Thursday, February 14, 2008

Pro V1 Ball in Jeopardy, and the Rule 35 Ball

Titleist has the #1 market position in golf balls, with it's high-end, ProV1 golf ball. This ball is amazing, and if you play golf, you know what I'm talking about.

The USGA places limits on the diameter of a golf ball. Ultimately, Titleist figured out how make the urethane cover thin enough so that they could make a 3-piece golf ball that flies far but can drop out of the sky and stop. If you can make the outer, polyurethane cover thin, then the core can be larger. If you have a larger core that can now accept more kinetic energy transmitted from a moving golf club to a stationary ball, the ball goes farther. Materials science has invented newer polymers that can accept this energy extremely efficiently and this makes the ball fly farther. The Sullivan patents covered this innovation.

After Titleist launched their ProV1 in October 2000, it raised a lot of eyebrows. But what happened next was a golf ball that took the golfing world by storm, claiming a dominant #1 position in the golf ball market.

The bad news for Titleist is that Callaway has claimed that 8 of the 9 patents that cover the ProV1 are invalid and infringe upon Callaway's patents. Callaway recently won its case against Acushnet (Titlest's operating company, which is a subsidiary of Fortune Brands, ticker: FO). So all of the sales that the ProV1 generated since 2000 are potentially at risk. It's a nightmare for Titleist.

Well the story goes like this: Apparently Callaway launched its Rule 35 ball and pros were playing it in 1998 with much acclaim. Then Bridgestone stepped in and sued Callaway for infringement, and at the heart of the debate was the Sullivan patents around golf ball construction. Callaway ultimately pulled the Rule 35 in 1999, but not before Titleist got some of the Rule 35's and studied them to tweak their own product offering. What came next was the ProV1 from Titleist in 2000. Well, in the ultimate ironic twist, Callaway bought Top-Flite brands in 2003 for $175M, and the Sullivan patents were part of this transaction. So it looks like Callaway might get the last laugh. (In match play, we call this having your opponent "dormie".)

The reason I was so interested in this story is that back in 1998, I used to play Callaway's Rule 35 Red ball. This ball was on the market before the ProV1, and it felt just like the ProV1 does now. I actually hit this ball farther than I've ever hit the ProV1, and I instantly fell in love with it. Then all of a sudden, Callaway stopped selling them, and the only place you could find them was on eBay for a ton of $$.

I hope Callaway can relaunch the Rule 35, because this ball was amazing. Competition is good, it drives innovation. Maybe Titleist will look to move technology forward again. This reminds me of Apple and Microsoft, if you believe Callaway's assertions, which a court in Delaware apparently did.

Headlines on ESPN

Summary of Case

Redacted Legal Brief