Sep 29, 2022 - News

Austin startup battles with toy giant Hasbro

A Nerf gun on display at Walmart

Hasbro products, like Nerf guns, dominate the toy gun aisle at an Austin Walmart. Photo: Asher Price/Axios

An Austin startup is locked into a sharp-elbowed contract dispute with toy giant Hasbro over a new-fangled water gun.

Driving the news: With the Christmas gift-buying season around the corner —or already here for some — Austin firm Gel Blaster has retained a PR shop to frame the fight as David vs. Goliath.

What they're saying: "In a glaring act of deception, bad faith and betrayal, Hasbro secretly began a cynical corporate scam to unlawfully crush Gel Blaster," Gel Blaster lawyers wrote in an Austin federal court filing last month.

  • The lawsuit accuses Hasbro of breaching a confidentiality agreement between the two firms — ahead of a potential partnership — after its engineers allegedly gleaned manufacturing specifications about gel blasters.

The other side: Hasbro officials have accused Gel Blaster of infringing on its own patents and asked a federal trade agency to investigate — but did not respond to an Axios interview request and has not yet filed a full response in federal court.

The backstory: Austin entrepreneur Colin Guinn launched Gel Blaster's first product on Kickstarter at the end of 2020, and, throughout 2021, Gel Blaster expanded its Austin-area team and began selling its products to small businesses across the country and through Amazon, per its lawsuit, which seeks unspecified damages.

  • Gel Blaster sells "blasters" that shoot water beads, known as "gelettes." "Gel Blaster's products are a marked improvement on paintball or foam-dart products: because the water-based ammunition disintegrates on contact, it leaves behind no stain, and there is no clean up," per the suit.
  • The Austin company claims it was approached by Hasbro and in August 2021 the two firms entered into a confidentiality agreement to facilitate the exchange of information ahead of a possible deal — including evaluations of potential patent strengths and weaknesses. That month, Hasbro executives flew to Austin and the two teams dined together at Uchiko.

Flashforward: In July, Hasbro filed a federal complaint, accusing Gel Blaster and others of importing soft projectile guns that violate Hasbro's patents — and in August the U.S. International Trade Commission voted to investigate. (Another toy firm, Spin Masters, filed the patent complaint with Hasbro.)

Between the lines: Gel Blaster officials say Hasbro "misappropriated" the Austin company's trade secrets, per the court filing.

  • "Hasbro has used and is utilizing the confidential product designs and specifications, financial information, client information, and business plans, to pursue the ITC complaint against Gel Blaster, all in an effort to prohibit Gel Blaster from importing its products into the United States and to gain significant business advantage for Hasbro."

The bottom line: A lot of money is at stake, as the companies compete for shelf space at big box retailers.

  • The lawsuit claims that Hasbro realized "the size of the prize" after attending a Gel Blaster meeting with Walmart officials.
  • And the suit accuses Hasbro of more recently informing Costco — a potential Gel Blaster customer — about the toy company's infringement claims as part of an "anticompetitive campaign to stamp out Gel Blaster's business."

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