Kirkland (Costco) Premium Golf Ball

[Lihu]

2 hours ago, boogielicious said:

You are reading emotion where there is none. You also seem to condone IP infringement when it benefits your wallet.  That is a slippery slope to reside on. 

 

All I read is your very opinionated posts about other people and their character.

I have over 27 patents (inventor only, and not the assignee) and helped to defended 2 of them.

I don't endorse anything of the sort, but I do endorse a free market. Take the good with the bad.

[iacas]

18 hours ago, Lihu said:

Personally, I think Costco should sell Snell Tour balls for $1.20

So you think Costco should rip off Dean Snell?

17 hours ago, Lihu said:

All I said was that Titleist charges too much for the current market situation.

No, you didn't.

And what evidence or proof do you have that Titleist is "charging too much"? They make a LOT of money. They have for a loooooooooong time.

They charge what the market can bear. Now, maybe you aren't in that market, or self selected out, but… their market is huge.

17 hours ago, Lihu said:

It's called a free market.

So is what Titleist is doing. Free market doesn't mean a race to the bottom (or free!) in terms of pricing.

17 hours ago, Lihu said:

I'm also a loyal Costco customer, and buy many things from them. I don't buy things at Costco because it's cheaper than everywhere else because it's not, I buy from them because they stand behind their customers. I can get things a lot cheaper than at Costco, but don't because there's good customer service at Costco (at least the three I frequent).

Costco also doesn't develop their own anything. So they, realistically, have no real idea what their golf ball is, what patents it may infringe upon, etc.

If they infringed on patents (and given how hard that is to prove, blah blah blah) they may have just made their own mistake suing Titleist. The courts will see Titleist as the smaller company by a lot, and see the giant Costco picking on them and stealing their IP, and assuming they can bankroll a larger longer lawsuit, and award Titleist with a sizable judgment.

Maybe.

If they stole IP, which I doubt they did, but you have no idea either.

[DwightC]

In the end, I don't think this is about corporate bullying or protecting intellectual property.  None of us know much about Acushnet's IP portfoliio (other than that they use it as a powerful marketing tool), and, when you are talking about well established corporations with market capitalizations in excess of $1-billion each, they have legal budgets that can take the litigation expense.  So forget the bullying claims.  They may not be entirely rational actors, but they aren't kids on the elementary school playground, either.

What you've got here is, basically, 'when business models collide.'  The warehouse clubs strip out layers of distribution and virtually all promotional/marketing clubs, put the stuff on a pallet, and see what moves as thousands of member/customers parade up and down the aisle.  If it moves they pile more on pallet.  And that's about it.  Forget manufacturing, forget supply chain management (well, dip your toe in it for the house label stuff), and forget R&D--those are problems for the vendors.  OTOH, Titleist, AFAIK, doesn't sell golf balls to golfers--it sells them to distributors who in turn move them to retailers, who then, with the assistance of enormous marketing efforts by Titleist, sell them to you and me.  Titleist gets a competitive edge from (1) making a better golf ball, and (2) a marketing budget devoted to player endorsements, etc.

Them's the facts, as they say.

The letter Acushnet sent Costo attempts to defend both of its strategies, saying, in effect, you can't sell your better golf ball with violating our patents, and you can't claim your golf ball is as good as ours.  Everybody is focusing on the first claim, but I'll bet the second claim may have been what tipped the balance at Costco and led them to file the declaratory judgement action.

Now, generally, a corporation isn't going to file a declaratory judgement unless it relates to (1) something vital to the corporate interests  or (2) a matter of broader principle and the facts are very much in your favor.  Here, you can rule out the first--Costco can do very well, thank you, without golf balls, club sets, gloves, etc., just sticking to tennis balls and vodka, groceries and apparel.  Golf balls, well, don't leave money on the table, but it's a sideline (which may be what Acushnet was banking on).  So that takes you to the second reason--it's a matter of bigger principle and you've got good facts.

