Denver-based Zen Magnets has been barred from selling tiny, colored magnet spheres.
A federal judge found that the company broke the law when it repackaged and sold the magnets, which it called Neoballs, because it had purchased them from a company that subsequently agreed to recall its products.
The recall was requested by the federal Consumer Product Safety Commission (CPSC), which alleged that the magnets were dangerous. High-powered BB-shaped magnets, most often marketed as adult desk toys, have been known to attract inside the digestive tracts of children who swallow them, damaging intestinal tissue. In 2012, a nineteen-month-old girl died after swallowing magnets.
On Thursday, U.S. District Court Judge Christine Arguello ordered Zen Magnets and its founder, Shihan Qu, to immediately stop selling Neoballs.
Arguello's ruling is the latest development in a years-long battle between Qu and the CPSC. Qu founded Zen Magnets in 2009, when he was a senior at the University of Colorado. In 2012, as reports of injures caused by magnets began piling up, the CPSC contacted thirteen companies, including Zen, and requested that they voluntarily stop selling their products. Ten companies agreed. The three that did not included Zen and Star Networks, whose products went by the brand name Magnicube.
So the CPSC sued the holdout companies in an effort to force them to recall their products. The agency also began the process of banning future sales.
In July 2014, Star Networks agreed to settle its lawsuit with the CPSC and recall its magnets. But seven days before the company signed the settlement agreement, it sold 917,000 of its magnets to Zen for $5,500. Arguello's order points out that Qu knew about the impending settlement and recall agreement when Zen bought the magnets.
But Qu argues that the Star magnets were made in the exact same Chinese factory where Zen's colored Neoballs magnets were made. If Star had sent its magnets back to the factory, he says there's a good chance Zen would have bought them from the manufacturer anyway. By purchasing them directly from Star, Qu says he simply saved the magnets a trip to China and back.
The CPSC found out that Zen was selling repackaged Star magnets. According to Arguello's order, the agency ordered Zen to stop because the magnets had been recalled. But Zen refused, arguing that it had "un-branded" the Star magnets and converted the "raw magnets" into another product: Neoballs. In May, the CPSC sought an injunction in federal court.
Arguello didn't buy Zen's argument, writing in her ruling that "although it seems clever at first blush, it quickly falls apart upon closer examination." Even though Zen repackaged the magnets with its own warning labels, she wrote, the magnets themselves remained the same — and therefore, posed the same danger to Zen's customers as they did to Star's customers.
She also noted that Zen was unlikely to stop selling Neoballs without a court order. The company, Arguello wrote, "has essentially turned its pledge to continue to defy the CPSC into a marketing campaign." Because Zen comingled the Star magnets with its own inventory of Neoballs and has no way of figuring out which are which, Arguello ordered that the company stop selling any colored magnets at all, even though Zen's magnets have not been recalled. The company is also no longer selling its signature silver Zen Magnets.
Qu says he's disappointed with the ruling. "There have been exactly zero recorded ingestions of the Neoballs that the injunction now effects," Qu wrote in a statement, "yet the last U.S. option for magnet sphere purchase has been cut off from U.S. consumers."
Qu is still fighting the CPSC's recall lawsuit, and he says he expects a ruling in the next few days.
A federal ban on the import and sale of small, high-powered magnet spheres went into effect in April. Qu is also contesting the ban in court.
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"We’re kind of fighting everything right now," he says. But, he adds, "without an income, I don’t know how long that will last."
Below, read the CPSC's complaint against Zen Magnets and the judge's order.