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TheStreet Open House

Small Businesses Keep Copycats at Bay

Stocks in this article: WMTTGTSBUX

The small toy business HandsOnToys applied for a patent shortly before launching Toobers and Zots. "We got imitated almost immediately by Wal-Mart (WMT)," HandsOnToys Chief Executive Officer Andrew Farrar says. "We had filed for a patent, but it was still pending, and 'patent pending' doesn't protect you."

Wal-Mart sells a sleeved blanket called the "SnugMee," but those who care about branding know that this doesn't carry the cache of a Slanket (which has a registered trademark) or a Snuggie (which has a "TM" after its name).

By the same token, "Teva," which is synonymous with "outdoor sandal," is a registered trademark. Because Teva sports a patent for the sandal, parent company Deckers Outdoor (DECK) was able to score legal settlements with what it said were a slew of copycats, including Big 5 Sporting Goods (BGFV) Wal-Mart and Kohl's (KKS).

A utility patent, which protects the technology and function of a product, or a design patent, which protects the aesthetics of a product, can be effective against bigger companies, says Jeffrey Schox, a patent attorney and founder of the Schox Patent Group in San Francisco.

"People often think of a bigger company walking over the rights of a smaller company," he says. "This happens, but if the patent rights are solid and the infringement is large, there are many law firms that will take on the case on a contingency-fee basis to protect the smaller company."

Entrepreneurs should decide whether their product is novel enough to warrant legal action. In Decor Craft's case, measured humility tells Kabessa that sometimes it's best to let it go. (That's what he decided to do when he recently saw a product similar to Decor Craft's Heart Measuring Cups in the bargain bin at Target (TGT).

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