Adam Ullman comes from a family of inventors and entrepreneurs that understands how hard it is to commercialize even the best inventions and how frustrating it is today because the patent system is stacked against startups and small businesses who can’t protect their patented inventions from copycats.
The 41-year-old inventor and entrepreneur is the CEO of Shoe Care Innovations Inc, the developer of an ultraviolet light shoe sanitizer that he co-founded in 2008 with his father and Shoe Care’s chairman, Allan Ullman, and brother Noah Ullman. Adam Ullman also is principal of PDCIP LLC. The name is short for protecting, developing and commercializing intellectual property. At PDCIP, he consults with businesses to ensure their invention is properly protected, advises on product development matters and transitioning into mass production, and offers business strategy and advice on how to bring the IP to market.
He also previously was a director of product development at Razer from 1999 to 2001 and was the founder of Reality Quest, a startup that developed a glove to control the user experience on Playstation games via wrist motions, though it later went out of business. He also has a master of laws degree in intellectual property, commerce and technology from the University of New Hampshire.
Shoe Care Innovations started out as an inventor’s effort to solve a personal problem. The elder Ullman suffered from toenail fungus. After undergoing three courses of treatment using a popular oral anti-fungal medicine, he noticed that each time the foot fungus came back. Talking this over with his podiatrist, he realized that his shoes had been re-infecting his feet.
Using his 30 years of commercial lighting experience, the elder Ullman was awarded a patent in 1999 for inventing the world’s first ultraviolet light shoe tree. The SteriShoe devices are mainly sold through podiatrists and physicians. The devices retailed for $130; the new versions retail for $150 and $100.
The treatment of toe nail fungus is a $3.2 billion market, according to the younger Ullman.
Shoe Care was funded by undisclosed outside investors and friends and family in 2008. Of the $1.1 million raised about $750,000 came from outside investors. In the first year, the company had sales of just under $1 million, followed by a 50% increase in sales in 2010 and again in 2012. Since then, the company has struggled to grow sales due to a number of issues.
The company’s advisory board is made up of three medical professionals — Dr. Bryan Markinson, who is the chief of podiatric medicine and surgery at Mt. Sinai School of Medicine, Dr. Andrew Shapiro, a podiatrist in Valley Stream, NY, and Dr. Warren Joseph, a specialist in the treatment lower extremity infectious diseases.
“I built a market that never existed before,” the younger Ullman said in an interview. “It’s very cool. We have eight U.S. patents, two U.K. patents, and one each in China, and Japan. We have a four in Malaysia, a second patent (design) in China, and 4 in the European Union.”
Shoe Care’s troubles with the patent system started when the company fell victim to a quality control issue at its supplier in China. Ullman said he discovered that the manufacturer of the SteriShoe device in China had substituted a cheaper capacitor for the one supplied by its preferred supplier TDK.
Ullman said after discovering the problem, Shoe Care’s only recourse was to replace all the faulty devices.
“They saved 30 cents per capacitor and cost my business hundreds of thousands of dollars,” he said.
Shoe Care had little recourse against the Chinese manufacturer because it still needed to ship products. The two companies eventually reached a settlement in which the manufacturer agreed to pay about a quarter of Shoe Care’s costs to replace the faulty devices.
During this crisis, Ullman said the company was able to stay in business thanks to a $250,000 loan from its investors and friends and family.
But the crisis also opened the door to competitors.
“We had a branded product. We had invested in a clinical study that was published in the Journal of the American Podiatric Medical Association. It showed we effectively sanitize a shoe, and the author concluded ‘these findings have implications regarding the ability to address the footwear environment as a means of breaking the foot infection cycle.”
Nevertheless, competition soon emerged from a company called Angel Sales Inc., which sold a ultra violet light sanitizer product called the Shuvee. The product was even marketed through Skymall magazines on airlines.
When Shoe Care investigated the Shuvee for possible patent infringement, it found out two things. First of all, the Shuvee was clearly infringing the SteriShoe patents. Secondly, the Shuvee device had a feature — a plastic cover — that effectively blocked most of the ultraviolet light that is supposed to kill the foot fungus.
In discussions with patent counsel, it became clear that the Shuvee was infringing 3 of Shoe Care's patents. The problem in the patent counsel’s view was that the design flaw could give them a reasonable argument against infringement.
