17 Companies That Copied a Competitor and Got Sued Into Oblivion
In the cutthroat world of business, innovation often walks a razor-thin line between inspiration and imitation. While taking cues from competitors is standard practice, some companies step too far over that line, and pay dearly for it. From tech giants to small startups, the history of commerce is littered with cautionary tales of businesses that thought they could get away with copying their rivals.
Here is a list of 17 companies that blatantly copied competitors and ended up facing devastating legal consequences.
Napster
The pioneering peer-to-peer file-sharing service changed the music industry forever, but not in the way its founders hoped. Launched in 1999, Napster quickly amassed 80 million users who freely shared MP3s, essentially copying the intellectual property of record labels and artists.
The Recording Industry Association of America slapped Napster with a massive copyright infringement lawsuit, resulting in a court order to prevent the trading of copyrighted material. Unable to comply, Napster shut down in 2001 and later sold its brand name in bankruptcy.
Vanilla Ice
While not technically a company, Robert Van Winkle (Vanilla Ice) faced a career-defining lawsuit when he copied the distinctive baseline from Queen and David Bowie’s ‘Under Pressure’ for his hit ‘Ice Ice Baby.’ Initially, he ludicrously claimed the two baselines were different, but facing overwhelming evidence, he settled out of court for an undisclosed sum rumored to be in the millions.
The lawsuit essentially ended his mainstream music career, turning him from a chart-topper to a cautionary tale about copyright infringement.
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BurnLounge
This company attempted to create a digital music store where users could earn commissions by selling music to others. Sound familiar? That’s because it essentially copied aspects of legitimate music retailers while adding a pyramid scheme element.
The Federal Trade Commission sued BurnLounge in 2007, calling it an illegal pyramid scheme. After a six-year legal battle, the courts ordered BurnLounge to shut down and pay $17 million in restitution, effectively burning this business to the ground.
Scour
Before there was YouTube, there was Scour—a multimedia search engine co-founded by future Uber entrepreneur Travis Kalanick. The platform allowed users to exchange video, images, and audio files, much like Napster.
This similarity didn’t go unnoticed by the entertainment industry, which filed a $250 billion lawsuit against the company for copyright infringement. Facing insurmountable legal pressure, Scour filed for bankruptcy protection in 2000, just months after the lawsuit was filed.
Grokster
Following in Napster’s ill-fated footsteps, Grokster created peer-to-peer file-sharing software that facilitated copyright infringement on a massive scale. The company boldly claimed legal protection under the Sony Betamax ruling, but the Supreme Court unanimously disagreed in the landmark MGM Studios v. Grokster case.
The Court ruled that Grokster intentionally induced copyright infringement, forcing the company to shut down and pay $50 million to settle the lawsuit.
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Aereo
Aereo’s business model was ingeniously simple yet legally problematic: the company used tiny antennas to capture over-the-air television signals and stream them to subscribers’ devices. By essentially copying cable TV’s service without paying retransmission fees, Aereo quickly drew the ire of major broadcasters.
The case went all the way to the Supreme Court, which ruled that Aereo’s service was illegal in 2014. Just five months after the ruling, the company filed for Chapter 11 bankruptcy and auctioned off its assets for pennies on the dollar.
BlackBerry vs. Typo Products
When Ryan Seacrest backed Typo Products’ iPhone keyboard case that looked suspiciously like BlackBerry’s iconic keyboard, the Canadian tech company wasn’t amused. BlackBerry sued Typo for patent infringement in 2014, claiming the startup had simply copied BlackBerry’s distinctive keyboard design.
The court agreed, issuing an injunction against Typo and eventually forcing the company to pay $860,000 in sanctions for violating that injunction. Typo ultimately settled with BlackBerry and agreed to permanently discontinue selling keyboard cases for smartphones.
Gibson vs. PRS Guitars
Guitar manufacturing titan Gibson took issue with Paul Reed Smith’s Singlecut guitar, claiming it copied the iconic Les Paul design. Gibson sued PRS in 2000, and initially won an injunction stopping PRS from manufacturing the guitars.
However, PRS appealed and eventually prevailed when the appeals court ruled the guitars weren’t similar enough to cause consumer confusion. While PRS survived, the company spent millions in legal fees and lost years of potential Singlecut sales during the litigation—a pyrrhic victory at best.
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A&M Records vs. LimeWire
Another file-sharing service, another devastating legal defeat. LimeWire operated for a decade, allowing users to share files—including copyrighted music—through its platform.
