Gel Blaster founder Colin Guinn and president Peyton Healey
In late August 2021, several top executives for toy giant Hasbro flew from the company’s headquarters in Pawtucket, Rhode Island, to Austin. They attended a backyard party that erupted into a water-gun battle.
The weapons involved were no ordinary squirt guns. The executive group — which included Eric Nyman, who would later become Hasbro’s president — and other guests were brandishing Gel Blasters, a high-tech invention that’s part paint ball, part Airsoft gun and part water pistol. It would become one of the hottest new toys to hit the market since the Super Soaker. In 2021, its first full year in business, Gel Blaster generated $5 million in revenue, and last year’s sales jumped to $75 million, according to Gel Blaster President Peyton Healey.
Currently, the market for Gel Blaster and similar toys is about $250 million, and by some estimates it could grow as large as $2 billion annually, Healey said in an interview.
“We literally can’t keep them on the shelves,” he said.
By all accounts, Hasbro was impressed early on with the high-tech toy developed by Austin entrepreneur Colin Guinn. In a video from the party, Nyman turns towards the camera and, smiling, says “too good.”
The good times, however, didn’t last. A year later, the backyard fun had become a full-fledged legal battle, with cases pending before the International Trade Commission and the federal district court in Austin. In the court case, Gel Blaster is asking for a preliminary injunction that would stop Hasbro from selling a competing water-gel gun. Hasbro, meanwhile, has told the ITC that it acquired two patents that apply to water-gel firing guns and that Gel Blaster is infringing on them.
What’s striking about the case isn’t just the David-versus-Goliath battle between a startup toymaker and one of the world’s biggest toy companies, nor the dispute over popular toy technology, but the speed with which the relationship between the two companies unraveled.
Back in 2021, Hasbro seemed eager to bring Gel Blaster under its Nerf brand. The two companies discussed a joint marketing strategy that included Hasbro licensing the Nerf name to Gel Blaster. After the backyard party, representatives from both companies had a celebratory dinner at Uchiko, an upscale Japanese restaurant that printed custom menus with the Gel Blaster and Nerf logos atop offerings of caviar, grilled oyster and $15 broccolini. Later, Guinn, who has a boat on Lake Austin, took a group of Hasbro representatives wakeboarding.
A former reality TV star (he and his wife appeared on The Amazing Race), Guinn is a self-described “serial entrepreneur.” In 2011, he teamed up with the Chinese technology company DJI to sell consumer drones in the North American market. He later joined another drone maker, 3D Robotics, as its chief revenue officer. In 2015, he founded Austin-based Hanger Technology, which makes drone software and four years later sold the company to Los Angeles-based AirMap.
Guinn began developing the Gel Blaster a year later, during the Covid-19 pandemic. His kids were stuck at home, and he wanted to come up with an outdoor activity that would get them off the couch. He launched the company at the end of 2020, after raising almost $300,000 from a Kickstarter campaign.
Guinn describes his invention as a “family friendly blaster” that was designed to look more like a toy than a weapon and notes that the ammo is both environmentally safe without any after-battle mess or debris.
“What we’re ultimately trying to do is … marry the best of video games and paintball,” Guinn said in court testimony. “For my kids, to get them off of their devices and outside playing, you know, shooting each other with these gel balls is cool.”
Unlike a traditional water gun that fires a steady stream, Gel Blaster shoots biodegradable beads, slightly bigger than a BB, that are filled with water and dissolve on impact. (It calls them “gellets.”)
By the end of 2020, Guinn had sold about $500,000 worth of Gel Blaster Surge pistols, according to Healey, primarily on Amazon.
Four months after the Kickstarter campaign, Hasbro came calling. The camaraderie of the backyard party was typical of the negotiations. Gel Blaster executives say they connected with the Hasbro team in a way that’s unusual for business partnerships, and emails from Hasbro executives show the sense of cooperation and excitement was mutual. As negotiations continued, Hasbro’s interest grew, and the company proposed taking an equity stake in Gel Blaster. It now wanted to license Gel Blaster’s technology and market it as the “Nerf Gel Blaster.” After studying Gel Blaster’s designs, one Hasbro executive said the Austin company had created a “much better mousetrap,” according to Gel Blaster’s complaint in the district court case.
By August 2021, the two companies had entered into confidentiality agreements and began exchanging detailed product information and developing joint strategies — Gel Blaster characterized it as giving Hasbro “anything and everything.”
