Dyson Goes To War Against Amway

Go to this week’s TL;DR here now.

Key Lessons:

• Owning your patent is not enough.

• Your credibility will be on trial.

• Build your own product.

• Hold on to your vision.

• Don’t go to war alone.

Last week on Methods of Prosperity

James Dyson became focused on one problem. Creating a bagless vacuum cleaner using cyclone technology. His result was a successful prototype after 5,126 iterations.

His invention faced resistance from established vacuum manufacturers. They wanted to protect their profitable vacuum bag sales. He faced setbacks with licensing deals. Hoover insisted on the rights to his design up front. Before any negotiations. Dyson refused. Financial struggles intensified.

Then Amway (the MLM company) wanted his product. But they backed out and tried to sue him for fraud. Dyson refunded their money.

It was 1986 that Dyson found success in Japan with the G-Force vacuum, which won a design award in 1991. This was his breakthrough. Only that licensing agreement was delayed. Dyson was broke.

Upon return from Japan, his house flooded and the ceiling collapsed. He was almost ruined.

Until the money came in from his Japanese deal. That put him on a winning streak.

Sears wanted his product. Then, when a Canadian company was about to license his cyclone vacuum cleaner, Amway copied it.

Part 104: James Dyson (continued)

It was May 1984. Dyson licensed Amway the month before. This was after James Dyson handed over his prototypes and designs. He claims to have spent time with their manufacturer, Bissell. Then Amway canceled their agreement. By September 1984, Amway accused Dyson of fraud. They sued him in an attempt to recover the money they had paid for his designs. He refunded their money. Dyson sued Amway in 1985 after the company produced the CMS-1000 vacuum cleaner. He alleged that Amway copied his dual cyclone prototype and confidential designs. Amway had already shown their vacuum cleaner to Sears. This caused some confusion as to who designed the cyclone vacuum cleaner first. That’s when Dyson decided to fight Amway.

James Dyson couldn’t fight this court battle alone. Dyson had a licensing agreement with the Canadian company named Iona. Which later became known as Fantom Technologies. In 1989, Dyson and Iona made a deal. Iona would manufacture and sell a line of commercial dual-cyclonic upright vacuums. They called this product Vectron. Later, Iona rebranded as Fantom when they sold the Vectron to consumers. This partnership allowed Dyson to enter the North American market. It also motivated Fantom to team up with James Dyson against Amway and Bissell. Fantom agreed to pay half the cost and take half the winnings. Their litigator agreed to a partial contingency fee. Which is a hybrid legal fee arrangement. It combines elements of both hourly billing and traditional contingency fees. He also would take a chunk of the winnings.

That’s when the battle began. Team Dyson, the plaintiff, filed their claim. Team Amway, the defendant, filed their defense. Then both sides called for discovery. This allowed Team Amway to offer all their evidence for the court to find a flaw in their case. That would determine the plan of attack and cross-examine witnesses. It was a long process. Team Dyson produced their evidence, but Team Amway produced hardly anything in response. Which was less than credible. Legal bills were mounting. As the case progressed, it was clear that Team Dyson had a strong infringement case. They also had a strong misappropriation of confidential information case.

That would have worked in the plaintiff’s favor, except that this was a patent case. Two scenarios are likely. Either the court rules the patent invalid, or the court rules that the invention is obvious. That’s why the situation forced James Dyson to defend the validity of his patent. This flipped the script. Instead of forcing the defendant to prove they’re not guilty of infringement, James’ credibility was on trial. After all, a patent granted is not the same as a patent made valid. The patent holder holds the burden of proof. Not the party who infringed on the patent.

Amway and Dyson settled in 1991. It was a long and arduous lawsuit. According to James Dyson, the lawsuit was against both Amway and Bissell in the USA. In the UK, it’s known as Bex-Bissell. Amway teamed up with Bissell to make the the CMS-1000 vacuum cleaner. James shared the technology with Bissell during the licensing agreement with Amway. That’s why Bissell had possession of his designs. Both parties became joint licensees of the technology (Amway+Bissell and Dyson). But then Dyson sued Bissell for manufacturing the Amway product. Amway continued selling its product, while Dyson received compensation. His share amounted to around $1 million.

That legal battle motivated Dyson to stop trying to license his product. Almost all of his license agreements had failed. Dyson was wasting his time dealing with other companies. His competitors rested on their laurels. They were in the business of selling bags, not innovating. It was time to start manufacturing his own product. He would take on the competition. Against market trends, Dyson started working on a new upright cyclonic vacuum cleaner. It would be the first that he sold under the Dyson name.

To be continued…

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– Sean Allen Fenn

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