Robert A. Montaquila will never forget the shock. For more than a year he and his team of designers at Aro-Sac Inc., a North Providence jewelry manufacturer, had toiled to make the perfect ear clip. It was well designed. Stylish. Trouble-free. It was patented with the U.S. Patent and Trademark Office. It would crush the competition, he thought.
Then, on a winter day in 1996, Montaquila discovered that a source of competition he hadn’t counted on would crush him.
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The new competition was a copy of Montaquila’s ARO-CLIP, the patented new product which had supercharged Aro-Sac’s sales since it was introduced in December of 1995. So in-demand was the new ear clip, in fact, that Montaquila was forced to double his workforce to keep up, hiring 35 new workers and running day and night shifts through the summer of 1996.
But on that winter day, Montaquila learned that a cheap copy of his new ear clip was flooding the marketplace, and taking his sales. The copies – or ‘knockoffs,’ as those in the business call it – were being imported to the United States, sold to manufacturers to make earrings, and then distributed to department stores.
And the importers bringing the products into the country – probably from plants in Asia – enjoyed a distinct competitive advantage. Since the manufacturer who copied Aro-Sac’s product had no research and development costs, and because of the general low cost of doing business in Asian countries, copies of the ARO-CLIP could be sold in the United States for less than it costs Montaquila to make them. While the Aro-Sac ear clip typically sold for $10 to $17 per gross, jewelry manufacturers could now buy copies of the clip for around $6.50.
For Montaquila, it was devastating news to report to workers who had put months into developing their new product.
“They’re kind of like artists, they craft jewelry out of metal,” said Montaquila, who is president of a business his grandfather started a generation ago. “When they see a copy come in, it hurts.”
Aro-Sac’s problems are not unique. Costume jewelry manufacturers statewide are fighting to maintain sales in the face of increasingly-stiff competition from foreign imports, many of which are knockoffs of patented products. And while the competition hurts many industries, it is especially burdensome to the local jewelry sector, which has lost a third of its jobs in the last 20 years.
“American jewelry makers face the growing problem of theft of their intellectual property rights,” Manufacturing Jewelers and Suppliers of America Inc., the Providence-based national trade group, warned in a 1998 amendment to its ‘White Paper’ on the state of the U.S. jewelry manufacturing industry.
Montaquila understands that as well as anyone. Since 1997, when the knockoffs of his products began to take hold, his sales have slipped 35 percent. The night shift is no longer needed.
Today, earrings made with copies of the ARO-CLIP are sold in local department stores – often alongside earrings made with legitimate Aro-Sac clips. The difference between a copy and the real thing can be distinguished by inspecting the inner wire. If it bears a U.S. trademark number, it’s Aro-Sac; if not, it’s a fake.
“The consumer usage of the clip has not diminished,” Montaquila said. “It’s our sales that have diminished.”
Montaquila’s grandfather, A. Robert Saccoccio, started the company in 1935 on Washington Street in Providence. Originally it was a job shop, performing tooling and stamping services for Imperial Knife Co. In the late 1940s and early ’50s Saccoccio began producing ear clips, eventually building the company into a well-recognized name in the ear clip business. In 1983, the company moved to 1 Warren Ave. in North Providence.
Though Saccoccio patented products, experts say jewelry makers of his day had little to fear because the quality of foreign goods was relatively low. That, however, has changed. Today, foreign manufacturers are so adept at copying goods, even some Aro-Sac employees have trouble distinguishing them.
“Some of it’s so good, even I can’t tell,” said Dick McCluskie, sales manager for Aro-Sac. “Anything that’s moving, they’re knocking off.”
They began knocking off the ARO-CLIP within a year. Montaquila said the clip is an improvement on a European clip that is widely used in the marketplace, the Euro-Clip. By making it with a bent wire, allowing it to dangle straighter, he made it easier to see. By making this and other changes, Montaquila created a unique product. He started work in 1994.
