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A Lawsuit Over Costco Golf Balls Shows Why We Can't Have Nice Things For Cheap (qz.com)
Ephrat Livni, writing for Quartz: Unless you're a golfer, you probably don't think about golf balls. But a new US lawsuit about these little-dimpled spheres has an economics lesson for all shoppers, showing why consumers have cause for concern when companies use court for sport. Costco, the wholesale membership club, rocked the golf world in 2016 when it started selling its Kirkland Signature (KS) golf balls at about $15 per dozen, a quarter to a third the price of popular top-ranked balls. Industry insiders called it a "miracle golf ball" for its great performance and low cost, and Costco sold out immediately. It's planning to release more in April. In response to the bargain ball's reception, however, Acushnet -- which makes the popular Titleist balls -- sent the membership club a threatening letter. It accused Costco of infringing on 11 patents and engaging in false advertising for claiming that KS balls meet or exceed the quality standards of leading national brands.
If you read TFA you will see that "why we can't have nice things for cheap" refers to the tactic employed by large companies of threatening legal action against small competitors that those competitors can't afford to defend against, even if they are likely to win. It's a tactic that Acushnet has used before.
They published why they don't infringe.
http://golf-patents.com/wp-content/uploads/2017/03/20170317-Complaint-Costco-v-Acushnet.pdf
That should give the other side pretty good visability as to what their options are.
Will be interesting to see what they do next.
If Costco did their homework, then maybe the dreaded golf ball triopoly is dad.
Oh, it's sooo exciting just can't wait to see what happens next.
Actually, it can be a crime. There's a whole concept of Dumping. It usually applies in the case of international trade, but can apply domestically as well. Generally it's used to drive competition out of business when they can't sustain the lower price.
Dumping
By both revenue and market cap, Costco is roughly 70-80x the size of the golf company. Costco's net income alone is higher than both Acushnet's revenue and their market cap. Costco has essentially unlimited resources available to fight any litigation, meaning this case will be decided on the merits if Costco wants it to be.
It looks like Titleist has 44 patents on their Pro V1 golf balls. These patents range from design to materials to manufacturing.
For example, the first patent in the list, 6013330, relates to UV curable inks and their application onto spherical surfaces such as golf balls. Reading the first page of the patent may give you a sense of the complexity of high-speed, production printing on a curved surface in a durable manner.
If you look at the patents you will notice that many of them are related to manufacturing processes. 9174088, for example, is a process for cleaning the seam created when the golf ball is molded in a way that allows the dimple pattern to be consistent across the seam.
There are a ton of BS patents out there and some of Titleist's may fall into that category. But it's not hard to imagine a lot of complexity goes into designing and manufacturing a golf ball. The company started in 1932 because of a golfer's frustration with the then state-of-the-art golf balls.
"Are that patents here number, shape, and size of the dimples? If so- bullshit patent."
Why so? There may be significant R&D which goes into the aerodynamics.
In any case, Costo says they have an "out" on every patent because there's a least one claim which doesn't apply to their ball. The claims seem to be in 3 classes: material hardness, "bounce" (Coefficient of Restitution), and dimple pattern ("profile defined by the revolution of a catenary curve" in 3 patents). Costco also challenges them based on prior art.
In any case, here are the patents, go look them up instead of asking what they're about: 6994638, 8123632, 8444507, 9320944, 8025593, 8257201, 7331878, 6358161, 7887439, 7641572, 7163472.
"National Security is the chief cause of national insecurity." - Celine's First Law
Seriously though, how can a golf ball have 11 patents on it?
Read Costco's reply to the court, in which each patent is listed along with Acushnet's claims and Costco's rebuttal. You can look the patents up online at the USPTO web site. Let's look at a few, shall we?
Patent# 6,994,638 - Golf balls comprising highly-neutralized acid polymers.
Abstract
A golf ball comprising a core comprised of a polymer containing an acid group fully-neutralized by an organic acid or a salt, a cation source, or a suitable base thereof, the core having a first Shore D hardness, a compression of no greater than about 90, and a diameter of between about 1.00 inches and about 1.64 inches; and a cover layer comprising ionomeric copolymers and terpolymers, ionomer precursors, thermoplastics, thermoplastic elastomers, polybutadiene rubber, balata, grafted metallocene-catalyzed polymers, non-grafted metallocene-catalyzed polymers, single-site polymers, high-crystalline acid polymers and their ionomers, or cationic ionomers.