I suspect that's what's going on here.  Now, before you can make an example out of somebody, the facts have to be in your favor.  That implies that the patent infringement claims are baseless, or at least that Costco and its counsel think they are.

Where does that leave Acushnet?  With a big problem, if you ask me.  Their letter strikes me as the sort of thing they send out routinely.  Earlier in this post somebody reeled off a list of smaller companies that had been successfully intimidated by a legal threat from them.  So, they sent a letter out.  Snuff that problem before it gets big.  And on to the next fire.

Instead, ka-blewie.  They've drawn the black bean.  Costco is going to use their sorry hide the beat a message into market incumbents in everything from bath towels to baby food.  Hmm.  I would, if I were Acushnet, take this opportunity to de-escalate the situation.  The world is big enough for Titleist and a good private label golf ball.

 

Edited March 22, 2017 by DwightC

[Lihu]

1 hour ago, iacas said:

They charge what the market can bear. Now, maybe you aren't in that market, or self selected out, but… their market is huge.

I see you selectively ignored the fact that I'm still a loyal customer to Titlest. I am part of their market, and will be only more so when my both kids are out of private high schools (which we pay with after tax dollars). So, I'm certainly not "poor" but definitely not wealthy. The point being that I can certainly afford $5 balls if I chose to pay that much. I get the overprinted personalized Titleist for $3 a piece. If I had to pay $5 a piece, I would. However, I'm only a loyal customer to Titleist for performance. If the Senll balls end up being better, then I'll get those and pay 2/3 the price for "normal" Tour ones.

I obviously did not endorse Costco ripping off Snell. If they need to charge something like $2.00 per ball, that's also fine. Dean Snell charges $2.20 per ball on his website when you buy 6 dozen at a time. I'm sure there's a good in between price they an agree on? That is, if Costco and Snell decided to do business together.

7 minutes ago, DwightC said:

The letter Acushnet sent Costo attempts to defend both of its strategies, saying, in effect, you can't sell your better golf ball with violating our patents, and you can't claim your golf ball is as good as ours.  Everybody is focusing on the first claim, but I'll bet the second claim may have been what tipped the balance at Costco and led them to file the declaratory judgement action.

This is the key. Many companies try this tactic as a last ditch effort to "save"  their markets. In this case, it's the $5 golf ball. It's likely that Titleist might lower their prices to something more reasonable in the future once they figure out that their "gravy train" ride is possibly over.

Edited March 22, 2017 by Lihu
Forgot to add "to"

[DeadMan]

Here's what I don't get about this whole thing. These balls were overruns, right? Costco could sell these cheaply because of that. From what I've read, it was unlikely that Costco would be able to sell quality balls so cheaply in the future. They're not really that much of a threat to Titleist right now. So why is Titleist poking the bear here by sending out nasty letters? That's what does not make sense to me.

[boogielicious]

27 minutes ago, DeadMan said:

Here's what I don't get about this whole thing. These balls were overruns, right? Costco could sell these cheaply because of that. From what I've read, it was unlikely that Costco would be able to sell quality balls so cheaply in the future. They're not really that much of a threat to Titleist right now. So why is Titleist poking the bear here by sending out nasty letters? That's what does not make sense to me.

If you don't protect IP in all instances, it could be used against you. They must of felt that this was enough of an infringement and wanted to stop it early.

[No Mulligans]

Perhaps Costco wishes they never brought out the Kirkland Sig, now they have to deal with a potential drawn out legal battle for a product that gets lost in the rounding of their financial statements.  Costco probably feels cornered as now they are forced to protect the reputation of the entire Kirkland brand.

There are no winners here.

Edited March 22, 2017 by No Mulligans

[iacas]

46 minutes ago, Lihu said:

I see you selectively ignored the fact that I'm still a loyal customer to Titlest.

I didn't miss that, no. I said "maybe" referring specifically to the balls, because you can be a "Titleist customer" for their gloves, shoes (FootJoy), hats, apparel, clubs… bags…

46 minutes ago, Lihu said:

So, I'm certainly not "poor" but definitely not wealthy. The point being that I can certainly afford $5 balls if I chose to pay that much.

