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bamabonners
05-03-2017, 09:32 AM
Just saw this on another forum...

http://www.nasdaq.com/press-release/mastercraft-and-malibu-settle-patent-litigation-20170502-01833

Thoughts?

moosehead
05-03-2017, 09:35 AM
Glad to see it settled, but I'm sure MC would have rathered it did not include a license for certain patents given the delta between the systems.

Mastercraftdave
05-03-2017, 09:36 AM
Just saw this on another forum...

http://www.nasdaq.com/press-release/mastercraft-and-malibu-settle-patent-litigation-20170502-01833

Thoughts?

So Mastercraft has to pay Malibu? I don't get how that works......

mzimme
05-03-2017, 10:14 AM
So... time for Malibu to move on to Skiers Choice?

That patent lawyer was goooooood.

Roman
05-03-2017, 10:30 AM
What I dont understand is how does lenco get away scott free? and all the other trim tab manufacturers? and Supra? and CC?

good patent lawyer is right! That's for sure.

So what happens when you are infringing. Do they just go sue the next guy? What about all these other little companies popping up selling surf tabs. How are they getting away with it?

Mastercraftdave
05-03-2017, 10:33 AM
What I dont understand is how does lenco get away scott free? and all the other trim tab manufacturers? and Supra? and CC?

good patent lawyer is right! That's for sure.

So what happens when you are infringing. Do they just go sue the next guy? What about all these other little companies popping up selling surf tabs. How are they getting away with it?

I'm with you. I would have thought that MCs system was different and they have a Patent on it.

I would imagine that CC and Supra are next. What about GSA and Super Surfer tab or whatever they are called.

FourFourty
05-03-2017, 10:46 AM
CC has already been hit..... that was before MC

mzimme
05-03-2017, 10:56 AM
CC has already been hit..... that was before MC

Yep. Little while back when Moomba released the Craz, I was out on a demo ride with the rep and he said MC was fighting this one, and that he hoped they won because the plan was to come after Supra (skiers choice) next. They're just going from company to company at this point.

I don't think the GSA guys are dealing with it yet because they're just a small fish compared to the OEM's. GSA isn't taking business from Malibu since Bu won't retrofit anyway.

MC25
05-03-2017, 11:06 AM
after all of this, I will literally never think of owning a malibu. That patent is BS...

csherbo
05-03-2017, 11:11 AM
I think the reason Malibu is having success defending the patent is because it isn't about the tab, it is about causing delayed convergence of the wake. If they had just patented the surf gate, it would not have been enforceable. Tabs for the purpose of adjusting the list of the boat are probably safe, rather than delay convergence. I suspect MC Gen1 was not subject to the patent claim.

kscrib
05-03-2017, 11:12 AM
Seems like BU is looking for alternative ways of making an income. When product line is declining, go the litigation route. Just my 2 cents.

FourFourty
05-03-2017, 11:22 AM
I think the reason Malibu is having success defending the patent is because it isn't about the tab, it is about causing delayed convergence of the wake. If they had just patented the surf gate, it would not have been enforceable. Tabs for the purpose of adjusting the list of the boat are probably safe, rather than delay convergence. I suspect MC Gen1 was not subject to the patent claim.

Problem with that, is every way you get a surf wave is delayed convergence. That is what actually makes the wave. Listing a boat with ballast causes delayed convergence, listing a boat with tabs causes delayed convergence, and making a boat dog track with a gate causes delayed convergence.

MC25
05-03-2017, 11:25 AM
I wish I was at the point in my life to throw money at a patent appeal process against them. absolutely ridiculous

brucemac
05-03-2017, 11:45 AM
let me guess, new boat prices are going up! :LOL:

csherbo
05-03-2017, 11:46 AM
As much as it irks me as a MC owner that this happened, I don't blame Malibu at all. The entire point of patents is to try and protect business differentiation, and if it is a strong enough patent to enforce, they would have to try and do it. Doesn't Correct Craft have a patent related to towers that everyone is paying a license fee for? Seems ridiculous these days, but if you can get a patent granted, and defend it, it is only good business sense to do so.

I am surprised MC decided to settle, as I would have thought they could have defended this, but perhaps the potential outcome of a loss was a lot scarier than the settlement.

csherbo
05-03-2017, 11:49 AM
I should have also said, sometimes settlement occurs to clean up the state of the business because something else is in the works, that an outstanding lawsuit gets in the way of. Things that come to mind are capital raises (IPO more equity), acquisitions, mergers, significant product launches etc.

