Keeping the Black & Decker Deal Alive

What do you do when the company licensing your product seems intent on killing it?

by Mike Marks

As an inventor, you want to believe that once the licensing deal is done you can just sit back and see money roll automatically into your bank account for years and years without lifting a finger.

That hasn’t been my experience with any invention and definitely not with the Black & Decker deal.

After the deal for PowerShot® was done, B&D gave it a good launch and the staple gun was even featured in B&D’s annual report (Read about licensing to Black & Decker here). But a year after launch it was clear that the product was struggling. There’d almost been a recall issued by the Consumer Product Safety Commission because people had been stapling themselves in the palm of their hands. The problem was understandable, since the product worked in the opposite direction of traditional staple guns.

Regarding the safety issue, the Worktools team (Mike Marks, Joel Marks and Brad Golstein) had considered many design options, including a rhinoceros horn on the handle to make it impossible to squeeze the wrong way. In the licensing deal itself, we had to attest that we'd warned B&D about any safety issues we were aware of and we explicitly mentioned the directionality issue. B&D assured us that advertising would take care of that problem. In any case, their lawyers addressed the injuries and fortunately, the product was not recalled.

Equally threatening to Powershot’s survival was that it was an orphan product. It needed a line of staple guns surrounding it to survive and B&D had made no move to develop one. Brad, Joel and I discussed the problem. As I saw it, we had three options:

1. Sue B&D for breach of contract because they were not making a good effort to sell the product.

2. Launch a forward action staple gun of our own - essentially knock off the staple gun we’d licensed to B&D.

3. Offer to create line extensions for B&D at no cost to them. We’d handle design and tee up manufacturing and all they’d have to do is agree to buy a minimum quantity if we met performance and quality standards.

Options 1 & 2 were non-starters. We couldn’t afford to get sued by B&D. With regard to option 3, Brad observed, “No way. We’re basically just 3 guys in what’s essentially a garage.” I said, “It doesn’t hurt to ask.”

So I called the B&D product manager and proposed that we design and set up manufacturing for a light duty staple gun at no cost to them, but with the requirement they agree to buy a minimum quantity subject to meeting performance and quality requirements. She checked with her boss and then came back and said, “Yes. We’d like to do that. We’d also like you to create a heavy duty staple gun for the DeWalt brand.”

That was more than I’d asked for. The dog had caught the car. And the dog had no money for gas.

DeWalt was SERIOUS. We needed someone serious to help with the design. I reached out to local industrial designers and ended up getting a good bite from the well respected design firm, SG Hauser. The Black & Decker name was magic and it set the hook. I met with Stephen Hauser and proposed the following:

“We’d like you to design two staple guns for Black & Decker on spec. We’ll pay you a share of our royalty up to a fixed amount. That amount will be more than your usual design fee.” Hauser was game. I visited him at his company’s palatial new design studio in Westlake Village. We debated what a reasonable design fee would be. Then we agreed to flip a coin on what the multiple of that fee should be. Really. They did a fantastic job, just as if we were a client paying them hard cash.

Next up, we needed manufacturers.

For the light duty gun we had a contact in Taiwan, Tangible Manufacturing, who was game. They agreed to invest in the development and tooling B&D (approx $100,000). Chinese companies (both Taiwan and mainland) are amazingly entrepreneurial!

For the heavy duty DeWalt gun we contacted New Standard in Mt Joy, Pennsylvania. New Standard was a metal stamper that made subassemblies for the PowerShot®. They had massive machines that smashed steel plates with a bang that sent shock waves through the company’s offices every thirty seconds. When owner Mort Zifferer was asked how he put up with the noise he answered, “I hear money being made.”

The desire to make money is why WorkTools, Hauser and Tangible were working on spec. The question was whether New Standard would join the program too. It was a big risk.

Making the Dewalt staple gun would mean an investment of $1.5 million with no guarantee that the product would sell well enough to recoup the investment. Understandably, New Standard was hesitant. Making them even more hesitant was that B&D had screwed them over in the past. We set up a meeting with New Standard at B&D headquarters. Mort Zifferer said to B&D, ”you guys have screwed me in the past.” B&D said, “trust us.” They sounded sincere. Mort was on board.