His first dispute came in 1996 after he learned that Waliga Imports and Sales Inc. of Johnston had ear clips brought in from overseas that were similar to his. Waliga, who said he could have fought Aro-Sac’s assertion that the clips were knockoffs, said he instead decided to back off.
“It was an unfortunate situation,” said Waliga, who buys his goods domestically and from overseas and sells them to manufacturers. “I want to see the industry in this state thrive – I was very willing to back off of this fight and let Aro-Sac try to make a living.”
But not all disputes are solved so easily. So many importers are now involved in the trade of knockoff jewelry goods that Montaquila says it is impossible – and too costly – to sue everyone. David S. Resnick, an attorney with Peabody & Brown who represents Aro-Sac, said the company plans to find and sue people who infringe Aro-Sac patents. But he acknowledged that many of them are small-time operators who aim simply to make as much money as they can until they get caught.
And since it’s the patent holder’s job to seek out violators and bring them to court, it’s difficult for small business people like Montaquila to catch everyone.
“Everyone we’ve sued on these patents has thrown up their hands and we’ve settled with them,” Resnick said. But he added: “It’s been very difficult to stop everybody; it’s extremely frustrating.”
Others in the jewelry business report similar frustrations.
“We may get one or two production orders, but after that it’s usually in the Orient, if it’s a good item,” said Ed DeCristofaro, vice president of LDC Inc., a Providence jewelry company.
“I think everybody in the jewelry industry is being affected by this foreign competition coming in,” added Clint Whitman, owner of Kraemer Findings Inc. in Providence.
But Whitman and DeCristofaro agree that the Rhode Island jewelry industry would be better off if consumers were better informed about where their goods were being made. Federal law already requires that “Country of Origin” labels be attached to jewelry coming into the country.
The constant problem, however, is that, somewhere between the docks and the retailer’s shelf, the tags are being removed, said Manufacturing Jewelers and Suppliers Spokesman John Harvey.
“There needs to be better policing of products as they come into the country, and as they move around the country,” Harvey said. “The consumer has a right to know where these products are coming from.”
Harvey and others in the jewelry business would like to see a federal law passed that requires Country of Origin labels to be indelibly marked on jewelry products. While such a law exists for imported Native American-style jewelry, it currently does not apply to other jewelry imports.
U.S. Sen. John H. Chafee, R-RI, however, has recently succeeded in adding an amendment to the U.S. Customs Service Authorization Act that boosts the power of the Customs office by adding civil enforcement authority to its current criminal enforcement powers, allowing Customs to impose civil penalties on an agency that is caught removing Country of Origin labels.
Some jewelry makers argue that the United States should hit foreign goods with high duties. But U.S. Sen. Jack Reed, D-RI, said a better approach is to break down barriers to trade and better enforce U.S. trade laws.
Companies suffering from unfair competition can also do a number of things to help themselves, according to Chafee’s office. First, jewelry makers should check their U.S. patents to be sure they’re on solid legal ground. Then, contact a specialist lawyer who can explain the options in dealing with individual companies. Next, alert the U.S. Customs Office of the problem. In so doing, be as specific as possible about the type of jewelry that’s coming in, which country it is suspected to come from, and at which port it is entering the United States.
Companies may also collaborate with the U.S. International Trade Commission. If the commission determines that an import infringes on a patented product it may issue an exclusion order under Section 337 of the 1930 Tariff Act, authorizing U.S. Customs to prevent the good from entering the country.
And in cases in which intellectual property violations have caused “substantial” injury to an industry, the U.S. Trade Representative’s Office may invoke Special Section 301 of the Trade Act of 1974, which authorizes the United States to retaliate against foreign nations.
But to manufacturers like Montaquila, such remedies seem a bit remote, given that he faces daily pressure to compete in an environment that is becoming increasingly difficult.
“No matter who you talk to in this business, they’ll tell you they’re working twice as hard just to survive,” said Bill Waliga, a member of the jewelry industry for 25 years. “I think the industry is too far gone – it’s too little, too late for the industry.”
Providence Business Newsã reprinted with permission, all rights reserved.
