The single biggest deal on Shark Tank was landed this week when Kevin O’Leary shelled out $2.5 million for a mere ten percent stake in Zipz. Evidently, Mr. Wonderful wants to be a big player in the wine business. After all, he does belong to a secret wine society.
What I find interesting about the grilling process in Shark Tank is how little the Sharks know about legal issues—and, in the end of the day, whether they really care. My guess is that they don’t.
When one of my clients buys a company, they spend months doing legal due diligence and turn over every stone. On patent matters, they want to know if their purchase will end them up in court. The problem is that once a deep pocket enters the picture, patent holders come out of the woodwork and start suing. I’ve had clients sued just a few days after closing.
When Andrew McMurray of Zipz began his presentation, the first thing Mr. Wonderful wanted to know wasn’t about his margin, but on whether he infringed the Copa Di Vino patent. This was a sore spot for Mr. Wonderful because he couldn’t land a deal with Copa Di Vino on a previous show, setting him back on his plan to take over the wine business. Several years ago Copa had developed a single serve wine glass and touted they had a patent on it. The Sharks evidently believed him because they weren’t sure they wanted to invest in a company that would infringe the Copa patent.
To Kevin’s question, Andrew gave some explanation that I couldn’t understand and said he had his own patent. When the conversation on patents got bogged down, the Sharks finally turned to business matters and Kevin did his deal, regardless of any patents.
So where to patent matters stand? If Copa Di Vino said they had the single serve wine glass locked up with a patent, this was not true. While they did file an application in the US claiming a process for putting wine into a single serve glass, it went abandoned several years ago. It took some digging, but I finally found the application. It is entitled, “Method for packing wine or a similar beverage, products obtained using said method and device for carrying out the method”. US 20030019364 A1. Bottom line—no US patent for Copa in the US, so Mr. Wonderful didn’t need to worry about it any way, at least in the US.
What about the Zipz patent? They do have a US patent as they claimed. They actually have two patents, a utility and a design. They are US 8,833,559 for “Single serve beverage container” and US D706,081 for “Beverage container.” They’re not bad, although I did find a few loop holes. The utility patent covers the shrink wrap on the outside of the glass. Their breadth is definitely limited because they weren’t the first to market—having been beaten to the punch by Copa. But, they did keep a continuation pending, so anyone trying to compete will have to worry about what future patent might pop out of the patent office.
So, if Kevin did his deal without doing any diligence, he probably got lucky on this one. I wish him all the best in his new wine venture. For him, I’m sure $2.5 million is not very much to risk.