Mastercraftdave
05-03-2017, 11:52 AM
As much as it irks me as a MC owner that this happened, I don't blame Malibu at all. The entire point of patents is to try and protect business differentiation, and if it is a strong enough patent to enforce, they would have to try and do it. Doesn't Correct Craft have a patent related to towers that everyone is paying a license fee for? Seems ridiculous these days, but if you can get a patent granted, and defend it, it is only good business sense to do so.

I am surprised MC decided to settle, as I would have thought they could have defended this, but perhaps the potential outcome of a loss was a lot scarier than the settlement.

I agree with you here. It will be curious to see if Bu goes after all these I/O companies with surf systems. Supra and Moomba better be ready.

I just don't understand, if MC has a patent for the GEN2 system, how Bu could sue them and win? Like 440 said Delay Convergence can be done many ways and if that the case they could sue Centurion because they list their boat. Maybe a patent lawyer will chime in...

mzimme
05-03-2017, 12:18 PM
I agree with you here. It will be curious to see if Bu goes after all these I/O companies with surf systems. Supra and Moomba better be ready.

I just don't understand, if MC has a patent for the GEN2 system, how Bu could sue them and win? Like 440 said Delay Convergence can be done many ways and if that the case they could sue Centurion because they list their boat. Maybe a patent lawyer will chime in...

They didn't win based on how that article read. I took away that they still believe they own the property their patent says they own, they're just saying that the cost to continue that defense is higher than the cost of the settlement. What probably happened is they guesstimated X number of dollars is what it's going to take with their lawyers to defend their property, when they could just pay a number that is lower than that defense, and make it all go away. There's no admitting that they "stole" anything going on here, it's just a cost analysis.

Morety
05-03-2017, 12:21 PM
I just don't understand, if MC has a patent for the GEN2 system, how Bu could sue them and win? Like 440 said Delay Convergence can be done many ways and if that the case they could sue Centurion because they list their boat. Maybe a patent lawyer will chime in...

Patent lawyer here.

In the patent world, you have to remember that what you are analyzing is whether a product reads on a patent's claims. The analysis isn't comparing product vs. product. So here you compare MasterCraft's products to Malibu's patent claims and vice versa. In this instance, MasterCraft settled with Malibu because they felt it wasn't worth the risk going to trial and potentially being found to infringe Malibu's patents.

Another thing to remember is you don't have to sell a product to be able to receive a patent. Malibu was very early to the patent game (for surf systems) and heavily invested in IP related to surf systems. They probably saw the market moving to surfing and now it appears to be paying off for them. Malibu has patents on SurfGate, obviously, but they also have patent claims that have coverage broader than the the product that is on the rear of their boats. So not only are they able to prevent people from directly copying SurfGate, they also have patent claims that may cover competitors' systems that are completely different than SurfGate. This is all completely legal, and fair, in the patent system.

So the easiest way to explain it is Malibu may have very broad patent claims that cover SurfGate AND their competitors' surf systems but MasterCraft may have patent claims that only cover their Gen2 system directly. With Malibu's approach, they not only protect their product from direct copying, but they may also set themselves up to get licensing and/or settlement fees from their competitors that infringe Malibu patents, but haven't directly copied the SurfGate system. As an IP lawyer, I'd advise all clients to follow this strategy, but it's an expensive strategy and you have to be willing to pay to try to get great IP coverage and always have pending patent applications to cover any developments in the industry.

In contrast, Malibu's products may not infringe MasterCraft's patents (I haven't studied them closely in about a year and have not read any new patents that may have issued within the past year) because MasterCraft may have only tried to patent Gen2 or something very close to Gen2. Because SurfGate is so different, Malibu may not infringe any MasterCraft patents if MasterCraft took this IP strategy.

All of the other companies could have spent money trying to get very broad patent coverage of surf systems years ago, but didn't until more recently. Malibu has a huge patent portfolio built up and that's why a lot of companies are settling with Malibu.

Mastercraftdave
05-03-2017, 02:24 PM
Patent lawyer here.

In the patent world, you have to remember that what you are analyzing is whether a product reads on a patent's claims. The analysis isn't comparing product vs. product. So here you compare MasterCraft's products to Malibu's patent claims and vice versa. In this instance, MasterCraft settled with Malibu because they felt it wasn't worth the risk going to trial and potentially being found to infringe Malibu's patents.

Another thing to remember is you don't have to sell a product to be able to receive a patent. Malibu was very early to the patent game (for surf systems) and heavily invested in IP related to surf systems. They probably saw the market moving to surfing and now it appears to be paying off for them. Malibu has patents on SurfGate, obviously, but they also have patent claims that have coverage broader than the the product that is on the rear of their boats. So not only are they able to prevent people from directly copying SurfGate, they also have patent claims that may cover competitors' systems that are completely different than SurfGate. This is all completely legal, and fair, in the patent system.