Maybe it's an ESL thing, @Lihu, but I never said anything about how much money you make or have saved.

You said their market strategy is failing or whatever. It is not. They sell a shitload of $5 golf balls. You made statements that are just wrong. That's what I addressed… not what balls you buy.

46 minutes ago, Lihu said:

I obviously did not endorse Costco ripping off Snell. If they need to charge something like $2.00 per ball, that's also fine. Dean Snell charges $2.20 per ball on his website when you buy 6 dozen at a time. I'm sure there's a good in between price they an agree on? That is, if Costco and Snell decided to do business together.

Why are you even talking about that? It has nothing to do with this…

46 minutes ago, Lihu said:

This is the key. Many companies try this tactic as a last ditch effort to "save"  their markets. In this case, it's the $5 golf ball. It's likely that Titleist might lower their prices to something more reasonable in the future once they figure out that their "gravy train" ride is possibly over.

Their market doesn't need "saving." They are the market leader, dude. It may be on a slight decline, but Dean Snell isn't going to take credit for it, and Costco can't, given that they don't even show up on market charts. Callaway is making a better ball. Bridgestone is making a better ball.

And still charging $$$ for them, too.

The $$$ ball market is still "YUGE" to borrow one of POTUS's favorite phrases. And seriously, what indications at all do you have that Titleist "might lower their prices"? Clearly the market feels their current pricing is reasonable.

Do you not understand that when you say "Titleist charges unreasonable prices" that it's you assigning your own value judgment to an entire commercial body of consumers… who repeatedly and by the millions prove you wrong? Clearly they're not "unreasonably" priced… they sell a golf ball every millisecond or whatever.

Titleist makes six golf balls a second every second of the year.

29 minutes ago, DeadMan said:

Here's what I don't get about this whole thing. These balls were overruns, right? Costco could sell these cheaply because of that. From what I've read, it was unlikely that Costco would be able to sell quality balls so cheaply in the future. They're not really that much of a threat to Titleist right now. So why is Titleist poking the bear here by sending out nasty letters? That's what does not make sense to me.

Because $15 is too low a price, but they could probably do $22.50 or something.

You can go on Alibaba or whatever right now and buy "premium urethane balls" for about $1/ball.

Just now, boogielicious said:

If you don't protect IP in all instances, it could be used against you. They must of felt that this was enough of an infringement and wanted to stop it early.

Yep. Same with trademarks.

4 minutes ago, No Mulligans said:

Perhaps Costco wishes they never brought out the Kirkland Sig, now they have to deal with a potential drawn out legal battle for a product that gets lost in the rounding of their financial statements.  Costco probably feels cornered as now they are forced to protect the reputation of the entire Kirkland brand.

Another way to look at it. This is a small thing to Costco. But now they may have to spend more than they made or might ever make on the golf balls on legal fees.

[MRR]

22 minutes ago, boogielicious said:

If you don't protect IP in all instances, it could be used against you. They must of felt that this was enough of an infringement and wanted to stop it early.

That's about all I took away from an IP presentation I attended.  Millions get spent on lawsuits against small companies that are specifically not trying to infringe on IP (lawsuits that everyone considers foolish) because a major company MUST initiate them in order to properly protects its rights from future companies that would actively try to steal their IP.

I'm pretty sure the solution is for the company with IP rights to just license to the other company, but I don't practice that type of law and cannot give an educated option.

[iacas]

1 minute ago, MRR said:

That's about all I took away from an IP presentation I attended.  Millions get spent on lawsuits against small companies that are specifically not trying to infringe on IP (lawsuits that everyone considers foolish) because a major company MUST initiate them in order to properly protects its rights from future companies that would actively try to steal their IP.

Pretty sure they don't HAVE to initiate a lawsuit… but for a big company that may be the most efficient way, to just handle them all the same. A cease and desist or other means are possible without jumping right to a lawsuit, even if 99%+ of them are settled.

But yes, you must enforce trademarks, IP, patents, etc. or else you basically nullify them.

