Bogus blenders: direct marketer spends $2 million to rein in counterfeiters.

IF imitation is the sincerest form of flattery then Alchemy Worldwide has admirers all over the globe.

The problem is, they're unwanted.

The maker and direct-marketer of the Magic Bullet Blender--a small, silver, slicing, dicing and chopping machine ubiquitous in infomercials during the last three years--is finding itself competing against knockoff versions of its own product.

That has prompted its Sherman Oaks-based manufacturer and marketer, Alchemy Worldwide LLC, to spend more than $2 million to fight the knockoffs and counterfeiters in the last two years--with no end in sight.

"Your initial financial risk is very costly," said Lenny Sands, Alchemy's chief executive. "If you have a success, then other people copy it and cut your legs out from under you."

The company has sold about 7 million of the popular mini-blenders worldwide--more than $250 million in revenues to the company to date--but countless cheap imitations that could do serious damage to the brand also have ended up in consumers' hands. The company recently seized more than 500 bogus blenders in San Francisco.

Of course, the counterfeiting of popular retail products--from Rolex watches to Louis Vuitton purses and fashion jeans--has been the bane of retailers for decades. But it's a particular problem for products hawked on infomercials, where merchandise sees airtime all over the world--exposure that gives competitors and counterfeiters the chance to copy the products even faster.

Indeed, the Magic Bullet is just one of many top-selling infomercial products that have spurred imitations over the years: the Thigh Master spawned the Thigh Sizer and BluBlockers sunglasses gave rise to Blue Max shades.

That means that companies such as Alchemy have to be far more aggressive in fighting knockoffs than even many traditional retailers, despite the difficulty in doing so.

"It can be a very time consuming process but it requires vigilance on the part of those wanting to protect their brand," said Dennis Loomis, an attorney with Jenkens & Gilehrist LLP who specializes in intellectual property rights.

Big seller

Launched in October 2003 by Alchemy's Homeland Housewares division, the Magic Bullet is one of those rare infomercial-driven hits amid a sea of derivative kitchen appliances, exercise gizmos and other non-essential, impulse buys hawked on late-night television.

The Magic Bullet retails on TV as a package deal, with two going for $99, while a scaled-down version called the "Magic Bullet Express" sells for $59 in some retail outlets.

And while it hasn't yet reached the league of George Foreman's Lean Mean Fat-Reducing Grilling Machine, which has sold an estimated 55 million units since its 1995 introduction, it's on its way to surpassing 10 million units if sales continue at their current pace.

It's also a rarity because most infomercial-driven products have a life cycle of only about 12 to 14 months, while the Magic Bullet is headed toward ending its third year.

The infomercial route can be expensive. Alchemy has spent $100 million on TV media buys in the United States and $3 million to $4 million abroad (the ads have been translated into 42 languages) to make the product a household name. But it can have a huge payoff: the $250 million in sales have netted $120 million in profits.

The company's founders--Chief Executive Sands, Mick Hastie (who stars in the infomercials) and fellow partners Brady Caverly and Jeff Clifford--all had experience in the direct marketing world, and knew the downside of early product success: copycats.

"You can really become a victim of your own success," said Hastie, who has blended everything from dips to smoothies on the infomercials.

The company consequently decided to fight for its property rights from the get-go, meaning that Alchemy had to apportion part of its initial budget to legal costs, a startup expense that not all new product manufacturers can afford.

Such vigilance can pay off, as happened when the company seized the 500 fake blenders in a San Francisco warehouse. There also have been seizures in Los Angeles and other cities. Currently, more than 1,000 impostor Bullets are sitting in a Van Nuys warehouse awaiting destruction.

The company says many are produced by companies in China and India using cheap labor, and can sell for as little as $10. Last year, Hastie was at a Hong Kong trade show and came face-to-face with a vendor hawking a counterfeit.

"I was walking around and I see some guy at a booth with an actual copy of our Magic Bullet retail box with my picture on it," Hastie said. "I asked him, 'Is this the blender on TV, the same one, and is that the guy who sells it on TV?' He looked at me, looked at box and said, 'Yes.'

"The penny still hadn't dropped, so I said 'Well, I don't think so, because that's me," Hastie continued. "And he actually said to me, 'It's not you, it just looks like you.'"

Company's face challenges are on two fronts: stopping the manufacture of knockoffs, or products so similar to the original that they infringe on intellectual property rights such as trademarks and patents, and stopping the illegal counterfeits that masquerade as the original goods.

Both are costly propositions, since stopping knockoffs requires building a legal case that shows elements including packaging, name or design of a similar product are too close to a protected brand.

With utilitarian items such as appliances, it's harder to protect the product use--fair competition has to allow for more than one blender on the market, for example--so the easiest tack is to try to show that unique features of the item, such as packaging and product name, are too close to the original.

Sands said the company's efforts are paying off, at least in terms of legitimate manufacturers who are infringing on the look and features of the blenders.

"There aren't many knockoffs of the Magic Bullet anymore. We have been able from the beginning to go after few well-known knockoff guys and stop them in the first year," Sands said. "There are a few similar products in our category but that's just good competition."

With counterfeiting, the problem is finding the source of the impostor goods, since the illegal distributors tend to lead a transitory existence, operating without a permanent home base.

Still, the contraband operations can be surprisingly sophisticated. Manufacturing requirements to make a blender, even a cheap imitation, are still more involved than for the fake Chanel sunglasses or Louis Vuitton bags found on city street corners. Sands said the company has discovered illegal operations that put $200,000 into the manufacturing duplication process.

"This is not a printing press in someone's garage. There's got to be some significant capital investment in producing knockoff blenders, so I would expect there's some money to be had there," said Loomis, the intellectual property rights attorney.

Daniel Cislo, Alchemy's intellectual property attorney, has kept busy. He's issued hundreds of cease-and-desist letters, and had about 10 temporary restraining orders and other legal judgments issued in favor of the company since the Magic Bullet hit the streets.

Cislo said that one internet distributor, Canada-based wonderfulbuys.com, began advertising and selling a similarly branded and packaged mini-blender that was eventually deemed to infringe on Alchemy's trade dress.

"Wonderfulbuys.com was a particularly egregious example," Cislo said. "They came out with something identical to our product in color scheme, but gave it a slightly different name, the 'Miracle Bullet.'"

After a restraining order was issued, the site had to change the name of the similar product to "Miracle Blender" and was forced to stop using Alchemy's copyrighted packaging designs, he said.

Vedant Rajput, chief executive of Wonderfulbuys, said that his Internet-based company makes an easy target for Alchemy, but it's part of being in a competitive market.

"This is not counterfeiting, this is not the guys on the street corner selling the fakes as real," Rajput said. "We had a similar product, and it's easy for us to undercut their prices."

"If you don't do it early enough then you won't be able to slow them down," Sands said of the company's counterfeit battle. "You have to make it part of your initial risk ratio or you end up with a business that is rotting from the outside in."