David versus Goliath: A Fort Collins watchmaker’s legal battle against a giant Swiss enterprise

Editor’s note: this story references a court case that had yet to be decided as of March 26. This story will not be updated, but coverage of the trial will continue on Bizwest.com.

FORT COLLINS and NEW YORK — For the past two years, Vortic Watch Co. founder RT Custer has been engaged in a legal fight for his company’s life.

He launched out of a successful Kickstarter campaign in 2014 with a business model that’s simple on its face: take an antique pocket watch from the pre-WWII era and modify the systems of gears and machinery underneath to fit into a 3D-printed wristwatch case.

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So far, the company most recently made $900,000 in 2019 from selling 350 watches, an increase over $200,000 the year prior.

After features in the New York Times, NPR and a handful of other national media outlets, Vortic started to advertise in magazines, with one displaying a watch using a Hamilton face and movement.

Then, Swatch came knocking.

The Swiss watchmaking giant sent Vortic a cease-and-desist letter over the advertisement, which was showing a prototype for watches that weren’t even in production.

Now, years later, a judge in New York City prepares to rule whether or not Swatch’s claims of trademark infringement and counterfeiting are valid, a ruling that could make or break Vortic as a company.

“They probably looked at me like I was weak”

After Swatch’s first letter arrived, the lawyer who helped incorporate Vortic recommended Custer reach out directly to Swatch to explain the “upcycling” process. He reached out to employees on LinkedIn and tried to contact executives in Switzerland for two years.

Custer was told to speak only to the company via its attorneys in a manner he said felt hostile.

“I was a kid, I was 23, and they probably looked at me like I was weak, like I was begging for forgiveness,” he said.

Custer had back-and-forth conversations with Swatch’s American attorneys for the next two years until July 17, 2017, when he was served with the lawsuit. In a last-ditch effort, he sent a handwritten letter to Switzerland offering to fly to Swatch headquarters and negotiate with the company in person.

The company’s chief legal officer sent him an email asking him to stop contacting the company’s executives and ended it with an ominous warning.

“I’m paraphrasing, but she called me kid and said the exact words, ‘this will all be over soon.’”

Swatch declined to comment for this story, saying it does not comment on active litigation.

A near settlement

Swatch is a conglomerate of some of the most well-known names in watchmaking history, including Logines, Tissot and Omega, the official timekeeper for the Olympics and the watches worn by Neil Armstrong, Michael Collins and Buzz Aldrin during the Apollo 11 mission to become the first humans to step foot on the moon.

Swatch acquired Hamilton in 1974, five years after Hamilton shut down operations at its hometown factory in Lancaster, Pennsylvania.

Between its 20 watch brands, Swatch sold the U.S. dollar equivalent of $4.14 billion in the first half of 2019, according to its latest financial report.

Over the next few months after they were served, Vortic attempted to settle with Swatch and was close to reaching a deal when the company switched its representation. Custer said the new lawyers scratched the two years of settlement talks and laid an ultimatum: either give up entirely or prepare to go to court.

At that point in August last year, Custer was at his wits end. He had been caring for his mother for months as she dealt with cancer treatments, and his second son was just four days old. He was ready to declare bankruptcy to avoid the financial pain of a trial.

“I’m sitting in my car in front of my workshop here trying to figure out how the hell I’m going to explain to my employees that they might not have a job tomorrow,” he said.

He searched on his phone for bankruptcy lawyers and happened on the site for Rob Lantz, a partner at Castle Lantz Maricle Murray in Denver. He managed to get Lantz on the line and explained the situation.

Lantz joined the case immediately. For the first time in a while, it seemed like someone outside of his family and friends believed Custer could prevail.

The trial

Swatch filed the lawsuit in the U.S. District of Southern New York, headquartered in Manhattan. Vortic’s motion to move the trial to Colorado was denied, so Lantz and Custer had to fly to New York City for the trial.

Andrea Anderson, a partner specializing in trademark law at Boulder-based Holland & Hart LLP, told BizWest branding laws are designed to protect consumers from being deceived, meaning Swatch has to be able to prove customers are mistaking Vortic watches with modern Hamiltons, or Vortic has to show it adequately disclosed that its products are different enough from Swatch’s.

