“Hoverboys run L.A.!”

These are the words my friend Chris shouted as he glided around the living room on a Hovertrax, a self-balancing device that looks like the bastard child of a Segway and skateboard. With countless celebrity endorsements, “hoverboards” seem to be everywhere these days, yet despite their popularity, their origin is unknown to most consumers.

Where did these hoverboards come from?

David Pierce at Wired magazine made a valiant attempt to get to the bottom of the hoverboard mystery back in June. In the article, David comes to the conclusion that most boards on the market are knockoffs of Chic Smart S1, which appeared in August of 2014, donning blue L.E.D.s and the letters “IO.” Chic brought the product to the Canton Fair, a semi-annual trade show in China, where the hoverboard devices were overwhelmingly popular and sold out quickly. It did not take long for other companies to reverse engineer and rebrand the products, and within the next few months, boards could be found on Alibaba for wholesale distribution.

If you hit your favorite social media platform, chances are you’ll see some rendition of the Chic Smart S1. PhunkeeDuck and IO Hawk are arguably the biggest players in the American hoverboard industry currently, and as David Pierce astutely notes, “Chic’s logo—the horizontal line on top of an oval that just so happens to look like “IO” when rotated 90 degrees—is plastered all over most versions of the board.”

It does not take a genius to realize that both PhunkeeDuck and IO Hawk are either buying or licensing Chic products and rebranding them to fit their company’s needs. However, it does take a genius to figure out what the hell IO Hawk is thinking incorporating Chic’s logo into their company’s image.

In this brutal interview, John Soibatian discusses the “invention of the IO Hawk,” which he claims was conceptualized in the early 2000s. John suggests that his friend and him were looking for a personal transportation device “to get out of restaurants and the club scene” without having to deal with a device as large as a Segway. Keep in mind, IO Hawk products literally use Chic’s logo, which can be seen clearly on the top of Chic Robotic’s website. What makes this interview espcially interesting is John’s reasoning for the company’s name:

“‘Io is actually a small, portable sized hawk who-uh is indigenous only to the island of Hawaii , and-uh [my friend] brought that back to me, and we thought, you know, what better thing than an animal that glides, that’s small. and is very unique, right? So we kept this IO logo and we thought it would be a good way to honor our partnership with our engineers and still have that branding for the U.S. and the global market.”

John Soibatian admits –possibly inadvertently– that Chic is his “engineering team,” and that he is “respecting” his engineering team by keeping the IO branding. Fact checking this interview, I did find that John is not lying completely. There is, in fact, a Hawaiian hawk called an ” ‘io.”

However, “respecting his engineers” is just a clever way to rationalize the fact that IO Hawks are literally Chic Smart S1 devices. While PhunkeeDuck undoubtedly incurs additional expenses by rebranding Chic products with the PhunkeeDuck logo, IO Hawk dodges this issues by incorporating the Chic branding into their own label. This guise of respect is just an easy way to justify reselling Chic boards –albeit a clever one.

If IO Hawk is indeed reselling Chic S1s, why can they get away with it? Surely the company that owns the patent for these devices would be irritated that IO Hawk is claiming this invention as their own. A little research reveals some important new information regarding this debacle:

Mark Cuban recently made headlines when he claimed that he and his partner, Shane Chen, own the patent for hoverboards.

The most important facts that emerged from this news can be found in the lawsuit that Cuban and Chen launched against IO Hawk and its competitors. In the lawsuit, which can be found publicly on Mark Cuban’s Twitter, several new pieces of evidence come to light regarding the origins of the hoverboards.

Firstly and most importantly, what is the patent? The lawsuit reveals that Chen holds “U.S. Patent Number 8,738,278:”

Two-wheel, self-balancing vehicle with independently movable foot placement sections.

The wording of this patent is important. It does not matter that Chic S1s have bigger wheels. It does not matter that IO Hawks have blue LEDs. It doesn’t even matter that PhunkeeDucks have different gyroscopes. All of these devices utilize independently movable foot placements for steering and control, and subsequently, all of these devices fall under the authority of this patent despite any nuances. The general language of Chen’s filing gives him firm legal ground to stand on.