So the easiest way to explain it is Malibu may have very broad patent claims that cover SurfGate AND their competitors' surf systems but MasterCraft may have patent claims that only cover their Gen2 system directly. With Malibu's approach, they not only protect their product from direct copying, but they may also set themselves up to get licensing and/or settlement fees from their competitors that infringe Malibu patents, but haven't directly copied the SurfGate system. As an IP lawyer, I'd advise all clients to follow this strategy, but it's an expensive strategy and you have to be willing to pay to try to get great IP coverage and always have pending patent applications to cover any developments in the industry.

In contrast, Malibu's products may not infringe MasterCraft's patents (I haven't studied them closely in about a year and have not read any new patents that may have issued within the past year) because MasterCraft may have only tried to patent Gen2 or something very close to Gen2. Because SurfGate is so different, Malibu may not infringe any MasterCraft patents if MasterCraft took this IP strategy.

All of the other companies could have spent money trying to get very broad patent coverage of surf systems years ago, but didn't until more recently. Malibu has a huge patent portfolio built up and that's why a lot of companies are settling with Malibu.

Im glad you decided to chime in. So with that being said, can MC not go after Supra, GSA and the likes that use tabs to have delayed convergence?

Its sounds like Malibu is all about a money grab and I would imagine that since they were the first to go public, that they have lawyers telling them to do exactly what you just detailed.

Since they are public companies, will the terms of the settlement be fully detailed? I will be interested to see what they had to pay.

LDA6339
05-03-2017, 03:00 PM
Problem with that, is every way you get a surf wave is delayed convergence. That is what actually makes the wave. Listing a boat with ballast causes delayed convergence, listing a boat with tabs causes delayed convergence, and making a boat dog track with a gate causes delayed convergence.

Breaking news: filling up ballast unevenly or having your crew not evenly spaced out port to starboard is now a Malibu Patent Violation.

Also no more using trim tabs to surf a 40 footer.

Morety
05-03-2017, 04:29 PM
Im glad you decided to chime in. So with that being said, can MC not go after Supra, GSA and the likes that use tabs to have delayed convergence?

Its sounds like Malibu is all about a money grab and I would imagine that since they were the first to go public, that they have lawyers telling them to do exactly what you just detailed.

Since they are public companies, will the terms of the settlement be fully detailed? I will be interested to see what they had to pay.

MasterCraft's patents would have to cover Supra, GSA, etc. products and without looking at the claims again, it's not a sure thing that they would. I remember seeing claims that required angles that were specific to the Gen2 product that may or may not be present on competitors' products.

You guys know that I'm all about MasterCraft and love these boats and am happy to be able to own one. I've never owned a Malibu, but I wouldn't call this just a money grab. These are big companies that are getting much more sophisticated regarding IP now that several, including MasterCraft, are publicly traded. Acquiring patents and then asserting those patents is done for many reasons and not just as a money grab. I'm sure on the Malibu forums they aren't calling it a money grab and are saying that Malibu was smart to patent everything they could in the surf spectrum. I wouldn't disagree with those people.

Will likely never see the terms of the settlement even though they are public.

WakeRider107
05-03-2017, 04:36 PM
Not really a big deal. CC and MC are just paying royalties to Malibu now. CC did the same thing back when they had the patent for the tower.

What I'm curious about is that MC's Gen2 tabs say patent pending on them with a patent number. Whats the deal with that? Marketing?

MC25
05-03-2017, 04:38 PM
did you see that it said theyre paying royalties? CC disclosed that they were, I didnt see anything about MC paying them.

WakeRider107
05-03-2017, 04:43 PM
did you see that it said theyre paying royalties? CC disclosed that they were, I didnt see anything about MC paying them.

http://www.tradeonlytoday.com/2017/05/mastercraft-and-malibu-boats-settle-patent-lawsuit/?utm_source=trade-enewsletter&utm_medium=email&utm_content=textlink&utm_campaign=enewsletter-050317

One time payment and license agreement

Morety
05-03-2017, 04:58 PM
MasterCraft will pay a one time payment for past use and royalties on a moving-forwards basis. This won't be an admission of infringement, just an agreement to move forward without patent litigation.

As for the Gen2 tabs themselves, my boat is in storage but I know they list at least one patent number. If they also say patent pending, that could be for separate applications that have not issued yet. I would imagine most everyone is going to keep at least one patent application pending that claims priority to the original application if they can.

WakeRider107
05-03-2017, 05:00 PM
MasterCraft will pay a one time payment for past use and royalties on a moving-forwards basis. This won't be an admission of infringement, just an agreement to move forward without patent litigation.

