All Commentary
Monday, March 21, 2016

The Hoverboard Came and Went. Why?

Patents Kill the Things We Love

Back in December, just in time for Christmas, Amazon was filled with opportunities to buy a hoverboard, the auto-balancing skateboard that runs off infrared sensors, gyroscopes, and motors. Of course it isn’t a real hoverboard like in the movies. It is more properly called a self-balancing, handle-free, two-wheel scooter.

Regardless, it is pretty amazing and dreamy: a foreshadowing of the future we all hope to experience. It’s a scaled-down version of the awkward looking Segway personal transporter used by police and warehouse workers. What the Segway needed for mainstream acceptance was a cooler design and a lower price: exactly what these self-propelled skateboards achieved.

Then patent law intervened. The patent holder Razor USA sued (spending up to $1 million per week!) to shut down the myriad “pirate” hoverboard beings sold online (and on the streets), mostly from China. They cost a fraction of what a “real” hoverboard cost.

As a result, many of them were taken off line. Choice became limited. Prices began to rise again. Suddenly a widely demanded consumer product was stopped from being an affordable part of mainstream life to become a luxury good.

Big win for Razor, right?

But the story hardly stops there. If you search today for hoverboard on Amazon, what you find are hoverboard skins, hoverboard chargers, hoverboard decals, hoverboard simulators, hoverboard refrigerator magnets. What you will not find is an actual hoverboard. Right now, you can only get those on eBay.

This is because the International Trade Commission has issued a ban on their importation due to a patent infringement case brought by Segway itself. This decision hit Razor along with dozens of other companies that were producing what was becoming one of the world’s most popular consumer products.

Live by the patent sword, die by the patent sword. The pirate-hunting monopolist was itself made to walk the plank for piracy.

The legal complications here are so complex as to have no real resolution. There is no original inventor we can go to and say: “you own the idea of the hoverboard.” The pertinent patents here are up to and probably exceed 400, and they have been sold and sold again.

I asked patent attorney Stephan Kinsella about possible competing claims. He noted the following:

It appears that hoverboards have technology covered by Segway’s patents and also by patents licensed to Razor. And who knows what other patents are lurking that cover technology in these devices? This means that Razor can’t sell its own hoverboards even though they have a patent license from the so-called inventor, because of Segway’s patents; but Segway might also have trouble selling hoverboards, because of Razor’s patent. And this may be why you can’t find Razor or Segway products anywhere—or those of pirates. What may ultimately happen is, as with the smartphone patent wars, Razor and Segway may cross-license their patents to each other, to permit each to manufacture hoverboards. But the prices will remain high and the incentive to innovate diluted because other competitors will still face patent threats from Razor and Segway. In this way, patents help lead to anti-competitive cartels, with a small number of patent-wielding big players, facing limited competition due to their combined patent threats.

The mythology of patents is that they protect the intellectual property of creators and thereby incentivize people to create more. A further myth is that they pertain to justice, since the creator is entitled to the fruits of his or her labor. The reality is that patents are nothing but a state-granted privilege to exclude competitors, and these privileges are traded in an open market and enforced by violent means. The results in the real world have nothing to do with justice and incentive for creators. They have everything to do with large-scale industrial monopolies.

What does this fiasco mean for consumers? Most often it just means higher prices and slower innovation (since innovation requires competition, not monopoly). But in this case, the snags and snafus are so egregiously complex that it means what would be unthinkable in a free market: the absolute unavailability of a product that everyone wants.

The technology exists. The product exists. The factories to make them exist. The channels to buy them exist. And yet, you can’t get them.

To be sure, some people are blaming safety issues. Some of the pirate models — produced so fast and furiously to meet the demand — had problems. There were stories of exploding batteries.

The Consumer Products Safety Commission intervened to ban models that didn’t pass a certain regulatory test — as if any company really wanted to sell defective products. As a result, some commentators chalk up the disappearance of the hoverboard to bad manufacturing.

But the safety issue is a red herring. The patent itself is the significant and defining factor for the banning of the product. It happened through a circuitous route, and in the name of defending property rights. As the Tech Times notes: “it isn’t the safety factor in question here. The big issue in question is that Segway claims the fundamental design of the hoverboard trespasses upon their original product, whether or not the scooter has handlebars.”

What’s more, the patents themselves exacerbate safety issues. It is not the reputable companies seeking long-term relationships with consumers who are willing to defy them but rather than bottom-feeding, fly-by-night companies who thrive in an overly restrictive market hobbled by intellectual property claims.

Government interventions can sometimes have opaque results, so far removed from the consumer’s experience that explaining cause and effect can be difficult. In this case, it is not so hard: the government has effectively banned something you love, all in the name of a paper legal claim. A claim to enforce rights has actually violated them.

If you are looking to buy a hoverboard but can’t, you can now place the blame squarely where it belongs: on fake rights invented by legislation called patents. They are the source of the problem. And though they have been around hundreds of years, and trace their origin to mercantilism, their cost has become more obvious in our times than ever before.  

Not only do they not protect and guarantee a competitive market, they disable one, at the expense of economic and technological development.

Does anyone actually believe that in 20 years there will be only one hoverboard maker or that they won’t be available at all? Of course not. This patent dispute will only succeed in delaying the future. Instead of going back to the future, industrial patents are pushing us forward to the past.