Instead of suing for infringement, Shoe Care filed a complaint with the Electronic Retail Self-Regulating Program, which is connected with the Better Business Bureau, and with the U.S. Federal Trade Commission.
Soon after, Angel Sales modified the design of the Shuvee, which meant the product was infringing.
In September 2013, Shoe Care filed an enforcement action against Angel Sales in U.S. District Court in Seattle, Washington.
The patents in suit were U.S. Patent Nos.: 5,978,996, entitled “shoe tree assembly;” 7,960,706, entitled “Shoe sanitizer;” 8,466,433, entitled “Integrated footwear sanitizing and deodorizing system.”
The complaint asked for a ruling that Angel Sales infringed the three patents, a preliminary and permanent injunction, a finding of willful infringement and damages.
Shoe Care eventually agreed to a joint stipulated motion to dismiss without prejudice after its counsel reviewed Angel Sales’ sales figures and advised it not to continue.
The company was represented in the case by Steven Lovett and Brian Park, partners with the law firm of Stoel Rives LLP in Seattle. They couldn’t be reached for comment.
Today, competition is even stiffer with amazon.com showing 8 versions of a ultraviolet light sanitizing product including ones sold by Kendal, Pedic, Comyan, UV Total Recovery, Pedifix, Uben, Linsam, StinkBoss and UV Pro.
In September 2015, the FTC imposed judgments of $656,423 and $629,359, against Angel Sales Inc. and its principals and Zadro Health Solutions Inc., respectively. Based on their ability to pay, the Angel Sales judgment was suspended and the Zadro Health Solutions’ judgment was partially suspended upon payment of $222,029 for consumer refunds. In each case, the full judgment will become due immediately if defendants are found to have misrepresented their financial condition.
“That money didn’t go to me. It hit Angel Sales pretty hard but they’re still selling their product.”
Ullman said Shoe Care’s experience shows several problems with the U.S. patent system, having to do with how costly patent enforcement actions are, how easily defendants can push a company into costly litigation through a declaratory judgement action, and how federal district courts set reasonable royalties.
“In our system, if I aggressively tell people they are infringing, they can bring a declaratory judgement action. It’s similar to IPRs in its effect.”
Enforcement actions typically cost up to $3 million to complete, when the costs of defending inter partes reviews and appeals are factored in.
“A reasonable royalty rule also doesn’t make sense,” he said. The problem with courts setting a reasonable royalty is that inventors have "an exclusive right" to commercialize their inventions and overruling that right is "unconstitutional."
"If an infringer's cost is $20 and it sells its product for $50, its profit is $30. If it sells for $50 and a I get a 5% royalty I get $2.50. That doesn't cover the damage to me. I have an exclusive right. How is a court allowed to overrule the constitution there?"
“Our politicians talk about our jobs going overseas, but our patent system has become a blue print for how to steal our innovation.”
In the meantime, Ullman said Shoe Care has advised several companies producing ultraviolet light shoe sanitizers that it believes they are infringing its patents.
The response so far has been a simple statement that they don’t believe they are infringing.
Ullman said that after Shoe Care followed up those initial notices with detailed claim charts it’s been radio silence.
With willful infringement bringing the threat of treble damages, Ullman said “putting someone on notice and waiting is not a bad strategy.”
He said the company may turn to a non-practicing entity to help finance an enforcement campaign. “Everything is under consideration,” he said without identifying any potential partners.
Ullman also rails against the current trend of efficient infringement, in which infringer feel confident they can infringe at will and use the IPR process and other legal tools to invalidate the patents.
“People would be mortified if the term were ‘efficient murder’ or ‘efficient theft’ and that’s really what this is. Our patent system is at great risk. Patents are a constitutional right.”
Ullman notes that that Article 1, Section 8 of the Constitution gives Congress the authority to punish counterfeiting of securities and coinage of the United States. Patent rights are of similar importance.
“Why are they not doing a better job of securing patent rights? There’s a way to secure products that infringe trademarks and copyrights but not patents.”
Congress needs to come up with a better way than litigation to determine whether an invention is infringed, he said.
“Our IP laws are dated. They were designed for a local economy and not a global economy.”
—To reach the reporter responsible for this story, please contact Dan Lonkevich at 707 318-7899 or at firstname.lastname@example.org