As chief executive officer of Umbra, Les Mandelbaum has plenty of things to attend to. But the one thing he's sure to do every day while managing the sprawling global enterprise is to send out cease-and-desist orders. They go to manufacturers and vendors around the world who are copying or selling copies of his company's designs for household products such as garbage cans, storage devices, kitchen utensils, picture frames and chairs.
Protecting intellectual property has always been a concern for companies such as Toronto-based Umbra, but the problem has grown exponentially since manufacturers began making goods overseas to take advantage of lower labour costs. Umbra, founded in Toronto in 1979 by Mr. Mandelbaum and his childhood friend Paul Rowan, started to outsource manufacturing in the 1980s, first to Japan, then to Taiwan and Thailand, and from there to wherever it could produce products competitively. By the mid-1990s, half of its production was being done in contract factories in Asia, and some of these factories were copying its leading-edge designs and selling the products on their own.
"We had a situation in Thailand where we had pretty good control over the factory and we were going very strong," Mr. Mandelbaum says. "And we made it very clear that they had to respect our intellectual property. Then we found another factory making the exact same goods and it turned out it was a relative of the factory owner, which is something that we see quite often in China, too." Umbra cut ties with the company and took its business elsewhere.
In some cases copycats have tried to undercut Umbra's prices. Other times they have tried to sell to retailers not served by Umbra, such as discount stores.
It isn't just an Asian problem. Mr. Mandelbaum was in Dallas recently and found copies of Umbra products in six major stores. "There are copies of our products sold everywhere, every day," he says, likening the battle to the war on drugs, where the fight will continue but will probably never be won. "As long as there is a demand for your product and you do not have certain parts of the marketplace or you don't sell it as inexpensively as possible, there are going to be copies."
He sees the first line of defence as making sure products are made as efficiently as possible and offered at a competitive price. Another way Umbra seeks to remove temptation is to manufacture goods for private labels so that copiers don't get that business. It has also designed products specifically to serve the discount market, such as the Umbra Loft line sold by Target.
Patents help, too, but they are expensive to put in place, hard to enforce and can be rendered ineffective by relatively simple workarounds. The term "patent pending" can backfire because it alerts copiers that there is no patent. Also, if a patent is not awarded, a company can be sued for putting out a false alarm.
Internet commerce has made things even more challenging. "People are selling over things like eBay and Amazon and when you attack them they can just disappear and appear under a different name," Mr. Mandelbaum says. "When you seek assistance, they say, 'We're just a platform or marketplace. You have to find these people and go after them yourselves.' "
When it comes to traditional retailers, those closer to home tend to respond more readily to threats of legal action, he says. And building good relationships with customers also gets results. For instance, Umbra makes sure to send its best and newest products to retailers who do not sell copies.
As for the factories, the company usually finds new manufacturers when things go sour, but not always. Sometimes it's a tug-of-war to decide who needs whom the most. At one point Umbra was advised to set up joint ventures overseas, which held the promise of giving it more control, but the copycats kept at it in spite of joint ownership.
In China, Umbra has found more success with wholly-owned enterprises. "It gives you more control, and we monitor them pretty closely," Mr. Mandelbaum says, noting that Umbra employs more than 720 people in China, compared with about 180 in Canada. About half of the products it makes in China are now made in facilities it owns.
The company is also well along in the process of changing its business model from using distributors to selling directly to retailers. It found that its distributors often had much more allegiance to retailers than they did to Umbra and would ignore its wishes about where and how its products were sold. Selling directly has its own set of challenges, but the retailers like the lack of middlemen markups and the new model is working well.
Trying to decide where and when to fight copying is a matter of cost, potential reward, and the effectiveness of legal systems in different countries. Mr. Mandelbaum knows his products are being copied in Turkey, for instance, but the market is not big there and the copies are not eroding Umbra's market share to the point where it is likely to be awarded big damages.
"There are a lot of grey areas and you can't fight everybody," he says.