Callaway 2010 Annual Report Download - page 115

Acushnet’s motions for a new trial and for judgment as a matter of law. Acushnet appealed the District Court’s
judgment to the Federal Circuit (Appeal No. 2009-1076). On August 14, 2009, the Federal Circuit affirmed in
part, reversed in part and remanded the case for a new trial. The Federal Circuit affirmed the trial court’s rulings
with respect to claim construction, and evidentiary rulings made during the trial and rejected Acushnet’s motion
for judgment as a matter of law, but ruled that the jury’s inconsistent verdicts and an error granting partial
summary judgment on Acushnet’s anticipation defense required the case against Acushnet to be retried. As a
result of its ruling, the Federal Circuit also vacated the permanent injunction. Acushnet filed a petition for review
by the United States Supreme Court which was denied on February 22, 2010. The case was retried based upon
Callaway Golf’s asserted claims. On March 29, 2010, after a five-day trial, a jury found that the asserted claims
were invalid as “anticipated” and “obvious.” Callaway Golf has moved for a new trial and for judgment as a
matter of law. Callaway Golf’s motion was fully briefed on June 15, 2010 and is pending for a decision in the
district court.
Acushnet has also filed requests for reexamination with the United States Patent and Trademark Office
(“PTO”) challenging the validity of the four patents asserted in the litigation. The Company believes that if it
secures a favorable final decision from the district court proceedings before all appeals associated with the
reexaminations are completed, the reexamination process will be terminated with respect to the patent claims at
issue in the litigation. An examiner at the PTO has issued decisions rejecting the claims of the four patents at
issue in the litigation. The examiner’s rejections have been appealed to the Board of Patent Appeals and
Interferences (“BPAI”). The BPAI heard argument on the appeals on January 19, 2011. The Company continues
to believe that the administrative process will take time and that at least some of the prior claims or newly framed
claims submitted as part of the reexamination proceeding will eventually be affirmed. If the BPAI does not
affirm the claims in the patents subject to reexamination, an appeal will be taken by the Company to the Federal
Circuit.
Callaway Golf has asserted that Acushnet’s request for PTO reexamination of the patents that are the subject
of the district court patent infringement litigation discussed above breached a settlement agreement between
Acushnet and Callaway Golf’s predecessor in interest, Top-Flite. On January 13, 2011, the district court hearing
the patent infringement action entered an order holding that Acushnet breached the settlement agreement.
Callaway Golf has advised the PTO of the district court’s breach of contract order and has requested that the PTO
stop the reexamination proceedings. That request is pending at the PTO. If the patents are invalidated by the
PTO, and that decision is upheld by the Federal Circuit, Callaway Golf will pursue all available damages arising
from Acushnet’s breach, including the damages that would have been available had it prevailed on its patent
infringement claims.
On March 3, 2009, the Company filed a complaint in the United States District Court for the District of
Delaware, Case No. C.A. 09-131, asserting claims against Acushnet for patent infringement. Specifically, the
Company asserts that two golf ball patents acquired from Top-Flite are infringed by Acushnet’s sale of Titleist
Pro V1 golf balls introduced after entry of the Court’s permanent injunction referenced above. In the second suit,
the Company is seeking damages and an injunction to prevent infringement by Acushnet. Acushnet’s response to
the complaint was filed on April 17, 2009. The case is in the discovery phase. Trial has been set for March 2012.
Acushnet has filed requests for reexamination with the PTO challenging the validity of the two patents
asserted by the Company in the second suit filed against Acushnet. The PTO has issued a final office action
rejecting the claims of one of the patents and the Company has appealed that rejection to the BPAI; the other
patent is still being reviewed by the examiner.
On March 3, 2009, Acushnet filed a complaint in the United States District Court for the District of
Delaware, Case No. C.A. 09-130, asserting claims against the Company for patent infringement. Specifically,
Acushnet asserts that the Company’s sale of the Tour i and Tour ix golf balls infringe nine Acushnet golf ball
patents. Acushnet has since dropped one of the patents, but expanded its infringement contentions to allege that
seven other models of the Company’s golf balls, using Callaway Golf’s patented HX surface geometry, infringe
five of the Acushnet patents asserted in the new suit. Acushnet is seeking damages and an injunction to prevent
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