On its side, B&D assigned two guys to oversee the project. Richard Browne, then Product Manager for PowerShot® and Fred Polanco, a manager of operations.

Everything moved forward as well as anyone could have hoped. Richard was a stern taskmaster who kept us on schedule. Hauser did great designs that focus groups blessed. There was a bit of stress with life testing at New Standard. We’d never managed anything like that before. How do you life test a staple gun? We learned that you set up a machine that will fire it 40,000 times.

We jumped all of the hurdles. Everything was a go. And then B&D had a change in management. Joe Galli had taken over. DeWalt staple gun? No way. In fact, B&D decided to sell its entire fastening business.

What?

“Fastening” was a term in our licensing agreement. We’d agreed that B&D could sell its entire business in the “fastening” category without our approval. But if they sold less than their entire interest, we’d have a say.

If you want to know why contracts get to 20+ pages, this is why. “Fastening” as the term was understood by B&D, by way of its internal organization, meant staple guns, rivet tools and glue guns. That’s how B&D understood the term in our contract. But the term was undefined. I pointed out that “fastening” would commonly mean things like power screwdrivers and even drills. You could hear their posterior sphincters shut tight.

Since they didn’t plan to sell their power screwdrivers and drills, we had a say. I was fixated on making sure that WorkTools, Tangible and New Standard didn’t get screwed. That meant that the business needed to be sold to anyone other than Arrow.

Into the mix stepped up a new PowerShot® product manager named Sean Quinn. Sean is a born entrepreneur and he saw the opportunity. He found backing from an investment firm and put together an offer. We fully supported Sean’s effort and in the end, he won. A big part of why he had financial backing was that line extensions were ready to go.

To seal the deal, we asked B&D for $75,000 because the transition would hurt our royalty stream. The reason didn’t matter. We had the ability to make things difficult and they paid to make us go away.

Sean went on to build PowerShot Tool Company in a major way and Joel was essentially part of his company’s design team. It was a beautiful experience. The PowerShot® family of products, including products sold under the Craftsman® brand, took a big bite out of traditional staple gun sales, especially from Arrow.

A couple of years into our relationship with Sean I suggested that he offer a desktop stapling attachment with the light duty EasyShot® staple gun, “it might even make a good Direct Response TV product.” As a result of that suggestion, I ended up in Florida watching over the production of a TV commercial with Todd Moses, one of Sean’s product managers.

In passing I told Todd that Joel had been working on a compact spring powered desktop stapler, one that would have the benefit of spring power but look like a desktop unit. Todd fell in love with the idea and that led to him founding a new company around WorkTools’ staple gun patents, with new patents to come. That was possible because WorkTools had excluded desktop staplers from its original licensing agreement with Black & Decker and the exclusion continued in the rewritten agreement with Sean. Todd created the PaperPro® brand and grew his company far beyond our expectations. We had equity in the new company and a royalty. It was a great deal and deserves its own full story.

The inspiration for the desktop stapler exclusion goes to a UPS driver who was picking up a box from our office while we were in the middle of negotiations with Black & Decker. We showed the driver our forward action staple gun and he exclaimed, “that would make a great desktop stapler!” We subsequently asked B&D for the exclusion and they readily gave it because they had no interest in desktop stapling. Big lesson for all inventors in that.

The honeymoon with Sean’s company ended when it was sold to Arrow, then owned by Masco. In our revised agreement with PowerShot Tool, having learned from what we did with B&D, Sean’s investors ensured we would not have a say in who the company was next sold to. They had majority control so Sean didn’t have a say.

When the Arrow/Masco deal happened we were offered $1,000,000 to buy out our royalties. We could surely have pushed it to $1.5 million. At the time we were taking in about $600,000/year and the patents had another 10-15 years on them. Even in the worst case, we figured we ought to see $3,000,000 over the remaining life of the contract, so we said no. Worse than the worst case happened. But saying no to a buyout was still the right call.

