Time Warner and ORC Case Study

Group # 9: | Aditya | Anil | Ilhomjon | Men | M. Diah |

Case: Time Warner, Inc. and the Case: Time Warner, Inc. and the ORC PatentsORC Patents

Managing Technology for Competitiveness

School of Management, AIT, March 2010

Background of Optical Recording Corporation (ORC )Background of Optical Recording Corporation (ORC )

James T. Russell, an American inventor, idea initiator of recording a digital audio signal optically, who was working in Salt Lake City, Utah

John Adamson, 1972 MBA graduate from the University of Western Ontario, who was working with Dominion Securities in Toronto, Canada

Dr. R. Moses and Dr. A. Stein – two Toronto businessmen

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Background of Optical Recording Corporation (ORC )Background of Optical Recording Corporation (ORC )

Optical Recording Corporation (ORC) was incorporated by John Adamson in 1984 to exploit a technology invented by James T. Russell.

John Adamson envisioned digital records on mobile type of device - and all pocket-portables.

John Orange, a patent agent, employed by J. Adamson to determine what protection J. Russell’s patents provide to the research focus of the company

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What a finding!What a finding!

Russell patents have less protection to the new company’s research focus

Philips and Sony’s newly released CD players and Discs might infringe one or more of the claims in the Russell patents.

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Negotiations with PHILIPS & SONYNegotiations with PHILIPS & SONY

John Adamson met with Philips Corporation at its NY office with the purpose of licensing agreement.

But the meeting had no progress towards licensing agreement

John Adamson visited TOKYO to meet with SONY Corporation

SONY, having strong defense didn’t want to make licensing agreement with ORC

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Negotiations with other CompaniesNegotiations with other Companies

J. Adamson and J. Orange traveled to Tokyo, Osaka and other cities in Japan to hold patent infringement and licensing discussions with other major Japanese electronics firms such as:

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SONY ProtocolSONY Protocol

John Adamson:Flew to Tokyo in mid-January 1988, for a final

meeting with Sony Corporation.He warned Sony that ORC is going to be bankrupt.Russell patents would revert to Salt Lake City a

former owner of the technology.

ORC’s first Licensing AgreementSony agreed to sign license agreement with ORC;The license, however, would only cover CD

players, not compact disc media.ORC had to reduce its royalty demands.Sony as the exclusive agent with full authority

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PHILIPS’ ProtocolPHILIPS’ Protocol

In summer 1988, ORC succeeded in licensing the Philips Corporation for both CD players and CD media .

Sony agreed to sign a license for CD media in November 1988.

By the end of 1988, ORC had a cash position well in excess & the licensing program was on a roll

The largest manufacturers of CD mediaThe largest manufacturers of CD media

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ORC’s American moveORC’s American move

ORC had settled a deal with Sony and Philips.

WEA Manufacturing , a subsidiary of Time Warner Inc. was the largest CD manufacturer in the United States.

Adamson held several discussions , by mail, telephone and face-to-face meetings, with Time Warner’s in-house counsel.

Adamson requested Time Warner to pay a modest $ 3 million just to avoid patent infringement

Adamson’s clever decision.

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ORC VS TIME WARNERORC VS TIME WARNER

ORC’s law firm filed a patent infringement complaint against WEA Manufacturing in the Federal District Court in Wilmington.

ORC claimed 6 cents on each CD sold by Time Warner since 1986 till 1992 which is 450 million disks with 27 million Royalty fees.

With a strong defense, even Adamson found himself confused with the technical issues of patent validity and product infringement .

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CONCLUSIONCONCLUSION

Source: http://www.buildingipvalue.com/n_us/86_91.htm

Basic Decision MatrixBasic Decision Matrix

SONYPHILIPS

Time Warner

ORC

Lester Hewitt (Houston, TX) and Richard Knight (Seattle, WA)

“There seems little point in investing in the creation and development of new intellectual property rights if major industrial firms are prepared to ignore and infringe existing patent rights that you already own” John Adamson

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