Furthermore, this is an actual patent. It isn’t pending. It isn’t disputed. Chen filed this patent in winter 2013, and the United States granted his request. Chen obtained the same patent in China as well, meaning that Chinese, knock-off manufacturers will have to Cease & Desist in the event of a lawsuit.

It seems that this entire situation comes back to Shane Chen, but I cannot make this claim definitively. Instead, I will provide the publicly available evidence and allow my readers to come to their own conclusion. The information is as follows:

• Shane Chen filed a U.S. patent for his device Feb. 11 2013.
• This patent was approved May 27, 2014.
• Chen filed for a Chinese patent March 20, 2013.
• The patent was granted August 28, 2013.
• The Hovetrax Kickstarter video was published on YouTube Feb 25, 2014.
• August 21, 2014, Chic publishes their video for the Chic S1.
• In fall of 2014, Chic brought the S1 to the 116th Canton fair.
• PhunkeeDuck.com is registered Jan 29, 2015.
• IOHawk.com is registed Dec 17, 2014.
• IO Hawk showed off their devices at the 2015 Consumer Electronic Show in Las Vegas.
• The lawsuit, mentioned above, states that:
  • “At the CES trade show, representatives from Inventist inspected the IO HAWK Product and advised John Soibatian of Soibatian Corporation that the IO HAWK Product infringed the ‘278 Patent. Representatives from Inventist showed Mr. Soibatian the ‘278 Patent. Accordingly, Soibatian has had actual notice of Inventist’s claim of infringement since on or about January 9, 2015. Soibatian denied infringement.”
  • “On January 22, 2015, counsel for Inventist and Mr. Chen sent Soibatian a detailed letter explaining how the IO HAWK product infringed the ‘278 Patent, and requested that Soibatian cease and desist the infringing acts. Upon information and belief, both the notice at the CES trade show and the letter notice of January 22nd were prior to Soibatian’s first sale of an infringing IO HAWK device. Yet, despite this notice and explanation, Soibatian began to sell the IO HAWK product in approximately February 2015 and has continued to infringe since that time, including expanding promotion of the infringing IO HAWK product.”

     

• As of August 26th 2015, Mark told TMZ that he had partnered with Chen around August 12th 2015.
• June 16th 2015, Chen launched his lawsuit against IO Hawk.

This is a lot of information to take in, but in my opinion, it paints a clear picture of what unfolded. Shane Chen started a Kickstarter for his invention, implying that he did not have adequate funding on his own to bring the product to market. Chic Robotics, a China based company, saw the Kickstarter video and used the available information to recreate the device, bringing it to the Canton Trade Show before Shane Chen was able to bring his product to a mass audience.

Companies like IO Hawk and PhunkeeDuck purchased the Chic products and branded them accordingly. Other Chinese manufactures followed in Chic’s footsteps and reverse engineered Chic products to bring cheaper models to sites like Alibaba. Mark Cuban discovered that these companies did not hold the patent to these devices, and reached out to Shane Chen to form a partnership. With Mark’s backing and financial support, Chen now had the proper legal and financial resources to launch his lawsuits against the infringing companies.

What does this mean for the future of IO Hawk and PhunkeeDuck? In the event that this lawsuit lands (and looking at Mark’s legal track-record, it will), all of these companies will face an injunction, preventing them from selling anymore of the knockoff hoverboards. Furthermore, since IO Hawk was notified of its infringement, the company is liable for direct infringement under United States patent law. The damages for this type of infringement could include the plaintiff’s legal fees, any damages the plaintiff may have faced due to the infringement, and any and all revenue generated by the infringer during its exploitation of the patent.

I do not know first hand if companies like PhunkeeDuck were notified that they infringed on Shane Chen’s patent. If they were not informed, they could claim that they did not know they were infringing on a patented product. In this case, these companies can still be held liable for contributory infringement, which carries similar penalties to direct infringement.

Regardless of the outcome, it is clear that Mark Cuban and Shane Chen now hold the primary patent involved in the lawsuit against hoverboard companies. There’s no way to know what might happen next, but an educated guess would assume that Hovertrax becomes the de facto hoverboard provider and that other companies will either close shop or reach a licensing agreement with Cuban and Chen.

 

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