with him a heavy notebook full of dates, times, processes and other records detailing the hows and whens of the development of the Shocker.
When cross-examined on the stand, neither Adam nor Billy Gardner could even give a good description of how the gun actually worked, let alone 'recall' any details of how 'they' invented it.
The judge finds that the PV guy is in part owner of the Shocker patent, and he then sells that part to WDP. Meaning the Angel guys are now part owner of SP's E-gun patent.
I don't know how paid-in royalties or the like from other companies work, but the bottom line was that WDP now did not owe SP any back or future royalties, but the patent was in fact still valid for any other 3rd party company wanting to make E-guns.
I don't know how companies like Kingman or Tippmann made their arrangements, or even if those agreements survived the dissolution of SP.
Anyway, the SP/WDP uneasy truce lasted 'til SP crashed, but the patent is now- or was up until very recently- owned by a bank. That doesn't mean it's invalid and you can start making electros again- in fact, the bank is legally obligated to fight infringements to maintain the value of that intellectual property.
And now, as it stands today, supposedly some other company has swooped in and bought out SP's stuff- including, supposedly, machinery, IP (yes, the patents) customer lists, remaining inventory, and so forth.
That company is deliberately obscuring it's origins, though- the WHOIS on their site is masked, the company is under a generic LLC name with few or no individual names attached, etc. That had led to speculation that the Gardners- who, as I've said before, are no dummies- may well have pooled cash (they were all millionaires, all they had to do was sell off a spare house or two) and formed the dummy corporation to "buy themselves back".
They would not by any means be the first company that went through bankruptcy to shed themselves of unsustainable debt or other sorts of bad legal agreements.