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Time Warner and ORC Case Study

1. Optical Recording Corporation (ORC) was founded in 1984 by John Adamson to exploit digital audio recording technology invented by James Russell. 2. ORC realized that Russell's patents may cover Philips and Sony's newly released CD players and discs, and sought licensing agreements from these companies. However, initial negotiations were unsuccessful. 3. ORC was eventually able to sign licensing agreements with Sony and Philips in 1988 after reducing royalty demands. However, when ORC approached Time Warner, negotiations broke down and ORC filed a patent infringement lawsuit against them.

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2K views12 pages

Time Warner and ORC Case Study

1. Optical Recording Corporation (ORC) was founded in 1984 by John Adamson to exploit digital audio recording technology invented by James Russell. 2. ORC realized that Russell's patents may cover Philips and Sony's newly released CD players and discs, and sought licensing agreements from these companies. However, initial negotiations were unsuccessful. 3. ORC was eventually able to sign licensing agreements with Sony and Philips in 1988 after reducing royalty demands. However, when ORC approached Time Warner, negotiations broke down and ORC filed a patent infringement lawsuit against them.

Uploaded by

isomiddinov
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPT, PDF, TXT or read online on Scribd
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Case: Time Warner, Inc.

and the
ORC Patents

Managing Technology for Competitiveness

School of Management, AIT, March 2010

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


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


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

3
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.

4
Negotiations 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

5
Negotiations 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:

6
SONY 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 Agreement


Sony 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

7
PHILIPS’ 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 media

8
ORC’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.

9
ORC 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 .

10
CONCLUSION
Basic Decision Matrix

“There seems little


point in investing in
the creation and
development of new
intellectual property ORC
rights if major
industrial firms are
prepared to ignore
and infringe existing
patent rights that SONY
you already own” PHILIPS
Time Warner
John Adamson

Lester Hewitt (Houston, TX) and Richard Knight (Seattle, WA) Source: http://www.buildingipvalue.com/n_us/86_91.htm

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