Once the company had been sold to Arrow I paid a visit to Arrow’s President, Allan Abrams, at their headquarters in Saddle Brook, New Jersey. Arrow was a family business founded in 1929 by Allan’s dad, Morris Abrams. They invented the staple gun category and the Arrow T-50, unchanged since the early 1950’s, remains the icon of a staple gun today.

We’d avoided Arrow like the plague when we first started thinking about licensing our new staple gun. At the National Hardware Show they looked unfriendly, old and arrogant. It was clear they would not be a good fit for a new product based on the premise that traditional staple guns, like theirs, worked the wrong way.

When I first pitched our forward action stapler to Black & Decker I’d said it would put a crater in Arrow's factory. I had envisioned that forward action stapling would put Arrow out of business. Instead, I was going to kiss the ring of our adversary.

Arrow Fastener is located in northern New Jersey about 15 miles from midtown Manhattan. The factory and corporate offices are directly next to I-80, but the feeling in the parking lot is serene, almost park-like. Allan Abrams’ huge Mercedes was parked directly outside of the front door under a gigantic portico, in a spot reserved for the boss. His massive office had classic 1960’s wood paneling and heavy leather furniture. When I entered he was sitting in a huge chair, probably the same one his dad, Morris, used to sit in.

Allan smiled and said, “Your invention is terrible. Your patents are worthless and we’re going to knock you off.” Hello to you too, I thought. I responded that the product was great but did need attention in manufacturing. As for knocking us off, I said, “You bought the company and if our patents were worthless you would have knocked us off already.” After that, we got along fine on a personal level. I actually liked him. He reminded me of my favorite uncle. But as a manager he was worse than useless.

I can’t say Allan intentionally tried to kill PowerShot®. But when I went to Home Depot and found 19 out of 20 PowerShot®’s to be non-functional, it certainly seemed that way. I visited Allan again, told him about the problem and explained how it could be easily fixed for just $5000. “It’s your problem. Your design is flawed, “ he said. That’s neither here nor there, I explained. “What matters is that it can be fixed for just $5,000 and I have no ability to get it fixed since you are in control.”

He didn’t fix the problem.

At that time Arrow was owned by Masco, a multibillion dollar conglomerate. Allan had reportedly sold out to them for over a hundred million dollars and that’s why he didn’t care about making PowerShot® work. He entertained himself by playing boss. Arrow was such a cash machine that a zombie could have run it for years without hurting the bottom line. I’m not saying Allan was incompetent or stupid. He was neither. He just didn’t care about making money with PowerShot®.

We were being held hostage.

The only thing I could think of was to try and buy the company. We didn’t have the $200+ million that would take, but with junk bonds and whatever, who knew? It was a card worth playing.

How do you go about trying to buy a $200 million company from a multibillion dollar company? I didn’t know. So I did the obvious thing and called Masco’s CEO (actually I specifically called his executive secretary) and explained that I wanted to speak to him about buying Arrow. She put me in touch with Donnie DeMarie, the head of Masco’s contracting division, the guy who oversaw Arrow, the guy who Allan Abrams ostensibly reported to.

We set up a meeting at Donnie’s office in Florida. I had my friend and business partner Steve Quick join me. Steve had taken over our Gator-Grip® socket business and has a good business head. We gathered around a large glossy table, said hello and then I launched into it, “Allan Abrams is killing your staple gun business and I want to buy it.” Donnie responded, “I don’t need you coming down here to tell me how I’m screwing up my business.” Steve later told me he wanted to dive under the table at that moment.

After the rough start we had a good conversation. Donnie explained he couldn’t sell Arrow because it was making too much money. A fair price that we might pay for the business, based on valuation, would not earn as much as the business was actually paying out. After that, we discussed business in general and Steve and I learned that even though Donnie’s group did $1 billion a year in business with Home Depot, he had trouble getting appointments with Depot buyers too. We left on good terms.

A short while after that meeting, Masco dismissed Abrams and brought in Gary Duboff to run things. Gary was a breath of fresh air, a rational, highly competent, business guy, motivated by profit. He made things work. Ever since, we’ve had a good partner at Arrow. Masco sold Arrow to Hangzhou GreatStar Industrial Co. in 2017.

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