Callaway 2009 Annual Report Download - page 34

the litigation with the Plans. Because the Company was not a signatory to the SAG collective bargaining
agreement, and was not in contractual privity with SAG or the Plans, on July 3, 2009 the Court granted the
Company’s motion to dismiss the Plans’ complaint, resulting in dismissal of the Plans’ action against the
Company and a favorable resolution of the Company’s action against the Plans. At the same time, however, the
Court denied Dailey & Associates’ motion to dismiss, because it was a SAG signatory. The trial commenced on
January 12, 2010. After three days of testimony the parties reached a settlement pursuant to which the Plans will
release all claims against Callaway Golf and its signatory advertising agencies through January 31, 2010 in
exchange for an immaterial payment. Formal settlement documentation has been exchanged.
On May 8, 2008, Kenji Inaba filed a suit against Callaway Golf Japan in the Osaka District Court in Japan.
Inaba has alleged that certain golf balls sold by Callaway Golf Japan with a hex aerodynamic pattern infringe his
Japanese utility design patent No. 3,478,303 and his Japanese design patent No. 1,300,582. Inaba is seeking
damages pursuant to a royalty based on sales. Callaway Golf Japan filed an administrative proceeding in the
Japan Patent and Trademark Office (“Japan PTO”) seeking to invalidate the patents in suit. The Japan PTO ruled
that the asserted claims in the Inaba patents are invalid. The Osaka District Court also ruled, on different
grounds, that the patents are invalid and also that Callaway Golf does not infringe the patents. Inaba appealed
both the Osaka District Court and Japan PTO rulings to the Japan Intellectual Property High Court. The
Intellectual Property High Court is considering the appeal of the Japan PTO’s ruling on the design patent, has
remanded the invalidation of the utility patent to the Japan PTO for further proceedings based on a technical
issue, and is considering the appeal of the Osaka District Court’s decision.
On July 11, 2008, the Company was sued in the Eastern District of Texas by Nicholas Colucci, dba EZ Line
Putters, pursuant to a complaint asserting that the Odyssey White Hot XG No. 7, White Hot XG (Long) No. 7,
Black Series i No. 7, and White Hot XG Sabertooth putters infringe U.S. Patent No. 4,962,927. The complaint
also alleges that the Company’s Marxman and iTrax putters infringe the alleged trade dress of plaintiff’s EZ Line
putters. The Company responded to the complaint on September 5, 2008, denying that it infringes the patent or
trade dress and has moved for summary judgment on both claims. If the Court denies summary judgment, then
the trial will commence on March 1, 2010.
On January 19, 2009, the Company filed suit in the Superior Court for the County of San Diego, case
no. 37-2009-00050363-CU-BC-NC, against Corporate Trade International, Inc. (“CTI”) seeking damages for
breach of contract and for declaratory relief based on the asserted use and transfer of corporate trade credits to
the Company in connection with the purchase of assets from Top-Flite in 2003. On January 26, 2009, CTI filed
its own suit in the United States District Court for the Southern District of New York, case no. 09CV0698,
asserting claims for breach of contract, account stated and unjust enrichment, and seeking damages of
approximately $8,900,000. On February 19, 2009, the Company filed a motion to dismiss CTI’s New York case.
On February 26, 2009, CTI removed the Company’s San Diego case to the United States District Court for the
Southern District of California, and filed a motion to dismiss, stay or transfer the California action to New York.
Those motions are pending.
On June 2, 2009, the Company was sued in the United States District Court for the Eastern District of
Pennsylvania, case no. 09-2454, by Greenkeepers, Inc. and Greenkeepers of Delaware, LLC asserting that the
Company is infringing U.S. Patent number RE40,407, relating to the golf spikes used in the Company’s golf
shoes. The Company answered the complaint on June 23, 2009 denying infringement. The Company tendered the
matter to its golf spike vendor, Softspikes LLC, which has accepted the defense while reserving its rights
pursuant to an indemnity agreement between the parties. The court has not yet set a trial date.
The Company and its subsidiaries, incident to their business activities, are parties to a number of legal
proceedings, lawsuits and other claims, including the matters specifically noted above. Such matters are subject
to many uncertainties and outcomes are not predictable with assurance. Consequently, management is unable to
estimate the ultimate aggregate amount of monetary liability, amounts which may be covered by insurance, or the
financial impact with respect to these matters. Management believes at this time that the final resolution of these
matters, individually and in the aggregate, will not have a material adverse effect upon the Company’s
consolidated financial condition.
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