What's Wrong With a Pajama Patent?
How a Shark Tank winner kicked a competitor offline
|Joe Mullin||Feb 10|
In the past two newsletters, I looked at the first batch of patent lawsuits that were filed in 2021. As I explained in my post about how to define a patent troll, I have a particular concern about abuses of the patent system caused by non-practicing entities (NPEs).
This week I want to focus on something quite different, by looking at a case where the plaintiff is not an NPE. Hug Sleep is a small Wisconsin company, founded by a husband and wife team. They make an adult swaddle product called the “Sleep Pod,” and had a recent marketing coup when they appeared on the TV show “Shark Tank.” On January 15, they filed a patent lawsuit against a California-based competitor called called MartX, which makes a product called ChillPajama.
It’s an important contrast to our ongoing discussion over NPEs. The Hug Sleep v. MartX case is how people expect patent disputes to work. A company that makes a physical thing you can hold in your hand has used a patent to force another company, with a similar thing, out of the market.
Today I’m going to explain why this “normal” use of the patent system1 is still very problematic for consumers, competition, and the economy at large. In my view, Hug Sleep’s patent and its lawsuit don’t meet the Constitutional goals of the patent system, which is to “promote the progress of science and the useful arts.”
A bit of housekeeping: you may have noticed that it’s Wednesday. After several weeks of publishing on Tuesdays, I’ve decided that future editions of the main Letters Patent will come out on Wednesday mornings. I’ll also continue to send out occasional Saturday posts with patent-related news links.
I reached out to Hug Sleep to see if they would talk about their story and the reasons behind this lawsuit, but they didn’t respond.
Hug Sleep: A Compressed History
In October 2020, the Mundts and their “Sleep Pod” were featured on ABC’s Shark Tank. They told how they started their company with just $2,500, and converted that to $490,000 in sales within 16 months.
“As this fabric stretches, it wants to compress, providing a gentle, calming pressure, helping you to relax and fall asleep,” Matthew Mundt told the Sharks. “It truly simulates the feeling of being hugged.”
The TV appearance seems to have been a major success. The Mundts received offers from all five of the Sharks, at exactly the price point they requested. (Fans of the show will know how unusual it is to get five offers.) They ultimately accepted offers from two, selling 20% of the company for $300,000.
Within just a few days of the show’s broadcast, the Mundts published a video update on their Facebook page saying they had temporarily sold out of product. “We’re overwhelmed, but overjoyed with the response,” Angie Mundt said.2
But when it came to selling compression sleep products, Wisconsin-based Hug Sleep wasn’t the only game in town. Out in California, another company was selling compression sleepwear, marketing it direct to consumers at ChillPajama.com.
Hug Sleep’s lawsuit against MartX, the company that makes ChillPajama, says their product infringes U.S. Patent No. 10,463,179. Hug Sleep wants damages, interest, and an injunction that would prevent future sales.
The Disappearing Competitor
After seeing the lawsuit, I became curious about ChillPajama, so I Googled the company. By the time I performed this search in late January, ChillPajama.com had already shut down its website. However, a Google cache still remained available, and I was able to see a version of the site that was up on January 8, just one week before this lawsuit was filed.
The website featured a chart that outlined the difference between their sleep compression product and “The Competition,” which I’m pretty sure describes their view of the Hug Sleep product. ChillPajama was selling for $64.99, which is $15 less than the current Hug Sleep price of $79.99.
Here’s the (now deleted) chart that ChillPajama created to explain how their product was different from, and better than, the patented Hug Sleep product.
I haven’t bought or handled either of these products. But just based on the description, it’s clear that ChillPajama was trying to differentiate itself from the competition, and improve upon the Hug Sleep product, not just copy it.
In particular, a product you can walk around in seems pretty different than a product designed specifically for sleep. Hug Sleep’s FAQ specifically recommends against walking in their product, and Shark Tank investor Robert Herjavec actually fell out of bed and hurt himself when he tested the product on TV. ChillPajama’s chart also shows differences in fabric, cut, and compression level.
I have no idea who created ChillPajama and no way to contact them. The parent company, MartX, is a Delaware LLC that was formed in August 2019. Since Delaware’s Secretary of State allows for considerable secrecy in regards to who owns LLCs, the trail pretty much runs dry there. The address in the complaint looks like an unlabeled warehouse in Placentia, California, and Google Street View isn’t particularly revelatory.
ChillPajama claimed it had its own patent pending, but searching USPTO databases for ChillPajama and MartX doesn’t turn up an application at this time.3
This “Promotes the Progress?”