As for the Gen2 tabs themselves, my boat is in storage but I know they list at least one patent number. If they also say patent pending, that could be for separate applications that have not issued yet. I would imagine most everyone is going to keep at least one patent application pending that claims priority to the original application if they can.

I stand corrected - it has a patent number, not patent pending.

MCs patent
https://www.google.com/patents/US8833286

MC25
05-03-2017, 05:03 PM
Where does this end? All Malibu is doing is inhibiting growth. Which in my opinion, is their goal.

Morety
05-03-2017, 05:06 PM
Where does this end? All Malibu is doing is inhibiting growth. Which in my opinion, is their goal.

I guess it would end with the elimination of the patent system, which dates back to 1790, and as a result, would also prevent anyone from spending money on R&D, knowing that their inventions could be copied immediately. But what do I know, Aric!!! ;)

brucemac
05-03-2017, 05:18 PM
$50K All Day*




* surf wave optional

:D

MC25
05-03-2017, 05:19 PM
That's not really what I meant, at all. Lol.

bamabonners
05-03-2017, 06:35 PM
Morety, what's stopping someone from getting a patent on pulling a person behind a boat with a rope while standing, sitting, or kneeling on an object?

Thank you for getting in on this discussion. Very informative....

bcd
05-03-2017, 06:47 PM
In my opinion, it's somewhat easy to get a broad patent, including designs that are already existing on competition. The patent department doesn't have the resources to fully vet out the applications they receive. The way it is supposed to work is you can sue to disprove a patent, but that is hard and costs a lot of money. Once you have the broad patent, it is easy to sue other companies, and they have a lot of pressure to settle. Lawyers are expensive and these battles can be drawn out costing a lot of money. It's a financial decision that has to be made whether to invest an unknown amount of money into the lawsuit or settle. Even if you win the suit, it still costs you a lot.

What should stop you from getting a patent on pulling a person behind a boat with a rope while standing, sitting, or kneeling on an object is prior artwork or knowledge of that being done. You can't patent what is already public knowledge and occurring. The issue is on lesser known ideas (surf systems) and due diligence on vetting out prior knowledge during the patent approval process.

It also takes very little differences from an existing patent for you to be awarded a whole new similar patent.

Morety
05-03-2017, 07:38 PM
Yeah, BCD has the prior art/knowledge and costs parts down.

To get a patent, it must be (1) statutory (can't patent music, software, etc.); (2) novel (new); (3) useful (easy requirement to pass); and (4) non obvious (compared to the prior art known by a person having ordinary skill in the art at the time of the invention). You can't get a patent on something that was already known when file the patent application. That's why you wouldn't be able to patent a process for wake surfing, without more, because it isn't novel at the very least. And maybe MasterCraft decided not to spend as much money on patent applications for their surf system early on because it was probably the closest design to trim tabs, which were known in the field. The Malibu and Nautique designs were probably seen as "newer" designs so they spent more money early on for patents. But once Malibu sued CC, the industry realized in a hurry that everyone needed patents, if only for defensive posturing in a soon-to-be filed lawsuit.

Once you have an issued patent that is very broad, which Malibu arguably has, you can file suit and assert your patent rights. But once you've been sued, your options are a little more limited: (1) settle; (2) invalidate the patent; or (3) convince a jury that you do not infringe the patent. All are costly, and the route you choose often depends on your appetite for risk and the amount you're willing to spend on legal fees. There are various strategic points during the litigation where it makes the most sense to settle, depending on what has happened so far. But there's always a chance that you can spend seven figures trying to invalidate or be found non-infringing, lose, and then pay more than the settlement would have been three years earlier!

And while you can get a new patent on a minor improvement from something that is already known and/or patented, in order to successfully assert that patent, the competitor would have to have that exact improvement claimed. These are often narrow patents.

MC25
05-03-2017, 07:47 PM
It's hard to imagine the continuous royalties being cheaper than fighting the patent. I feel like that was a battle they could've easily won though.

Morety
05-03-2017, 08:06 PM
Ongoing royalties are easy to pass on to the consumer (us). Often, it's just listed right there on the invoice plain as day.

I think the old tower royalty was $100 per boat to Nautique. If MasterCraft sells 2000 boats a year, that's a $200,000 royalty per year, all of which is paid for by the consumer. No out of pocket money. And maybe it's only for a few years before MC figures out a design-around that no longer is subject to the license. Hence, two leg towers instead of four leg towers like we used to see.

