This memo is to recommend that ttools should stop negotiations with Palm and take immediate legal action through patent litigation means. This action is needed in order to protect ttools’ innovation and for survivability of ttools business. Based on the design patent and non-disclosure agreement with Palm it is very clear that Palm has committed the infringement hence chances of ttools winning of litigation case are high. There are high chances that Palm might consider to settle the litigation before going to the trial of the case as they knew that they have committed the patent infringement. Even if Palm goes for the trial, chances of ttools winning are high because they clearly have sufficient prove that the patent violation had happened. Once the litigation action initiated there is a good chance Palm might start negotiation with ttools for licensing or royalty sharing agreement if not for paying the infringement losses.
Though costs of pursuing litigation case are high, it’s the only credible and plausible alternative ttools has to win investors’ confidence to invest more money into ttools business. As a startup company with minimal capital, the risk involved around this proposal to incur huge legal costs is high. Ttools has very well written utility patent issued, the nondisclosure agreement signed by Palm, in addition to the clear infringement of the patent are strong factors to file litigation charges. Ttools need to convince it’s our investors that their patent is a strong asset for the company and shall seek their help to invest in the litigation expenses. Looking at the other alternatives, it’s evident that they will not yield any positive outcome since ttools does not have any bargaining power to negotiate or the resources to compete with Palm. Innovation and intellectual property rights are ttools are the strengths of ttools and it should focus on leveraging its strengths to compete with Palm.
Based on the recent communications with Palm, it is clear that they are not interested in negotiating with ttools despite the fact that they have reminded them about infringement. Palm is already in a contract with IDEO to design a stylus similar to ttools which means that Palm will cease to publish any ads about ttools products from their online newsletter. Negotiating or competing without taking any action to stop infringement of its intellectual property would not enable ttools to leverage its core organizational strengths in competing with Palm. In its current state ads through the online newsletter is the most helpful marketing tool for ttools to reach out to the PDA owners. If Palm stops publishing ads which is highly likely action from Palm’s perspective in order to promote their own product ttools need to develop their own marketing capabilities.
Even if they start their marketing campaign, ttools might not be able to compete Palm in terms of resources and market reach. The other alternative of ceasing negotiation and competing with Palm might not be very effective because of the fact that we do not have the capabilities to set a solid ground for such competition. Even if ttools start competing based on its superior pricing and material quality, Palm could easily match its pricing and material quality as long as they could infringe ttools product design. If ttools does not file litigation charges, Palm has not compelling reason to negotiate with ttools for distribution agreement or continue to support online ads for ttools products. Filing litigation charges gives ttools the bargaining power it needs to strike any deal or do any negotiation with Palm, without these legal action Palm has no reason to negotiate and ttools didn’t have any strength to compete.