Matrix gets first-hand lesson in global piracy

FORT COLLINS – It’s pretty common for a company to start business stateside and then either expand sales internationally or move operations overseas.

Steve Brown, president of Matrix Investment Corp., did things the other way around. His company was founded in El Salvador, then eventually moved to the United States with corporate headquarters in Fort Collins.

The 16-year-old company continues to have extensive operations and sales in Central America, however. And now, after enduring some hard lessons in international piracy and spending an extensive amount of money to litigate against plagiarism, Matrix is ready to move on.

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Company officials expect to relocate this month from 1118 NE Frontage Road into new headquarters at the Landings Office Park in south Fort Collins.

The move itself was driven by the fact that even after winning in court against the product pirates, Matrix still had lost so much that it shut down one division, trimmed staff and focused on other existing products. And it no longer needed the extensive warehouse space at the Frontage Road location.

Matrix is a wholesale distributor of Alumicolor measuring instruments, including professional T-squares, triangular drafting scales, graphic tools, calibrated triangles, and much more. The company also will provide personalized logos on its products for clients who want to pass out rulers or other items as an advertising tool.

Matrix also is the corporate headquarters for seven corporations in Costa Rica, El Salvador, Honduras and Nicaragua and a cattle ranch near Walden. The overseas operations include retail and distribution stores called Alumicentro that sell the measuring tools as well as aluminum extrusion products such as window and door flashings, trims and related hardware. An aluminum extrusion plant in El Salvador called Aldeca manufactures the items.

It was a completely different line of products that attracted the piracy, however.

“The line we closed was called Angelitos,´ said Margie Brown, Steve’s wife and general manager at the Fort Collins headquarters. “It was a line of soft-sculpture gifts and accessories such as birds, flamingos, sea creatures and mermaids.”

The brightly-colored, pillow-like products were sold at places that included Nature’s Own Imagination, Pier I and Disney World. All of the designs were copyrighted, but that did not prevent Chinese manufacturers from mimicking designs, “right down to the stitch,” and undercutting prices.

“We tried to stop it by making sure we had copyrights, trademarks and logos registered in the United States and El Salvador,” Steve Brown said.

The costly process resulted in 318 copyrights.

“But it’s hardly worth it, because it’s so hard to enforce,” he said.

He and Margie recalled one customer who had purchased 10,000 of their Christmas wreaths three years in a row. The fourth year, the wreath still was listed in the customer’s catalog, but Matrix had not been asked to fill the order. They contacted the customer, who said he had obtained a lower-priced product elsewhere to list in his catalog.

Subsequent investigation resulted in U.S. Customs seizing a shipment of the pirated designs in California and a lawsuit by Matrix against the bandits. The suit was won, but Matrix was left with $150,000 in legal fees and the decision to shut down the entire Angelitos line. An El Salvador sewing plant closed, displacing 300 workers. The Fort Collins headquarters went from 14 employees to seven.

Steve Brown said the whole experience was discouraging.

“If Microsoft can’t control knock-offs of its software, then how can a company like ours protect its products?” he asked.

Jim Wilson, an international-business consultant who owns Quantum International in Longmont, said the Brown’s “took the proper action, but they still were damaged.

“There’s no easy solution,” he said. “Even the Microsofts of the world have to vigorously prosecute.”

Wilson said that even if a company is successful in stopping one vendor, others often step in and continue the trademark and copyright violations.

“If you have stable products that are easy to copy, it becomes very hard to prevent,” he said.

Defensive steps may include moving manufacturing off-shore and cutting prices, or even resourcing the product to China for manufacturing.

Once the decision was made by Matrix to close the division, the company moved steadily forward again.

“Angelitos was draining energy, time and money,” Margie Brown said.

Another Alumicentro retail outlet recently opened in Nicaragua. And sales of the aluminum products continue to swell stateside in stores that include Art Hardware, Hobby Lobby, university bookstores and architecture stores.

International revenues last year were approximately $17.5 million, up from $16.2 million in 1995. Revenues at the Fort Collins headquarters in 1996 were $2.8 million, up from $2.5 million the previous year.