In particular, she said Swatch has to demonstrate confusion from customers looking to buy luxury watches rather than the general public. That becomes far more difficult to show when the target market is watch obsessives.

While brands have the right to defend their trademarks, Anderson said it’s difficult for them to prevent people from buying those pieces for retrofitting or other purposes once it’s out in the marketplace.

“The deal is, you sold it, it’s out there in the stream of commerce and you can’t really control third parties or what they’re doing with their products that they bought from you legitimately,” she said. “In this case where they’re selling a used product, the risk is lower.”

Lantz told BizWest Swatch’s argument rests on two major points: that Vortic using vintage Hamilton watch faces constituted copyright infringement, and that the company was producing inferior knock-offs by mixing old Hamilton parts with modern parts so it would fit within a wristwatch case.

Vortic holds that the watches using the Hamilton mark are clearly distinguishable from modern Hamilton-branded timepieces because it only repurposes Hamilton’s American-made models decades before Swatch bought the brand, not the ones more recently made in Switzerland.

As the trial went on, Custer said Swatch’s attorneys were trying to get him to say that his pieces were essentially “frankenstein watches” because of how they included non-Hamilton parts, a term that would give credence to Swatch’s position that the Vortic timepieces are inferior in quality.

But Katz argues that Swatch-made Hamiltons currently sell for between $380 to just over $4,000 for the most expensive model while Vortics range between $1,500 to as much as $7,500 for a piece. That doesn’t translate to undercutting on price.

“The guy who’s trying to get a deal, I think isn’t going for one of the Vortic watches because they’re so much more expensive than the new product,” he said.

The trial ended on Feb. 19. As a bench case, the case and its verdict will be decided solely through U.S. District Court judge Alison Nathan’s opinion.

If Nathan were to return a verdict in Vortic’s favor, Lantz said Swatch has already threatened to appeal.

A precedent for restoration projects?

Lantz believes this case could set a precedent on the “upcycling” industry of crafters who restore and repurpose antiques for use today, granting the trademark holders expanded powers to dictate how those products can be modified. He pointed to the trend of putting electric engines on vintage motorcycle bodies or modifying minivans into stretch limousines as examples of niche trends that could be stopped if Vortic loses the case.

Also at stake, Lantz argued, is the history that Vortic watches aims to preserve.

American-made pocket watches before 1950 made the railroads run on time during the transportation medium’s infancy and were used to time bomber runs during World War II.

“These pocket watches represent those generations, that era, and they’re being discarded for the precious metals on the exterior of the watches, the gold, the silver, the other metals,” he said. “The cases, the watch face, the movement, the dials, they are truly beautiful pieces of art.”

However, Anderson believes it’s unlikely this case would set sweeping precedent for upcycling companies since the courts tend to take a case-by-case approach to ruling on copyright infringement.

Preserving stories

The lawsuit has made raising seed capital near-impossible for Vortic, as Custer had to disclose to the Small Business Administration and potential investors that he was in federal litigation against one of his industry’s dominant players.

He also went through the legal strife of battling an international giant while managing a hectic home life. He has two infant sons, and his mother eventually died in early March.

So what has kept him stubborn enough to take the litigation all the way to the courtroom? Oddly enough, it’s not an innate love of timepieces.

“‘I’ll be honest, I am not a watch person, even though I run a watch company,” he admitted.

He is, at heart, a marketing nerd, the son of two advertising agency veterans. From a young age, he was taught that a good story is behind every good campaign to market a product. He believes retrofitting watches gives them a new forum in which their owners can tell the stories of what’s on their wrist, whether it was handed down over generations in a family or flew onboard a bomber soaring over Europe.

That, in his mind, is worth spending tens of thousands of dollars to fight to preserve.

“I’m making something that is priceless to these customers, and I’m the only one in the world who does what I do,” he said. “There’s something in that, that I can’t let go. I can’t let someone else tell me that the process of preserving someone’s legacy is illegal, because it’s not.”