Categorized | China, Trade

Popular Wrench Fights a Chinese Rival


Reposted from The New York Times


Popular Wrench Fights a Chinese Rival

Shaila Dewan | November 8, 2012 | NY Times

Last Christmas, Sears had a brisk seller in the Bionic Wrench, an award-winning, patented tool with spiffy lime green accents. This holiday season, though, Sears has a special display for its own wrench, in the red and black colors of its house brand, Craftsman.

One customer who recently spotted the new Craftsman tool, called the Max Axess wrench, thought it was an obvious knockoff, right down to the try-me packaging. “I saw it and I said, ‘This is a Bionic Wrench,’ ” recalled Dana Craig, a retiree and tool enthusiast in Massachusetts who alerted the maker of the Bionic Wrench. “It’s a very distinctive tool,” he added.

The tools have one significant difference, Mr. Craig noted. The Bionic Wrench is made in the United States. The Max Axess wrench is made in China.

The shift at Sears from a tool invented and manufactured in the United States to a very similar one made offshore has already led to a loss of American jobs and a brewing patent battle.

The story of the Bionic Wrench versus Craftsman, which bills itself as “America’s most trusted tool brand,” also raises questions about how much entrepreneurs and innovators, who rely on the country’s intellectual property laws, can protect themselves. For the little guy, court battles are inevitably time-consuming and costly, no matter the outcome.

Still, the inventor of the Bionic Wrench is determined to fight. He is Dan Brown, an industrial designer in Chicago who came up with the wrench after watching his son try to work on a lawn mower. Mr. Brown says he believes that the Max Axess wrench copies his own and he is planning to file suit against Sears, which declined to answer any questions about the wrenches for this article.

The Bionic Wrench is distinguished by its gripping mechanism, a circle of metal prongs that, inspired by the shutter in a single-lens reflex camera, descend evenly to lock onto almost any nut or bolt.

Since Sears has halted new orders, the Pennsylvania company that makes the Bionic Wrench has had to lay off 31 workers, said Keith Hammer, the project manager at the company, Penn United Technologies. “And that’s not to mention our suppliers,” he added.

Mr. Brown sees a broader issue than just the fate of his wrench. “Our situation is an example of why we’re not getting jobs out of innovation,” he said. “When people get the innovation, they go right offshore. What happened to me is what happened to so many people so many times, and we just don’t talk about it.”

Inventors typically spend $10,000 to $50,000 to obtain the type of patent Mr. Brown has on the wrench, said John S. Pratt, a patent expert at Kilpatrick Townsend & Stockton in Atlanta. Though he said he could not comment on the merits of Mr. Brown’s potential suit, patent infringement cases can be especially difficult in the tool field, where many improvements are incremental, Mr. Pratt explained.

A defendant in such a case would most likely argue that either the tool did not warrant a patent in the first place, or that its own product did not violate the patent.

The fact that Sears made some changes to the wrench’s design, like making the grooves that allow the metal prongs to slide back and forth visible instead of hidden, will make the case more challenging, he said. “It’s hard for me to imagine that Sears isn’t particularly careful about breach of patent, so there’s probably another side to the story,” he said.

After patenting the wrench in 2005, Mr. Brown formed a company, LoggerHead Tools, to bring it to market, making a point of having it made in the United States.

The Bionic Wrench was greeted with enthusiasm at trade shows and in industrial design competitions, and the company survived the downturn in 2008. Mr. Brown resisted overtures from large chain stores that wanted to sell the tool under their proprietary brand, he said, and rejected the lure of cheaper manufacturing in China. “I was raised a different way,” he said.

The tool sold fairly well on its own — LoggerHead has shipped 1.75 million of them — but Mr. Brown, 56, who teaches industrial design at Northwestern University, says LoggerHead operated on a shoestring and he plowed much of the profit back into the company. “You cannot have big offices and fancy cars and everybody with an administrative assistant, because we are competing with China,” he said.

In 2009, LoggerHead hit pay dirt when Sears agreed to do a test sale. The product sold out, Mr. Brown said, and Sears ordered 75,000 Bionic Wrenches the next year. In exchange Mr. Brown agreed not to sell the wrench to Sears’s competitors, including Home Depot and Lowe’s.

In 2011, sales at Sears increased again, far outpacing LoggerHead’s other outlets like the QVC shopping channel and smaller hardware stores. But LoggerHead’s profit margin remained small, in part because it produced a television commercial and paid Sears to show it.

The Sears Holdings Company, which owns the Craftsman brand, declined multiple requests to comment on the Bionic Wrench or the Max Axess Wrench. The company would not answer questions about patent infringement or the volume of sales.

But in a string of e-mails provided by Mr. Brown, the buyer at Sears who had the LoggerHead account wrote, making liberal use of exclamation points, that the wrench’s holiday sales last year exceeded its target by 23 percent.

In the manufacturing world, lead time can determine price, and from the beginning cost was a particular issue for the Bionic Wrench, because of the competition from China. A 2006 article in The Wall Street Journal was headlined, “Wrench Wins Awards, but Is It Priced Too High to Be a Hit?”

