Callaway 2011 Annual Report Download - page 108

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Set forth below is a description of certain litigation to which the Company is a party.
The 2006 Pro V1 Golf Ball Patent Infringement Litigation
On February 9, 2006, the Company filed a complaint in the United States District Court in Delaware (Case
No. C.A. 06-91) asserting patent infringement claims against the Acushnet Company, a wholly-owned subsidiary
of Fortune Brands, alleging that Acushnet’s Titleist Pro V1 family of golf balls infringed nine claims contained
in four golf ball patents owned by the Company. The Company prevailed in a December 2007 jury trial on 8 of
the 9 patent claims asserted against Acushnet. In November 2008, the Delaware District Court entered a
permanent injunction prohibiting continued sales of the infringing Pro V1 golf balls by Acushnet. In August
2009, the United States Court of Appeals for the Federal Circuit reversed and remanded the case for a new trial.
The case was retried and on March 29, 2010, a jury found that the claims in the patents asserted by the Company
against Acushnet were invalid. On April 21, 2011, the District Court in Delaware denied, in part, the Company’s
motion for judgment as a matter of law and denied the Company’s motion for a new trial. The Company has
appealed the District Court’s rulings to the Court of Appeals for the Federal Circuit, Appeal No. 2011-1407.
In 2006 Acushnet filed requests for reexamination of the patents asserted by the Company in the United
States Patent and Trademark Office (“PTO”). On March 9, 2011, the Board of Patent Appeals and Interferences
(“BPAI”) affirmed an examiner’s rejection of the patents, relying on evidence submitted by Acushnet in its
requests for reexamination. On April 11, 2011, the Company asked the BPAI to reconsider its decision. On
September 24, 2011, the BPAI denied the Company’s request for reconsideration. The Company has appealed
the BPAI’s decision to the Federal Circuit, Appeal Nos. 2011-1622, 2011-1623, 2011-1624, and 2011-1625. The
Company has asserted in the 2006 Pro V1 Golf Ball Patent Litigation described above that Acushnet breached a
1996 settlement agreement by filing the requests for reexamination of the asserted patents in the PTO. On
January 13, 2011, the District Court in Delaware entered an order finding Acushnet breached the 1996 settlement
agreement by filing the reexamination requests in the PTO. Damages for Acushnet’s breach of the 1996
settlement agreement have not yet been determined by the Court or by a jury.
On March 15, 2011, the Company filed suit against the Director of the PTO in the United States District
Court for the Eastern District of Virginia, Case No. 1:11 cv 266, seeking a court order vacating, holding
unlawful, and setting aside the PTO’s orders in the reexamination proceedings initiated by Acushnet. Among
other things, the Company has alleged that the PTO’s refusal to vacate or stay the reexamination proceedings—in
the face of the Delaware court’s order determining that the PTO proceedings were initiated in breach of the 1996
settlement agreement—exceeded the PTO’s jurisdiction and authority and was arbitrary, capricious, and
otherwise contrary to law. On July 27, 2011, the Court granted the PTO’s motion for summary judgment, holding
that the PTO’s actions were not arbitrary, capricious or contrary to the law. The Company has appealed the
Court’s decision to the Federal Circuit, Appeal No. 2011-1551.
The 2009 Pro V1 Golf Ball Patent Litigation
After the District Court in Delaware issued a permanent injunction barring further sales of the infringing Pro
V1 golf balls in November 2008, Acushnet introduced a new version of those golf balls. On March 3, 2009, the
Company filed a complaint in the United States District Court for the District of Delaware, Case No. C.A. 09131,
asserting claims against Acushnet for patent infringement with regard to the new balls. Specifically, the
complaint asserts that two golf ball patents owned by the Company and acquired from Top-Flite are infringed by
the new versions of the Pro V1 golf balls introduced in 2009. Acushnet has filed requests for reexamination with
the PTO challenging the validity of the two patents asserted by the Company in the 2009 litigation. The PTO has
issued final office actions rejecting the claims of the two patents and the Company has appealed those rejections
to the BPAI.
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 Company’s Tour golf balls infringe nine Acushnet golf ball
F-34