What Are the Interests in This Case of the Various Players in the Varacil Market?

Yuna Lee

2012123261

BIZ 3138_Business Negotiation

Case Write-up II (due 5/17/2016)

Case: C.K. Claridge, Inc.

1. What are the interests in this case of the various players in the Varacil market?

There are five players in this case; CKC, Tolemite, BARD, other competitors, and the patent attorneys. 1) CKC is in the second rank of Varacil market and even though they produced synthetic Varacil, they are not paying any royalty to Tolemite which is a great competitive advantage over BARD, who is the market leader. In this case, CKC’s main agenda is to minimize the cost and resolve this problem as soon as possible so that they can go back to their normal business smoothly without causing any further trouble. The only way to win is to prove that Tolemite was not patentable at first. However in this way, CKC will lose its cost advantage which comes from the fact that BARD has paid 4% of royalty fees to Tolemite for using their technique. On the other hand, if CKC lose, they have to pay at least 10% of royalty fees to Tolemite. CKC also has to consider other costs of going to court and appealing. Therefore, for CKC, it is important to figure out how much the cost would be in each scenario (win, lose, appeal, or settle) and find the proper R% to settle. 2) Tolemite generates revenue by collecting royalty fees. They are trying the win this case so that they can receive additional royalty revenue not just from BARD but also from CKC. Once the court goes in favor if Tolemite and BARD against CKC, it would be way much easier to force other small companies to pay royalty fees as well since this lawsuit would set a precedent. If they lose, their patent goes invalid and they will no longer generate revenue in Varacil market. 3) For BARD, it is important to maintain their market share and stay as market leader in Varacil market. Their goal is to win the lawsuit so that they can share 10% of royalty fees with Tolemite and make other competitors including CKC to lose their price competitiveness of not paying royalty fees. Also since they have rights to sublicense to other Varacil producers, there will be high chance of extra revenue if the court recognizes the patent, because in that case other companies have to pay royalty fees either to Tolemite directly or through BARD under sublicense contracts. Moreover, even if they lose the case, they don’t have to pay royalty fees to Tolemite anymore and can even get back what they have paid before, so they have flexibility in this case. 4) Other Varacil producers would stand for CKC because they are also exposed to legal risks of paying royalty fees if the court recognizes the patent. 5) Finally for the attorneys, since they work on commission fees by providing legal services, their interest is to persuade CKC to go to court and get commission and counseling fees.