[Lihu]

14 minutes ago, iacas said:

Maybe it's an ESL thing, @Lihu,

Probably. . .

14 minutes ago, iacas said:

You said their market strategy is failing or whatever. It is not. They sell a shitload of $5 golf balls. You made statements that are just wrong. That's what I addressed… not what balls you buy.

I didn't mean that it's failing right now, but having observed and participated in many companies that start employing these tactics, it seems like it's the turning point in their "gravy train ride". They have to start thinking about having to compete.

My company makes stuff that costs more to make than the competitors even in Asia, and we price accordingly. The main advantage we have is that we back our products and have significantly superior performance to boot.

 

14 minutes ago, iacas said:

Their market doesn't need "saving." They are the market leader, dude. It may be on a slight decline, but Dean Snell isn't going to take credit for it, and Costco can't, given that they don't even show up on market charts. Callaway is making a better ball. Bridgestone is making a better ball.

Sure, I agree that they have a great market right now. Their product is really good and I and many others will continue to use them. Especially since I was optimally fit for the Pro-V1 along with my new woods. . .

The Callaway balls are pretty nice too, I have a few samples that are really great as well, but they're the same price and I got fit nicely for the Pro-V1. I see no reason to use other balls. That and I have a lot of Pro-V1 in my garage.

 

14 minutes ago, iacas said:

And still charging $$$ for them, too.

Well, $5 is a good value because it doesn't pay to purchase $1 for crappy balls and score badly when you just paid $39 for a value round of golf. However, if you can get the same quality ball like a Snell Tour ball for half the price, it seems like that's a better value?

 

14 minutes ago, iacas said:

Another way to look at it. This is a small thing to Costco. But now they may have to spend more than they made or might ever make on the golf balls on legal fees.

Yeah, this is just a bad thing about patents and defending them. Acushnet really messed this one up by sending that letter to Costco instead of just ignoring all the internet claims of superior performance by assorted people. The net result of the letter was better marketing for Costco balls.

Like you said, loyal Pro-V1 users will continue to use Pro-V1 at a higher price than $1 balls anyway.

[iacas]

1 minute ago, Lihu said:

I didn't mean that it's failing right now, but having observed and participated in many companies that start employing these tactics, it seems like it's the turning point in their "gravy train ride". They have to start thinking about having to compete.

@Lihu, how about we leave the business stuff for those who know a hell of a lot more about it than you and I combined?

I'm pretty sure a lot of smart guys would tell you that Titleist is competing pretty well. They are, again, the market leader. By a lot.

1 minute ago, Lihu said:

Yeah, this is just a bad thing about patents and defending them. Acushnet really messed this one up by sending that letter to Costco instead of just ignoring all the internet claims of superior performance by assorted people.

Again, they are obligated to protect their IP/patent if they felt there was an IP/patent violation!

[Lihu]

3 minutes ago, iacas said:

@Lihu, how about we leave the business stuff for those who know a hell of a lot more about it than you and I combined?

I'm pretty sure a lot of smart guys would tell you that Titleist is competing pretty well. They are, again, the market leader. By a lot.

Yeah, we'll see how everything plays out.

As I said in a recent post, I'm a loyal customer to both companies and really hope nothing bad happens to either of them.

Edited March 22, 2017 by Lihu
Grammar issue...

[DeadMan]

2 hours ago, boogielicious said:

If you don't protect IP in all instances, it could be used against you. They must of felt that this was enough of an infringement and wanted to stop it early.

Hmm, I did not know that. Although I probably should since am I a lawyer. Thanks.

1 hour ago, iacas said:

Because $15 is too low a price, but they could probably do $22.50 or something.

You can go on Alibaba or whatever right now and buy "premium urethane balls" for about $1/ball.

Hmm, would $22.50 be a threat to Titleist? You can get somewhat close to that on other balls, albeit not with the brand recognition that Kirkland has.

[iacas]

23 minutes ago, DeadMan said:

Hmm, would $22.50 be a threat to Titleist? You can get somewhat close to that on other balls, albeit not with the brand recognition that Kirkland has.