“We are one team now!” said Eric Listenberger, Hasbro’s vice president for product development, in an email message that was included in Gel Blaster’s complaint. “This is shaping up to be a killer partnership.”
But then Hasbro made a discovery that it would later claim killed the deal. Spin Master, a toymaker whose brands include Etch-A-Sketch, Rubik’s cubes and Gund plush toys, held patents for ammunition made from super-absorbent polymers and devices for launching them.
At first, neither Hasbro nor Gel Blaster seemed worried by the development. According to the complaint, the parties entered into another agreement, signed in late September 2021, that outlined their joint defense against any patent challenge and set aside $1 million for any potential legal costs.
Gel Blaster even invited Hasbro to participate in previously scheduled discussions with Walmart, which was interested in selling the Gel Blaster Surge. The country’s biggest retailer was impressed enough to suggest it wanted to place a big order.
“I think Hasbro really woke up during this meeting because the Walmart buyer said … she wanted over two and a half million Blaster products to be put on Walmart shelves,” Gel Blaster’s attorney, Scott Doyle with the Washington office of Kelley Drye & Warren, said at a recent Austin federal court hearing.
Then, the tone of the relationship changed. Healey, Gel Blaster’s president, said Hasbro told him they were no longer interested in pursuing a deal with Gel Blaster.
“By this point, we had literally given them everything they would need to become Gel Blaster,” Healey said in an interview. “They had everything — they had our marketing; they had our customer list and contacts.” And they had Gel Blaster’s plans for fending off challenges over the Spin Master patents.
Even so, Guinn and Healey thought things were ending on friendly terms. Nyman told Guinn Hasbro might be interested in discussing other inventions in the future, Gel Blaster claims in its complaint.
“We continued to believe their sincerity, all the way until we got the letter from them saying, ‘we own these patents and we’re suing you in the ITC,’” Healey said.
Hasbro filed the ITC case in July 2022, and it was only when Gel Blaster later received a notice of investigation that it realized Hasbro had licensed the Spin Master patents earlier in the year. The ITC action seeks to keep Gel Blaster and its Chinese manufacturer, Yi Jin Electronics Science, from importing Gel Blasters to the U.S., arguing that the Austin company’s products violate the Spin Master patents.
“They’re trying to block production,” said Michael Smith, a patent attorney in Marshall who’s not involved in the case. “If somebody is having products made overseas, the ITC is a forum where a competitor can stop you from bringing in your products if they can show infringement. I’ve seen cases [that ] are filed to drive competitors out of the market.”
Such tactics aren’t uncommon in patent disputes. Josh Malone, a Dallas inventor who developed a product for filling multiple water balloons at once, found himself accused of patent infringement in 2011. The accuser, Telebrands, convinced the U.S. Patent and Trademark Office to revoke Malone’s trademark for Bunch O Balloons. After a lengthy legal battle, Malone won restoration of his patent rights and was awarded a $31 million judgment. Today, he volunteers with US Inventor, an inventor advocacy organization.
In an email exchange, Malone said he saw similarities between Hasbro’s tactics in the Gel Blaster case and the ones Telebrands used against him — especially acquiring other patents and then claiming infringement.
In his case, Telebrands’ patent infringement claims “added a couple of years and millions of dollars to the litigation — enough to squash most small businesses.”
Organizations like the ITC and other patent oversight authorities “are not set up to dispense justice,” he said.
The expense, as well as the ease with which companies can use ITC complaints as a weapon, makes patent battles unaffordable for many startups.
“It’s very expensive to defend against patent invalidity,” Smith said. “Most plaintiffs, unless they’re an established company, don’t have enough money to go through this.”
Healey said he believes Hasbro was counting on the cost of litigation to force his company to drop the case. But the explosive popularity of Gel Blasters enabled it to fund its court fight.
“They expected this to end us, and what happened in the interim is that our product was just wildly successful,” he said.
Hasbro, which makes everything from Play-Doh to the Monopoly board game, got into a similar dispute in 2001, when the inventor of Super Soaker high-powered water guns accused the toymaker of violating an agreement to pay royalties. The inventor, Lonnie Johnson, was eventually awarded almost $73 million.
In the Gel Blaster case, Hasbro pressed ahead with its own product, the Nerf Pro GelFire Mythic. In a quarterly earnings call with investors in September, Hasbro CEO Chris Cocks referred to the Mythic as a key innovation for the Nerf brand.