Compare that to fighting the patent trying to invalidate it. Probably going to cost $2m+ and the lawyers want to be paid now, not over the next 20 years. And now MasterCraft is a publicly traded company, so an additional and unexpected $2m line item for "legal" in any given year may raise some eyebrows and cost shareholders. So you're trying to offset $2m in legal fees over the same 2000 boats that year, which is now a cost increase of $1,000 per boat that they are still trying to pass on to the consumer. Going to be a lot harder to pass all of the costs off to the consumer fighting the patent than taking a license.

Then you consider there's the risk that you can't invalidate the patent and you're found to infringe in district court. Now you have to appeal and you add in another couple million in legal fees for that. At the end of that, if that verdict is upheld and not overturned by the appellate court, you have to pay the damages and the possibility of getting an ongoing license then is probably pretty low based on this prolonged legal fight. So you pay the district court legal fees, the appellate legal fees, the damages, AND you have to come up with a new design immediately that doesn't infringe anyone's patents because that settlement offer with the chance of a license is long gone and you have to keep producing boats.

MC25
05-03-2017, 08:10 PM
Wow. Thanks for the insight Morety. You are correct about the $100 royalty, it was listed on the build sheet of our 2010 lol.

Morety
05-03-2017, 08:15 PM
Now that CC and MasterCraft have both passed on trying to invalidate the Malibu patents in court, I'm not sure who is left that can absorb the legal fees necessary to do so. A lot of people were probably hoping MasterCraft never settled because of anyone, it would have been MC with the money to do so.

Morety
05-03-2017, 08:22 PM
;) Also, MasterCraft, other lurkers, I'm available for hire. DM me!

MC25
05-03-2017, 09:18 PM
;) Also, MasterCraft, other lurkers, I'm available for hire. DM me!

Move back to Tx!!!

214skier
05-04-2017, 12:12 AM
In my opinion, it's somewhat easy to get a broad patent, including designs that are already existing on competition. The patent department doesn't have the resources to fully vet out the applications they receive. The way it is supposed to work is you can sue to disprove a patent, but that is hard and costs a lot of money. Once you have the broad patent, it is easy to sue other companies, and they have a lot of pressure to settle. Lawyers are expensive and these battles can be drawn out costing a lot of money. It's a financial decision that has to be made whether to invest an unknown amount of money into the lawsuit or settle. Even if you win the suit, it still costs you a lot.



What should stop you from getting a patent on pulling a person behind a boat with a rope while standing, sitting, or kneeling on an object is prior artwork or knowledge of that being done. You can't patent what is already public knowledge and occurring. The issue is on lesser known ideas (surf systems) and due diligence on vetting out prior knowledge during the patent approval process.



It also takes very little differences from an existing patent for you to be awarded a whole new similar patent.



Amen

I have been on both sides of this. The days of the entrepreneur inventing something of merit in his garage are far and few between. This has turns into a game of blackmail and brinkmanship that is generally stifling of innovation. IMO a company that trolls for patent infringement is largely one loosing in the market trying to sell on merit and value-the only way to succeed is to try and outlast the victim in your game of attrition.


Sent from my iPhone using Tapatalk

JasterCraft
05-04-2017, 06:30 AM
Well, I have certainly learned something new today. This was a very informative thread.


Sent from my iPhone using my iThumbs

Mastercraftdave
05-04-2017, 08:22 AM
;) Also, MasterCraft, other lurkers, I'm available for hire. DM me!

You have definitely cleared up the whole situation, thank you. From someone in a family business, I can see both sides but the whole IP thing is crazy and really makes you think about some of these designs.

Props to Malibu for forward thinking as it will pay off for them, but I feel as if at some point MC will come up with something to remove the big tabs off the rear of the boat.

allzway
05-04-2017, 09:31 AM
I think the reason Malibu is having success defending the patent is because it isn't about the tab, it is about causing delayed convergence of the wake. If they had just patented the surf gate, it would not have been enforceable. Tabs for the purpose of adjusting the list of the boat are probably safe, rather than delay convergence. I suspect MC Gen1 was not subject to the patent claim.

This is what I have read also. This also means they plan to go after any device even suck gates because they do the same thing.

mikeg205
05-04-2017, 11:15 AM
after all of this, I will literally never think of owning a malibu. That patent is BS...

funny avatar

Loewen
05-04-2017, 02:01 PM
Publicly traded company = settle and don't defend because it will all be passed on to the consumer just like the "tower licensing fee". In the end, very little cost to the company.

While I don't disagree with MC's decision, it doesn't mean I have to like it

There is a reason there's a "P" in Malipu

cbryan70
05-04-2017, 02:02 PM
funny avatar

You just noticed that? Where have you been Mike? Hope all is well.