According to Mr. Brown’s account of his dealings with Sears, the chain was pleased with the tool’s performance and agreed to place an order for 2012 in plenty of time to keep the cost low. Then his buyer at Sears changed and that agreement seemed to get lost in a new round of haggling. When the order for Father’s Day finally came, Mr. Brown said, it was too late to guarantee the lower price. He refused the order.

Sears responded by agreeing to the higher price. But when it came time for the Christmas holiday order, negotiations stalled once more, again pushing LoggerHead past the deadline to get the best price, according to Mr. Brown.

“We were sitting there going, ‘Why do they want Father’s Day so bad but they won’t commit for Christmas?’ ” Mr. Brown said. Now he believes that the company had already placed its order for the Craftsman version.

In late September, Mr. Brown said, his suspicions were confirmed. LoggerHead got a “customer feedback” e-mail from Mr. Craig, the tool connoisseur, describing the new Max Axess wrenches. “Sadly, they are made in China,” Mr. Craig wrote. “Can you tell me if LoggerHead has authorized these?”

Craftsman has come under fire before, accused of misleading customers into thinking that its tools are made in America and for stealing intellectual property. In one case, Sears spent two decades defending itself against a claim by Peter M. Roberts, who as a young Sears employee had, on his own time, invented a type of socket wrench.

Mr. Roberts told the court that Sears had played down the value of his invention, paid him $10,000 for the rights, and then made tens of millions of dollars. He eventually received settlements of less than $10 million, according to news reports.

In another, more recent case led by Lee Grossman, Mr. Brown’s lawyer, a judge awarded $25 million to the maker of a tool called the Rotozip who said he had disclosed trade secrets to Sears in an attempt to get the store to carry a new version of the tool.

Sears, a jury decided, took the trade secrets and had the tool made abroad for Craftsman.

“You have LoggerHead out, Dan Brown out, and dozens of American workers laid off — all in the name of profits for Sears,” Mr. Grossman said.

LoggerHead’s lawsuit, Mr. Brown said, will most likely include claims that Sears interfered with the company’s ability to do business with other stores.

“I’m in favor of free trade,” Mr. Brown said. “The person who’s out-innovated loses. But it’s destructive when someone competes but doesn’t out-innovate, they just produce it in a different market without regard to safety codes and human conditions.”

The company that makes the Max Axess wrench and other tools for Craftsman, the Apex Tool Group, is being acquired by Bain Capital, the company founded by Mitt Romney, in a $1.6 billion deal.

Throughout the presidential campaign, Bain was criticized on the grounds that it encouraged outsourcing by companies it buys at the expense of American workers. Apex makes many of its tools overseas. A company spokesman referred all questions to Sears.

Mr. Brown and his lawyer say they believe they have a solid case against Sears, but it could take years to litigate. “What happens to us in the meantime?” Mr. Brown asked.

Mr. Brown is also concerned that while he fights in court, Sears can undercut the price of his wrench.

For now at least, Sears still has some of Mr. Brown’s wrenches in its inventory. On the Sears Web site, the Craftsman and the LoggerHead wrenches are listed at the same regular price, $24.99 for the 8-inch version, and today both are on sale. But for at least a few days in recent weeks, only the Craftsman version was on sale, for $19.99.


2 Responses to “Popular Wrench Fights a Chinese Rival”

  1. William Ryan says:

    It seems to me that our government is content to let China and any big box corporation do what ever they want. I feel the pain for Mr. brown and all the great American innovators who end up loosing the rights to their patents or copy rights. This is just flat out stealing and no body cares about justice when corporate greed for profits will trump every time…The bad thing about this case is the fact that Bain Capital was involved as deal maker they smell profits for them no matter who get hurt in the process. I really do feel sorry for Mr. Brown and many others like him who get taken to the cleaners because they are just a small business with not much capital or political power..This is what Romney stands for and promotes as doing good business and a job creator for China…

  2. Mo says:

    William the reason Washington doesn’t want to change the status quo with trade is threefold. First the multinationals that make larger profits by having China subsidize their production are very influential in Washington. Second, the US uses tech transfers as a way of getting foreign policy concessions. Third, countries like China allow the US to export inflation where the US exports fiat money and receives real goods in return. This is why so many countries have billions if not trillions of US dollar assets. By being able to export inflation it allows the gov’t to keep price indexes like the CPI lower than it normally would have been. With inflation exported, it allows the US gov’t to continue to spend on foreign policy and world policing objectives. This would explain why the Federal Reserve had no ojections to offshoring.

    Under sounder money where money is anchored to a commodity like gold, there wouldn’t be an offshoring bubble. Only inflation under a fiat monetary system could distort prices in a country’ structure of production and cause it to be cheaper to pay and have a factory stripped down and shipped overseas, pay to train foreign workers as replacements, pay to find and create a whole new supply chain overseas, re-export the product back to the US and pay all the adminstrative costs of having a global supply chain like accounting costs, etc. Also under sounder money, companies like Bain wouldn’t be able to borrow money created out of thin air to buy up companies and then shift the equipment overseas.


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