Costco's Nasty Legal Battle Over Popular Golf Ball Could Filter Down to Promo Industry - Promo Marketing

• Updated on: 2017-03-24
• Read original article here

There’s a potentially vicious legal battle brewing between two retail giants—all over a tiny, unassuming golf ball. And the result could have some implications for the promo industry. Stick with us here.

Costco, the mega membership-only wholesaler, and Acushnet, parent company of Titleist (and four other major golf brands), are at odds over the former’s Kirkland Signature golf ball. The ball, priced at $15 a dozen at Costco, has become a minor sensation among golfers, drawing frequent comparisons to the Titleist Pro V1 for their similar features and design. Both balls have a four-piece, urethane construction. And there’s a 256-page (!) forum thread on Golf WRX largely devoted to comparing the Kirkland Signature to the Pro V1, with many golfers favoring the Kirkland.

The main difference between the two? The Pro V1 sells for $48 per dozen—more than three times the price.

Naturally, Acushnet wasn’t happy. According to Golf-Patents.com, the company sent Costco a threatening letter claiming its ball infringes on 11 patents related to the Titleist Pro V1. Acushnet also took issue with Costco’s guarantee that Kirkland Signature products “meet or exceed the quality standards of leading national brands,” accusing Costco of false advertising.

Many legal battles over patent infringement or intellectual property end quietly. And, in Acushnet’s case, many have. GolfDigest reported that the company sued ten different start-up brands over 17 different golf balls—most of them lower priced balls with specs similar to those of the Titleist Pro V1—stifling the smaller companies’ efforts.

But Costco is not a small company. It’s the second largest U.S. retail chain. And it isn’t playing Acushnet’s games.

Rather than rolling over or quietly settling the matter, Costco launched an all-out offensive. The wholesaler filed a formal complaint against Acushnet, not just claiming the Kirkland Signature doesn’t violate any of the 11 patents, but alleging that the patents are invalid. This is a huge deal, as Golf World explained:

That’s a bold ask in the world of golf ball patents, especially where Acushnet is concerned. Acushnet holds more U.S. patents in golf ball technology than any other company (more than 1,200), and its latest tour-dominant Pro V1 and Pro V1x multilayer urethane cover balls continue to rule the golf ball marketplace at nearly $50 a dozen. Costco does not manufacture the Kirkland Signature ball. It is produced by Nassau, a vendor in Korea that works with several U.S. golf companies. “Costco has no idea what they’re getting into with Acushnet,” said one veteran of the golf ball industry familiar with ball patents and litigation.

The aggressive move by Costco seems aimed at a quick resolution. David Dawsey, of Golf-Patents.com, told Golf World that Acushnet will likely file a motion to dismiss the lawsuit, and Costco will follow it up by seeking a summary judgment ruling it is not in violation of the patents. But it may not go that way. And, as Golf World notes, it’s probably in Costco’s best interest to avoid a lengthy legal battle—Acushnet once spent six years fighting Callaway over golf balls. That kind of court fight may not be worth Costco’s time or money, given that Kirkland Signature golf balls account for a mere fraction of a percent of the company’s earnings.

But what if Costco does see it through? That’s where the promo industry could see some changes.

The Titleist Pro V1 is one of many multilayer, urethane-cover golf balls—the kind favored among tour players. That distinction, along with the obvious allure of the Titleist brand name, has made the ball a big seller, both at retail and in the promo industry. Most major golf products suppliers, including BIC Graphic, Ball Pro Promotional Group and Gold Bond Inc., offer the Pro V1, and it routinely tops rankings of the best golf balls.

If Acushnet loses a legal fight against Costco—and especially if its patents are invalidated in the process—it could loosen the Pro V1’s grip on the market. As noted, Acushnet has been aggressive and litigious in stamping out competition, particularly from smaller companies. A loss in court could make this approach significantly more difficult, creating more room for competitors to chip away at Acushnet’s virtual stranglehold on the market for golf’s most popular type of ball.

This scenario is a long way off, but it’s not impossible. And if demand for the Pro V1 slips in favor of cheaper models offering the same features, the promo industry would feel the effects up and down the supply chain. The overwhelming success of Costco’s Kirkland Signature ball proves that a substantial segment of the market is already willing to forgo Titleist brand loyalty for a similar ball at a drastically lower price. And, typically, retail trends are a strong indicator of what’s to come for promotional products.

Plan accordingly. In the meantime, let’s sit back and watch two titans battle it out. It should be fun.