The record industry finally took action in 2006, filing a massive copyright infringement lawsuit. Four years later, a federal judge found LimeWire liable for inducing copyright infringement and ordered the service shut down.
The company later agreed to pay $105 million in damages to record labels, effectively ending its 10-year run.
Cadbury vs. Darrell Lea
Even chocolate isn’t immune to intellectual property battles. Australian confectioner Darrell Lea faced the full legal might of Cadbury when the British chocolate giant claimed the smaller company had copied its distinctive purple packaging.
After a bitter nine-year legal battle that began in 2003, Darrell Lea narrowly avoided complete destruction when the court ultimately ruled in its favor. However, the prolonged litigation severely damaged the company’s finances, contributing to its eventual sale in 2012 after going into receivership.
Rubik’s Brand vs. Cube Knockoffs
The iconic Rubik’s Cube has faced countless imitators since its invention in 1974. In 2017, Rubik’s Brand went after Duncan Toys and Toys “R” Us for selling what they claimed were knockoffs of the famous puzzle.
The defendants didn’t just face a lawsuit—they were raided by U.S. Marshals who seized the alleged counterfeit cubes. Though the case eventually settled, several puzzle manufacturers have found themselves twisted into legal pretzels for copying the famous cube’s mechanism and appearance.
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Playdom
Disney subsidiary Playdom learned an expensive lesson about copying virtual worlds when it settled a lawsuit with Worlds Inc. for a reported $7 million. Worlds Inc. claimed Playdom had copied its patented technology for allowing users to interact in virtual spaces.
The settlement came after years of litigation that drained Playdom’s resources and distracted it from its business operations, showing that even with Disney’s backing, stealing intellectual property carries significant risks.
Bratz vs. Barbie
One of the most bitter battles in toy history erupted when Mattel sued MGA Entertainment, claiming the Bratz dolls were developed by a designer while he was still employed at Mattel. Mattel essentially argued that MGA had copied their employee’s work product.
Initially, Mattel won a devastating $100 million judgment, but the case took a dramatic turn when an appeals court overturned the verdict. While MGA ultimately survived, both companies spent over $600 million on the decade-long legal fight—enough money to make even these fashion dolls faint.
Hyundai vs. Ssangyong
When Korean automaker Ssangyong launched the Korando model in the early 1980s, competitor Hyundai claimed it copied design elements from their vehicles. What followed was a protracted legal battle that severely damaged Ssangyong’s reputation and finances.
Though they settled the case, the legal costs and reputational damage contributed to Ssangyong’s eventual bankruptcy filing in 2009. The company has since been acquired by Indian automaker Mahindra, but never regained its former market position.
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PhoneDog vs. Noah Kravitz
This cautionary tale involves a company suing a former employee who took his Twitter followers with him when he left. PhoneDog sued Kravitz for $340,000, claiming he essentially copied their customer list by keeping his 17,000 Twitter followers when he changed his handle after leaving the company.
While the case settled for an undisclosed amount, it demonstrated the potentially devastating consequences of assuming social media followers belong to individuals rather than the companies they represent.
Motorola vs. Huawei
Chinese tech giant Huawei faced serious allegations when Motorola accused it of stealing trade secrets through industrial espionage. Motorola claimed Huawei had systematically copied its wireless technology with the help of former employees.
Though the companies eventually settled in 2011, with Huawei paying an undisclosed sum, the case damaged Huawei’s reputation in Western markets and foreshadowed the company’s later struggles with trust issues in the United States and Europe.
Adidas vs. Skechers
The three-stripe design is synonymous with Adidas, so when Skechers released shoes with similar striped patterns, Adidas was quick to file suit. This wasn’t an isolated incident, Adidas has sued Skechers multiple times for allegedly copying its designs.
In one significant case, a judge issued a preliminary injunction preventing Skechers from selling shoes that resembled Adidas’ Stan Smith sneakers. These ongoing legal battles have cost Skechers millions in legal fees and lost sales opportunities, demonstrating the perils of treading too close to a competitor’s iconic designs.
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The Price of Plagiarism
The business graveyard is filled with companies that thought copying a successful competitor was a shortcut to prosperity. Instead, these cautionary tales demonstrate how intellectual property infringement can lead to astronomical legal fees, devastating financial penalties, irreparable reputation damage, and in many cases, complete business failure.
Innovation may be difficult, but as these examples show, the cost of imitation can be the ultimate business death sentence.
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