C K Coolidge Inc CKC versus Tolemite Corporation and Barton Research and Development BARD case

Document Type:Case Study

Subject Area:Statistics

Document 1

Noteworthy, BARD coming to the picture dates back to 1979 when Tolemite Corporation invited her to produce for the latter under its patent. The two had a sublicensing agreement of 4 percent commissions on all sales from all synthesized Varacil to be channeled to Tolemite while as BARD kept the lion’s share. CKC had discovered a similar synthesizing process of the Varacil in 1989 but had not to sort to patent their processing techniques. CKC management learned later of a suit on BARD and Tolemite’s patent infringement. What is the worth of the mineral? Varacil is a core mineral for pharmaceutical manufacturers. Through efforts from her legal counsel, Evans and Blaylock the infringer would cripple Tolemite’s prior art and invention. Counterclaims from Tolemite’s counsel emphasized the novelty at the time of invention rather than the adoption of naturally occurring processes.

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Efforts for a pretrial settlement on a 2. 5 percent royalty payment for future sales were ignored. The legal fees had cost CKC nearly $300,000 a month before the hearing of the case due in October. 5million led by Ralph Purcell the president of CKC. The transition from organic to the synthetic process was marked a huge price drop as competitors including CKC and BARD sought to dominate the market pie. The situation prevailed for five years from 1984. Possible Decision Alternatives Christine Schilling, an analyst, brought a new perspective of the quantitative analysis of the decision problems through formulating two decision tree options. The two options sort to establish whether or not the probability of going to trial is cheaper for Arrow Industries and warrants more success than an outside court settlement.

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The break-even curve illustrates the practicality of Christine’s perspective. Figure 01. The Figure 01 illustrates the threshold determining whether to settle or fight. From the graph, anything above 7. 5% in royalty rate compensation, warrants Arrow Industries to fight through court trials. b) Tolemite wins= $150,000 The exposure to liability is a quotient of A. Past liabilities when a) Tolemite wins, could amount to 10% of sales 1990- 1993 resulting in the sum of $267,300. b) Tolemite settles past liabilities before trial at the same royalty rate applied in future sales. B. Future royalties if: a) Tolemite wins, it will receive 10% of future sales b) Tolemite agrees for a pretrial settlement, it would subject it to the break-even curve rates at figure 1. Evaluation by probability Probability analysis facilitated Arrow Industries to determine the best action through counter analysis of consequential decisions.

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As illustrated, the highest probability of an appeal for Tolemite upon Arrow’s win is 0. 9 with additional legal fees for Arrow of $526. Subsequently, Arrow will be required to cough either $ 395,700 if she wins the appeal or $919,300 in the event she loses. The probability that Tolemite will not appeal stands at 0. Therefore, Arrow’s probability of making no appeals after the first lose stands at 0. 9 leading to legal fees of $844,800. Evaluation by EMV The expected monetary value (EMV) associated with every branch of the decision tree herein refers to the legal fees expense of each stage. As such, the underlined summations on Figure 02 above are the EMV costs that Schilling foresees. Ideally, EMV is acquired through multiplying the probability by monetary value.

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