What is claimed is:
1. A golf ball comprising: a core comprising a center and an outer core layer, the center comprising a thermoset polybutadiene rubber composition having a first hardness; and the outer core layer comprising a polymer comprised of an acid group fully-neutralized by an organic acid or a salt of the organic acid, and a cation source or a suitable base of the cation source; and having a second hardness; and an inner cover layer and an outer cover layer comprising ionomeric copolymers and terpolymers, ionomer precursors, thermoplastics, thermoplastic elastomers, polybutadiene rubber, balata, grafted metallocene-catalyzed polymers, non-grafted metallocene-catalyzed polymers, single-site polymers, high-crystalline acid polymers and their ionomers, polyurethnnes, polyureas, polyurethane-ureas; polyurea-urethanes; or cationic ionomers; wherein the first hardness is from about 50 Shore A to about 55 Shore D and first hardness is less than the second Shore D hardness by at least about 10 points.
Here's Costco's rebuttal:
11. Costco is not infringing any valid claims of U.S. Patent No. 6,994,638 (“the ’638patent”). Acushnet has accused Costco of infringing claim 1 of the 638 patent. Costco’s sales of the KS golf ball do not constitute infringement of claim 1 of the 638 patent, however, because, among other things, the Shore D hardness of the center core of the KS ball is not “at least about 10 points” less than the Shore D hardness of the outer core.
12. The 638 patent is invalid under 35 U.S.C. 102, 103 and/or 112. The claims are invalid under 35 U.S.C. 102 and/or 103, for example, in light of U.S. Patent No. 6,468,169 and other prior art publications and activities
Clearly, a lot of chemistry work went into this patent to make the balls have a certain elasticity. Costco says that their balls do not have the same properties, therefore they did not infringe upon this claim.
Here's another:
Patent# 8,123,632 - Multi-layer golf ball
Abstract
Golf balls consisting of a dual core and a dual cover are disclosed. The dual core consists of an inner core layer formed from a rubber composition and an outer core layer formed from a highly neutralized polymer composition.
Here's the claim in question:
"17. A golf ball consisting essentially of: an inner core layer formed from a rubber composition and having a diameter of from 1.100 inches to 1.400 inches, a center hardness (H.sub.center) of 50 Shore C or greater, and an outer surface hardness of 65 Shore C or greater; an outer core layer formed from a highly neutralized polymer composition and having an outer surface hardness (H.sub.outer core) of 75 Shore C or greater; an inner cover layer formed from a thermoplastic composition and having a material hardness (H.
John
The reason Costco sells them cheap is because they deal in volume - instead of making balls in hundreds of thousands, they can make balls by the millions, extracting mass production cost benefits.
And because they were partnered up with another company who designed the balls, they got a good quality ball, made quite cheaply in volumes that out-do the other manufacturers since Costco does stuff in bulk.
Apparently the golf balls in question are a OEM ball manufactured by Nassau Golf Company (located in South Korea). Nassau has also sold OEM golf balls to TaylorMade (a golf equipment subsidiary of Adidas). Although I suspect nobody knows for sure, the word on the street was it manufacturing over-run which is unlikely to be repeated.
The interesting thing that most folks are missing is that Costco is pre-emptively suing Acushnet (the seller of Titleist balls) seeking declartory judgement (yes, Costco is doing the suing) in response to a lawyer letter sent by Acushnet. This is mostly because they need to defend the tag line "meet or exceed the quality standards of leading national brands" of their Kirkland branded products, not because they want to sell more golf balls (although they probably do, it's not the main reason for their lawsuit). They want to establish a legal precedent that they can use this tag line in the rest of their business to deter future lawsuits on this basis.
Yes, golf balls have changed quite a bit in 20 yrs. Then the best ball was balata cover (natural rubber) over a core with a rubber band wound around it. This ball was "soft" and had lots of spin (which is good for stopping on the green) but not much distance for the average player, and the cover got easily damaged if you topped the ball, leaving a cut all the way through the cover. The cheaper balls were solid rubber centers with an Surlyn cover (ionic containing synthetic polymer) that resisted being damaged by bad hits. They went further for the average player, they had less spin, so did not stop on the green. But they felt like they were very hard when you hit them. TopFlight was a brand, nicknamed Top-Rock because they were so hard. Today no balls are covered in balata, none have rubber band windings (I think). You can get a ball with a soft feel and good spin that still goes far. They are usually many layers from the cover down to the center, each possibly being patented, plus the manufacturing processes to make them. And the dimple design has changed over time, leading to the better aerodynamics, so go further and less off center, again a patentable concept.