Update, 9/15/17, 3:01pm PT: Added analysis of the patent language. Update, 9/15/17, 2:08pm PT: Input Club posted a response to Massdrop's statement (opens in new tab). Original article, 9/15/17, 9:20am PT:
It appears that Input Club and Massdrop are getting a divorce.
Input Club, a small collective that’s produced several popular keyboards, including the WhiteFox and K-Type, has worked with Massdrop on group buys in the past. The two companies also collaborated to create the Halo series of switches. (Previously, we were not aware that Massdrop was involved in that process.)
Because of some undisclosed issues between the two, Input Club opted to use Kickstarter for its latest group buy, for the latest generation of the WhiteFox. In that Kickstarter, the switch options were limited to Kailh Blue or the Input Club-designed and Kaihua-made Halo True or Halo Clear switches.
However, Massdrop asserted that by offering the Halo switches, Input Club was in violation of the patent and licensing agreement they’d made. That launched a drama that is currently unfolding.
He Said, She Said
In an update on its WhiteFox Kickstarter page on Thursday, September 14, Input Club stated in part:
We (Input Club) developed and invented the Halo switches, and worked with Massdrop to finance the physical tooling that allows them to go to mass production. We assigned Massdrop the patent rights in exchange for a royalty and a “license-back” that we believe allows us to source the switches for use in keyboards. But when we tried to order switches for the WhiteFox/NightFox, Massdrop would not let us source them. They then claimed to own the “Halo” name and asked us to give up the license-back altogether, so we would essentially lose all access to our own invention.
Essentially, the Input Club is stating the following:
-Input Club designed the Halo switches-Massdrop funded the tooling-Massdrop owns the patent rights-Input Club gets a royalty from the sales of the Halo switches-Input Club has a “license back” agreement that lets the group source the switches
This morning, September 15, Massdrop posted an official response (opens in new tab), which reads in part:
As you may know, for some time Input Club has collaborated with Massdrop in the design of Massdrop's HALO switch. Throughout our relationship, Input Club has acknowledged they are the "Designer" of the HALO switch, with Massdrop as the "Manufacturer and Distributor" of the HALO switch.Along the way, Massdrop spent tens of thousands of dollars, dozens of hours, and many domestic and international flights to help bring this concept to life. In our agreement, in exchange for this effort, Input Club agreed to receive a royalty from Massdrop from the sale of the HALO switch and Massdrop would be able to exclusively manufacture and distribute the switch.In our agreement for the HALO switch, Input Club requested an exception to our exclusive distribution rights to allow them to offer switches directly to end customers as replacement parts and as standalone switches via their website. This was a reasonable request, so we agreed and wrote it into the agreement.
Massdrop also stated that Input Club made “untrue remarks regarding Massdrop and the relationship between Input Club and Massdrop.”
Given both companies’ statements, there are some details to parse.
First, the key piece of Massdrop’s statement is the nature of the distribution agreement it says it struck with Input Club--that Input Club could distribute the Halo switches “directly to end customers” as, and we quote:
-Replacement parts-As standalone switches-Via their website (meaning this one)
In Massdrop’s purview, Input Club violated that agreement by offering the Halo switches as an option for a (future) shipping keyboard--not as replacement parts and not as standalone switches--and via Kickstarter instead of via the Input Club website.
Input Club, as stated above, believes that the agreement allows it to source switches for the keyboards it sells. Both parties also seem to contest who owns the “Halo” name.
Given that, at least according to Massdrop, there have been legal discussions about this issue for two months, it’s unlikely that anything will be resolved without a lawsuit.
One wrinkle here is that it's possible that Massdrop signed the agreement with Input Club under the assumption that any keyboards that the latter group developed using the Halo switches would be run through Massdrop. Instead, of course, Input Club launched a Kickstarter campaign.
Now that we've received some comments from Input Club (nothing yet from Massdrop) and have seen the language of (part of) the agreement that's in contention, there's more to go on. Input Club posted a response to Massdrop's statement (opens in new tab). In it, Input Club published some of the official agreement:
Sec. 3(c)(ii)(2)(c)Limited License Back. Massdrop does hereby grant Designer a limited, non-exclusive andrevocable license to use Massdrop’s Joint Inventions solely to the extent necessary for Designerto (i) perform Designer’s obligations under this Agreement; and (ii) to request manufacture of,and purchase, Products solely from the manufacturer designated in Exhibit C, and to sellproducts incorporating such Products to end users. Input Club (itself or with or through otherentities) agrees to not distribute or sell such Products to resellers or distributors.
We're told that within this passage, "Designer" refers to Input Club, "Product" refers to the switches, and "product" is keyboards. We reached out to a patent expert for some clarity on the legalese contained within. Dennis Crouch, a Patent Attorney and Law Professor at the University of Missouri and author of the popular Patently-O Blog, parsed the language out for us to the extent that it's possible without seeing the entirety of the contract.
As is certainly the case in many legal proceedings, this disagreement may come down to the tiny details present in the contract. For example, the contract states that the license is “revocable,” but the definition here is unclear. Crouch noted, “Best practices would have expressly stated whether it is revocable ‘at will’ rather than only ‘for cause.’ Courts will also consider the extent that the license was an important bargained for element of the agreement and will apply the ‘implied covenant of good faith and fair dealing’ that is an aspect of every contract.”
Another important detail amid the debate about patent rights is the fact that this particular patent has not yet been granted—it’s still pending. Considering that’s the case, the whole license issue technically isn’t an issue—yet. “The general rule of patent law is that nobody needs a license until the patent issues,” said Crouch. “So, although Massdrop might be able to revoke the license, Input Club doesn't need a license.” However, he further explained that “there is a quite narrow patent law doctrine of 'provisional rights' that allows for back-damages after a patent issues for actions that took place before the patent issued. This […] caveat can only apply once the patent applications publish (which they have not) and only if the application issues in the same form as published (the vast majority of patent applications are amended to account for prior art discovered by the patent office).”
In other words, because the patent doesn’t yet exist, Input Club is most likely free to do whatever it pleases regarding the Halo switches. However, there’s a serious risk involved in doing so, because if Massdrop pursued and won back damages, that would obviously cause significant problems for Input Club down the road.
To be clear, we aren’t adjudicating this disagreement here—just parsing it as far as we (or a seasoned patent attorney) can without seeing the full agreement. Crouch added a caveat that, for example, Input Club may have forgone the ability to “practice the invention” elsewhere in the contract.
Also note that there's a difference here between patent rights and intellectual property rights--such as who owns the name "Halo." We're seeking clarification on that point, but Input Club believes it owns that nomenclature.
We're awaiting a response from Massdrop to our queries.