What are the interests in this case of the various players in the Varacil market? 1) Tolemite This company developed Varacil production patent in the market. Tolemite had a monopoly in this patent and this company licensed this skill to BARD. Tolemite took a royalty from BARD about 4% amount of sales. 2) BARD BARD is the number one firm in the Varacil market. They had an overwhelming market share in Varacil market. They had given royalty to Tolemite for using producing skill. Furthermore, BARD received rights to sublicense to other Varacil producers who became interested in the process.
This will also give BARD good revenue model. 3) C. K. Clardige(CKC) CKC is in the second position of Varacil market. They also produced Varacil but they didn’t give any royalty to Tolemite currently. This is the strong point of CKC. CKC produced Varacil without any fee, so this aspect will be the competitive advantage of CKC. 2. What should Mr. Purcell do? If you think he should propose a settlement, what amount do your recommend, and how should it be communicated? First of all, we have to take a view of each part of company circumstances when they faced to sue.
All three firms had the pros and cons when they went to court. 1) Tolemite : The best or The worst Tolemite will get a 10% royalty from CKC when they win the lawsuit. Moreover, they can make revenue from other company through similar suit when they win this lawsuit. But they had huge risk. If Tolemite lose the suit, they might get zero revenue in the Varacil market. Because losing suit means that the patent of Tolemite is invalid. In this reason, this suit has the chance that the best result and the worst result to Tolemite. 2) BARD : How to make the larger advantages?
BARD is the largest beneficiary in this lawsuit. When the Tolemite win the suit, BARD could make competitive advantages. CKC will give Tolemite 10% royalty while BARD give only 4% royalty. On the other hand, BARD could also get advantages when Tolemite lose in the court. It means Tolemite’ patent is invalid, so BARD don’t have to give any royalty. This will strengthen the first position of the Varacil market. In this reason, BARD have to ponder how make the largest advantage in this suit. 3) C. K. Clardige(CKC) : How to make the smaller disadvantages? CKC is the weakest position in this suit.
If they win the court, they don’t have to give royalty to Tolemite. But BARD also didn’t have to give any royalty. After this result, competition between BARD and CKC will be more intensified. The result of competition will make huge damage to the CKC because BARD is more powerful company in this market compared to CKC. On the other hand, failing in the court also make damage to CKC. The will lose all of competitive advantage in the market. They have to give 10% royalty for 7 years even though BARD give only 4%. This suit will make only damage to CKC regardless of the result.
Purcell must take a settlement with Tolemite. Because this suit is just make a lot of cost without any advantages. The matter is the way to make the deal and generate amount of royalty or options. The break-even curve of this court is like ‘Figure B’. This showed that 7. 5% of Royalty will be the middle of the negotiation. But this didn’t contain any cost of suit. So the royalty which CKC will give will be little bit lower than this break-even prediction. Moreover, CKC should remember that BARD had given only 4% royalty to Tolemite and the fact that the possibility of winning suit is higher than counterpart.
This prediction is from the attorney. These are the strong point of CKC when they faced the negotiation with Tolemite. I suggested 4% royalty to Tolemite which is same amount as BARD and suggested long-term relationship. This relationship will be the mutual check with BARD. Tolemite already knew that the BARD is the most advantageous position in triangle relationship. If this situation goes continuously, it is natural that Tolemite will lose their position because BARD also had got a sublicense right. This factor will threat Tolemite’s right later days.
CKC have to emphasize this fact. Purcell didn’t have to focus on short-term sight, for example, the cost of court, cost of winning, cost of losing, etc. Of course these factors are important, but they have to walk one step behind and look again in long and large view, the relationship in the market and triangle chain of interest. If Purcell emphasized these factors and persuade Tolemite to recognize the hidden counterpart, BARD, the communication will go well. Do not see in narrow and short sight, Be wider and longer. This will be the important point in this settlement.
