What Happens When a Company Worth $5bn Clones Your Product?

by Natasha Postolovski. Writer, maker, traveler.

Like many this week, we followed the story of CYNK Technologies with interest. The company rose from six cents a share in June to a high of $21 this month, giving it an apparent market value of $5 billion; a remarkable achievement for an organization with, reportedly, only 1 employee and no assets. Its premiere product, Introbiz, bears an eerily similar UI and functionality to the Envato Marketplaces, except Introbiz's users buy and sell celebrity contact information rather than digital products.

Compare the item listings and item page of Introbiz with the item results and item page of GraphicRiver, for example. This part of the story wasn't picked up by any of the major news outlets that reported on the sky-rocketing stock price with bemusement: CNNMoney, TIME, Business Insider, Forbes, WSJ, Reuters, and many more.

The Introbiz site bears similarities to Envato Marketplace clone scripts floating around the internet. If Introbiz does use one of these clone scripts, it's a remarkably makeshift technological foundation for CYNK Technologies, a company that reported a $1.5 million loss in 2013.

Some have said that the stock's meteoric rise (25,000%) resembles classic pump and dump schemes of the past, where a cheap stock's price is artificially inflated through positive coverage, then dumped by the owners once the stock reaches its peak value. The US Securities and Exchange Commission (SEC) has halted trading of the stock while it undertakes an investigation.

If there's one thing that holds true for all successful digital products, it's this: there will be clones, possibly many. These clones will chip away at a portion of your revenue (or user base, or market share, or audience). Facebook has so many clones that Mashable created a roundup of the top 10, while one website gathered together a list of 250 websites that copy the functionality of Twitter. However, it's not only these massively high-profile products that have struggled with clones. Almost any digital product that enjoys some degree of success, whether it's an app, a game, a website or a blog, is at risk.

The question is: what happens when a company clones your product? In general, you have three choices: you ignore it, you start legal action, or you send a DMCA take-down notice to the clone-site's webhost for use of your intellectual property.

Most lawsuits against clone sites are unsuccessful. Facebook lost a 2009 lawsuit against German website StudiVZ, and hasn't fought any high profile anti-clone lawsuits since then. Often, clones are based overseas. Suing abroad is costly and time-consuming, and IP laws are complex. In the StudiVZ case, the judges ruled that the website wasn't doing anything wrong because it made no attempt to convince users they were actually on Facebook (despite taking many cues from Facebook's UI and functionality). Taking a clone site to court is difficult, costly, time-consuming, and may fail to effect any real change.

Realistically, the choice of how to deal with clones is usually one of two options: trying to persuade the owner to take down the site (usually met with silence), or alternatively, sending a DMCA take-down request to the clone's webhost.

At Envato, our products and author items have been cloned again and again. We're dilligent about sending a formal DMCA take-down request whenever we can, but the success of this route is deeply dependent on whether the clone-site's webhost is willing to take action.

Webhosts receive thousands of these kinds of DMCA take-down notices every day. They can be slow to respond, and sometimes may not act at all. The hesitant response is understandable: for them, DMCA take-downs are a liability that might force them to lose a customer. Sometimes these take-down requests are successful, but often they aren't. As with the ruling of the judges in the StudiVZ case, IP is one of the law's most challenging areas, and one of the hardest to enforce. When one file or website is taken down, it's often a matter of hours before it pops up somewhere else on the internet, resulting in a process that feels a little like digital whackamole.

For most companies, clones are an unavoidable side-effect of operating a thriving digital product, particularly when your technology is simple-enough, at least on the surface, to duplicate. CRUD apps are particularly vulnerable to cloning. The massive cost and effort of international lawsuits, the mixed success of DMCA take-down requests, and the unwillingness of clone operators to shut-down their sites make this a difficult problem to solve. Many companies have opted to ignore the problem. At Envato, our primary response is to keep trying to make our own products better. We also send DMCA take-down requests and contact infringing individuals to ask that IP-violating websites and items be taken down. Because clone sites don't just impact on us, but on our community of authors, we feel a responsibility to take action on their behalf.

Success in this realm is a challenge. In the realm of digital products, clones are an ever-present part of the landscape, and an inevitable byproduct of creating something of value.

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