Legal Eagles

Scenes from a modern sports story, or . . . a few days in the lives of golf equipment companies:

Act I: Mark King leaves Taylor Made Adidas Golf after 15 years, goes to Callaway to head a new golf ball project, signs a contract with a clause prohibiting him from working for a competitor, and four months later goes back to Taylor Made.

Intermission: Callaway sues.

Act II: Start-up wonder Orlimar takes on Callaway in its advertisements.

Intermission: Callaway sues Orlimar, Orlimar sues Callaway, case settled.

Act III: Orlimar engages in TriMetal rattling, says a golf industry writer was mistaken in portraying the settlement as a huge victory for Callaway.

Intermission: Lawsuit being considered.

Act IV: Former start-up wonder Adams Golf experiences steep decline in stock price, shareholders upset.

Intermission: Shareholders sue founder Barney Adams.

Act V: Orlimar launches its own golf ball, the product packaged in a pop-top can that Taylor Made claims one day later to violate its patent.

Intermission: No lawsuit yet over the moisture-barrier-level patent issue.

Just wondering, but does anybody see a trend here? It’s a brave new world out here in the golf equipment business, where X-12s and TriMetals and Burner Bubbles and shallow-faced metal woods are feverishly competing for market share and public acceptance, not to mention court time.

What’s at stake? How about several hundred million dollars in sales every year?

When you have that much money involved, you’re obviously going to have some disputes. And this is something that all parties involved in the lawsuit merry-go-round can agree on.

The next guy to start up a golf equipment company probably will be Perry Mason.

“It’s the nature of human beings,” says Ely Callaway, the venerable founder of industry behemoth Callaway Golf. “And business. There are controversies and many are carried into a court of law.”

Callaway points out that his company has been involved in only four big lawsuits in 16 years. It’s just that three of them have come in the last 12 months.

As a matter of fact, the whole scene could be considered entertaining for its great theater value alone.

It has even afforded some golf guys the opportunity to show off their creative writing skills.

Consider this example--an actual press release--penned by an obviously overheated public relations type for Taylor Made on the Callaway-King affair:

“At its worst, it appears Machiavellian . . . [or] the legal version of Caddyshack, where someone goes from legal zealotry to absurdity.”

That’s a tough leap, all right. Upon closer examination, this is believed to be the only time in press release history that the words Machiavellian and Caddyshack appear in the same paragraph.

Let’s move on. Since it’s sports, there should be some kind of big scoreboard listing winners and losers. Only it’s not that simple. In this game, you can’t really tell the winners from the losers because everybody puts on a happy face.

Check that. There is one set of clear winners. That would be the lawyers.

“We’ve got enough attorneys to field a football team,” said Jesse Ortiz, chief executive officer of Orlimar.

In a rare moment, his counterpart at Callaway, Chuck Yash, agreed.

“One lawyer, the guy starves,” Yash said. “Two lawyers, they both get rich . . . but I don’t mean to sound too skeptical.”

Aw, go ahead. You know, in the golf equipment wars, skepticism is not in short supply. You see more skepticism than graphite.

The golf equipment business wasn’t always this way, of course. It was once a chummy little club in which the companies used to put out their product and then got together to play golf in the afternoon. The only dispute was about who was away.

If there was a ground zero in how things changed, it might have been in the 1970s, when golf ball maker Polara was forced into court by the United States Golf Assn. over an issue called symmetry.

“It ended a lot of the buddy-buddy nature between equipment makers,” Yash said.

The bottom line is that it signaled to everyone in the business that it was no longer a get-along-with-everybody world. Another result of that dispute is the equipment companies were put on notice that disputes were being raised to a new contentious--and litigious--level.

Still to come was the landmark USGA suit against Ping in the mid-1980s over the clubmaker’s use of square grooves, which were outlawed.

The non-buddy system is pretty much in effect now. The most protracted disagreement of recent vintage involves the Carlsbad-based Callaway and Hayward-based Orlimar.

In January, Callaway filed a lawsuit that claimed Orlimar’s advertising campaign was false and that Orlimar violated two of its patents on irons. Orlimar denied any wrongdoing and filed a counterclaim for unfair competition and false advertising.

The matter was settled last month. Callaway claimed a victory because the U.S. District Court’s consent decree forbade Orlimar from infringing on Callaway’s iron patent and also from using certain advertising slogans.