Let’s concede that the creators of the Hug Sleep product created something innovative. And, let’s even assume they used their patent to prevent a competitor from copying their idea, at least on a basic conceptual level,4 and thus “free riding” off their innovation and producing a lower-cost product. A lot of folks would say that the Hug Sleep patent lawsuit represents the system working exactly as intended.
Still, I would argue that Hug Sleep’s litigation, and others like it, creates real problems for the economy and innovation.
First, competition is very good, and Hug Sleep’s lawsuit has already limited it. People who want compression sleepwear, like consumers in most markets, are better off with more choices. ChillPajama was selling what appears to be a different product for a lower price. Sleep Pod might be good for some consumers, while others would prefer the ChillPajama. Now, they won’t get a choice. They won’t even see the comparison chart that ChillPajama made, which has already been wiped off the Web by Hug Sleep’s litigation.
Maybe ChillPajama was a Johnny-come-lately that started making its product only after Hug Sleep blew up following the Shark Tank appearance. If that’s the case, then we have to ask… So what? Popular products are supposed to have new market entrants, which improve quality and lower prices. That’s Econ 101, but for reasons that remain unclear to me, patents are treated as some kind of hall pass out of normal economics.
Second, the Hug Sleep patent seems very broad, and may well prevent future competitors. ChillPajama tried hard to make clear how different its product was. Reading the Hug Sleep patent and the complaint, it’s unclear how one could make compression sleepwear and not run afoul of the Mundts and their legal claims.5 Simplifying Claim 1, it describes:
A body portion and neck portion that are sewn together
Fabricated based on a “stretchable material with memory”
The sleepwear must have a “stretched” mode and a bigger “unstretched” mode
An entrance for arms and legs
Patent system defenders often say that it’s beneficial to force others to “design around” patents, and that this is somehow part of the innovation process. This is a dubious claim. A design-around is socially valuable only when it leads to new and useful technology, not when it’s an arbitrary change just to avoid a lawsuit.6
Third, Hug Sleep built on the innovations of what came before them, like all people do. And there’s nothing wrong with that! But why shouldn’t MartX be allowed to do the same? Compression has been used in athletic products going back decades, and as a runner I can attest that the popularity of compression clothing has reached new highs in recent years. You don’t have to be a marketing Ph.D. to think of expanding this trend into different areas, like sleepwear.
Even looking just at compression products specifically targeted towards sleep, it’s easy to find ones that pre-date Matthew Mundt’s 2019 patent application. A company called Fabric For Wellness sells compression sheets and a “Compression Sensory Body Sock,” both of which have reviews dating back to 2017. Just like the Mundts, that company has promoted their product as an alternative to weighted blankets.
In last week’s post, I noted that about 75% of non-pharma patent cases were filed by non-practicing entities. In that final 25%, we find a just a few small manufacturing companies like Hug Sleep. Cases like Hug Sleep v. MartX are supposed to be the “good” lawsuits.
But ChillPajama made a strong and direct pitch that they had the better product. Now maybe that’s true, and maybe it isn’t, but that’s supposed to be for consumers to decide. (Not to mention, being able to make a lower-priced product is innovative in and of itself, although it’s a type of innovation that’s often unfairly derided in patent debates.)
I truly wish the Mundts and Hug Sleep all the best. They seem like nice people, and I’m sure they worked hard for their success. Their Sleep Pod seems like a popular product that fits the zeitgeist. But I think we’re all worse off when the Hug Sleeps of the world can so easily delete their competition by filing a patent lawsuit.
Images, from top: Hug Sleep founders on TV (ABC); Robert Herjavec tests out the Sleep Pod on Shark Tank (ABC); ChillPajama product shot (ChillPajama.com website).
Small manufacturer lawsuits aren’t the true “normal,” of course. The real normal is the most common type of patent lawsuit: a non-practicing entity filing suit over a tech or software patent.
The Sleep Pod shortage appears to have been temporary, and the product is back in stock.
The idea that MartX saw the Hug Sleep product, and was inspired by it to create their own sleepwear, is a pretty big assumption. Without being able to talk to MartX, I don’t have great knowledge about when and why they started their business. If Hug Sleep actually had good evidence of copying, it would have behooved them to put it in their complaint, since copying can be evidence of willful infringement (and can lead to greater damages).
Remember, Hug Sleep could explain clearly and publicly how to avoid infringing on their patent. It’s their choice not to talk about their lawsuit publicly, or to explain the bounds of their patent in clear English. If they were truly interested in just preventing infringement, why not do that?