I don't know.

Also, I can buy Titleist balls at a few hundred places (maybe thousands)… closer to me than my nearest Costco. That is over 90 miles away.

[nevets88]

Quote

David Dawsey, a patent attorney who studies the golf patent landscape at his website golf-patents.com and broke the news of the Costco suit, says the process in this case will be fairly direct.

“Once Acushnet files an answer [to the suit], and probably a motion to dismiss the lawsuit, Costco is likely to seek a summary judgment ruling that they don’t infringe the patents to try to dispose of the matter,” he wrote in an email.

What’s not clear is just how strong a case Costco can make in its effort to detail the invalidity of Acushnet’s patents, or whether, given its limited knowledge base in golf ball technology (the Kirkland Signature is its first private label golf ball), it can stand toe-to-toe with the industry leader. Invalidating patents is not easy and it will take a lot of time, especially when it comes to the kind of golf ball patents developed by Acushnet, the kind that have stood the test before.

http://www.golfdigest.com/story/costco-vs-acushnet-who-has-the-upper-hand

[iacas]

IIRC Callaway - who knows a thing or two about golf ball patents - didn't fare well (nor did they get waxed, either) against Titleist.

[Lihu]

1 hour ago, nevets88 said:

http://www.golfdigest.com/story/costco-vs-acushnet-who-has-the-upper-hand

Interesting read, but were's what I got out of it. . .

Costco said "screw you" to Acushnet, and wants to invalidate 11 of their patents. It would be interesting which claims are being focused on by both companies, and how it pans out.

 

Quote

“Costco finally said ‘Screw you, you want to play this as a game? Well, we’re actually going to bring a lawsuit and now you’re going to be forced to defend a lawsuit,’” said Dreyfuss, who has co-authored books on intellectual property law and international intellectual property law.

David Dawsey, a patent attorney who studies the golf patent landscape at his website golf-patents.com and broke the news of the Costco suit, says the process in this case will be fairly direct.

“Once Acushnet files an answer [to the suit], and probably a motion to dismiss the lawsuit, Costco is likely to seek a summary judgment ruling that they don’t infringe the patents to try to dispose of the matter,” he wrote in an email.

What’s not clear is just how strong a case Costco can make in its effort to detail the invalidity of Acushnet’s patents, or whether, given its limited knowledge base in golf ball technology (the Kirkland Signature is its first private label golf ball), it can stand toe-to-toe with the industry leader. Invalidating patents is not easy and it will take a lot of time, especially when it comes to the kind of golf ball patents developed by Acushnet, the kind that have stood the test before.

Moreover, Costco has to navigate a difficult timeline. Although it’s already on record saying it will return to selling the Kirkland Signature in limited quantities next month, those sales could be problematic if it’s not granted a declaratory action, or worse if Acushnet files a counter claim. In that case, if Acushnet ends up the winner, damages would be trebled.

And therein lies the question. Although this might be “a matter of principle” for Costco, one has to wonder how much stomach it has for a protracted—and perhaps extremely costly—legal tussle with an opponent known to fight such matters to the end. For all the media hype and the cult-like status afforded the Kirkland Signature ball, fact is its contribution to Costco’s bottom line is likely no more than an accounting rounding error due to its inability to produce more than limited quantities of the ball.

Costco didn’t become a giant in retail by not knowing how to calculate return on investment and in this instance, the math might not hold up and profits could end up outweighing principle. That’s because one thing is almost certain. In a game of courthouse chicken over anything having to do with a golf ball, Acushnet would rather collide head on at full speed than be the one who swerves to the side first. Of course, when it comes to defending low prices, Costco seems just as committed.

It might not be fun to be in the middle of such a confrontation, but it ought to be fun to watch.

 

Well I guess it "ought to be fun to watch."

Acushnet apparently bullied many smaller ball companies out of the market in the past. I wonder what Nassau is doing, or do they have to do anything?

 

Edited March 22, 2017 by Lihu
Grammar