For instance, Orlimar couldn’t claim in ads that “oversize is overrated” or “oversize is obsolete.” However, “not oversize, the right size” was permitted.

The court ruled out “titanium is obsolete” but permitted “go beyond titanium.”

Callaway said Orlimar was the clear loser and had built its ad campaign on the idea that it would soon offer stock. Orlimar has not yet done that.

“A company that wanted to go public and pretend to the readers of these advertisements that they were going to be the next Callaway,” Callaway said. “Therefore, ‘People, you should buy our stock.’ That’s OK, but they did it in a way that was false.

“We got everything out of them in the settlement we would have gotten if we had gone to court. Now they’re trying to pooh-pooh it. Well, you can’t pooh-pooh it.”

Naturally, the pooh-pooh issue is open to interpretation.

Ortiz said the constant court battles have taken a lot of the fun out of the business, but that’s the way it goes. The golf equipment business mirrors society, Ortiz said.

“And we’re a litigious society,” he said.

“People are just suing for anything rather than trying to sit down and resolve differences. You’re not a success if you’re not getting sued, and we’ve become a real target in the last 20 months.

“When you go from virtual obscurity to high profile, when you do that, there’s a lot of jealousy and a lot of fear in competitors. It’s easy to blame another company for your problems and your woes, and it’s a lot harder to look in the mirror and say, ‘You know what? We need to build a better product?’ ”

That runs along the same lines as what Callaway is thinking . . . about Orlimar.

“We have never made a shallow-faced fairway wood,” said Steve McCracken, senior vice president and chief legal counsel at Callaway. “We think that’s bad technology for golfers.”

Ortiz said that while Orlimar doesn’t have the “war chest” that Callaway does, the settlement is hardly bad news for either party.

“Believe me, settling the lawsuit was good for both sides,” Ortiz said. “What would have come out would have been quite embarrassing to Callaway.”

Maybe, but we won’t know now. As far as embarrassing, about the only one who may be even slightly red-faced is Gene Yasuda, a golf industry reporter for GolfWeek, who wrote a tongue-in-cheek article that described the Orlimar-Callaway settlement as an out-and-out legal romp for Callaway.

Orlimar took the unusual tack of issuing a news release, objecting strongly to Yasuda’s article. Lawyers telephoned other lawyers. GolfWeek later ran a small correction, saying it reported erroneously that McCracken had said he had information that showed Orlimar “tinkered” with robot-testing.

Yasuda said he could not comment on the flap.

Ortiz said Orlimar has gotten everyone’s attention.

“The Big Guys are busting our chops a little bit,” he said. “I guess it means ‘Welcome to the club.’ ”

It’s an expensive club. In 1998, Callaway’s sales were about $700 million, compared to about $280 million for No. 2 Taylor Made. Orlimar’s sales figures for 1998 were about $70 million and are projected to reach $85 million in 1999--still a far cry from Callaway’s hefty total, but a significant advance nonetheless.

Now that its squabbling with Orlimar is out of the way, Callaway turns its attention to the King matter. Callaway is concerned that King could use its trade secrets now that he’s the president of Taylor Made Adidas, which makes golf clubs, golf balls, apparel and shoes.

“Mark is a man of principle and we are surprised Callaway is trying to make an issue of his integrity,” said Robert Erb, Taylor Made’s vice president and chief legal officer.

Callaway says the doctrine of “inevitable disclosure” comes into play. Erb says the opposite.

“This is ridiculous,” Erb said. “Mark’s contract with Taylor Made is clear. He can’t speak to anyone about Callaway’s trade secrets.”

Whew, that’s a relief to Callaway. Not.

“Mark King, we treat that as a serious issue,” Callaway said. “It can be a landmark case in California law.”

Even bigger than the moisture-barrier-level patent dispute?

But that’s another story.

And another court.

Have your lawyer call our lawyer and we’ll discuss it. We’ll do lunch.

In the meantime, the lawsuits just keep on coming, but Callaway insists the public is not getting turned off by the squabbles.

“We believe that most people believe in fair play,” he said. “OK, if you can’t settle anything, OK, you go to court. People don’t know all the facts. If they did, they’d say, ‘OK, we hope you win.’

“And just because we’re big and a leader doesn’t mean we should act too scared to defend ourselves.”

So let’s do that lunch. And don’t forget the dress code: Wear your best lawsuit.