Smith, the Marshall patent attorney, said it appears Hasbro viewed the patents as means for capturing the entire market itself.
“It looks to me like somebody has decided [that] ‘we can go buy these patents and then eliminate our partner, and we’ve got the whole market to ourselves,’” he said.
It hasn’t worked out that way. At the end of last year, Gel Blaster controlled about 47 percent of the market for water gel guns, compared with about 15 percent for the Nerf GelFire, a Nerf executive testified at a hearing in Austin in late January. (Two other competitors, SplatRBall and Prime Time Toys, control most of the rest.)
At the hearing, Hasbro executives noted that they continue to see the Mythic and other Nerf gel guns as important products in a rapidly growing category.
However, the company said it had no intention of pushing Gel Blaster out of the market. It blames the patent issues for the collapse of its deal with Gel Blaster.
A Hasbro representative said the company doesn’t comment on pending litigation, but in its counterclaim Hasbro said it “tried to make a deal work, but simply could not because of patents that Gel Blaster should have known about, but about which it never informed Hasbro.”
At the January hearing, Adam Kleinman, Hasbro’s senior vice president and general manager of the Nerf brand, testified that the relationship with Gel Blaster changed after Hasbro hired outside counsel to review the Spin Master patents and found that Gel Blaster’s products infringed on them.
“We couldn’t go forward with a product line that would infringe patents,” he testified. “There was just too much risk based on the strength of the patents.”
Initially, Kleinman said he believed Spin Master planned to market its own, competing gel gun. Only later, when he saw a news article in early 2022 in which a spokesperson said Spin Master wasn’t manufacturing a gel gun did Hasbro decide to approach the company about its patents, Kleinman said.
Those discussions began in the spring of 2022, months after parting ways with Gel Blaster, he testified. At the same hearing, a Hasbro product development executive said the company began working on the Nerf GelFire Mythic several months earlier, in November 2021.
In its counterclaim, Hasbro accuses Gel Blaster of infringing on the patents and of using the Nerf name in ad placements on Google and YouTube that link to the Gel Blaster website.
In seeking the injunction, Gel Blaster claims that Hasbro’s gel shooters are based on the technology and designs that it shared as part of the companies’ earlier agreements. In particular, the company claims Hasbro has copied its trigger mechanism from computer design files the company shared with Hasbro. The new Hasbro Mythic contains “all of our innovations that we haven’t even been able to put on the marketplace yet,” Doyle said in court.
Hasbro, however, argues that many of the designs that Gel Blaster claims are trade secrets had been used by other companies for years and were widely known by enthusiasts, or “modders,” who often modify toy guns to increase the firing rate or other functions.
U.S. District Judge Lee Yeakel hasn’t issued a ruling on the injunction, but Doyle, the Gel Blaster attorney, urged him to move quickly on the preliminary injunction.
“This can’t wait for a year or we’re going to be down to 2 percent market share,” Doyle said.
Gel Blaster has had other struggles, too. The Consumer Product Safety Commission in October ordered it to recall almost 63,000 Surge guns made before October 2021 because of a risk that their lithium batteries could overheat and catch fire. The company cooperated with the recall.
At the start of the hearing, Yeakel warned a decision might take a while, citing his heavy case load:
“You could not have a case in a worse court docket-wise to try to have anything done on a hurry-up basis. We are underwater here in Austin. We haven’t had a new judicial position in Austin since 1991. And unless you’ve been living in a cave somewhere, you know that Austin’s population and the Austin Division population has more than doubled during that period.”
Meanwhile, a Gel Blaster representative said the company expects the ITC case to be ordered to mediation in early April. That could lead to a settlement. It seems likely that however the case is resolved, Gel Blaster and Hasbro will continue to battle it out in the marketplace. But Gel Blaster’s refusal to back down — and its financial resources to mount a strident legal challenge — has spawned a usual David-versus-Goliath showdown. Only this time, David is armed not with stones but with rapid-fire dissolving water pellets.
The Austin federal district court case is Gel Blaster Inc., F/K/A Gel Blaster LLC v. Hasbro Inc., case number 1:22-cv-00828-LY. The ITC case is In the Matter of Certain Soft Projectile Launching Devices, Components Thereof, Ammunition, and Products Containing Same, case number 337-TA-1325.
Gel Blaster – Kelley Drye & Warren:
Cornell Smith Mierl and Brutocao:
Hasbro – Fish & Richardson: