Notes for AP and Shepard Fairey and HOPE

Tang’s second-generation trainer continues to be popular in Far East Asian and emerging markets, his second generation trainer is available at many large supermarkets and sports shops, and at affordable prices. Tang manufactures his products in South East Asia, where his family enjoys business connections (e.g., China, Malaysia and Indonesia). Tang’s father is a figure whom Tang respects enormously. Tang hopes to emulate his father’s success with his own sports shoe business.

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  The profits from the sale of the prototype should be divided roughly on a 75-25 basis in your client’s favor.
  
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  For legal reasons regarding the IP of the prototype trainer, the profit from Lee’s second-generation trainer released in the Far East would need to be shared with Mr. Tang.
  
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  Tang wishes to monopolise the online market and is reluctant to share this platform with Lee, unless Lee is willing to share information relating to his recent innovations. Your client is aware of Lee’s new trainer designs and believes they could give his products a competitive edge.
  
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  Tang’s outlook: By 2020, Tang believes that the number one market for future sports trainer sales will be driven by the United States, Mexico and Canada, collectively generating more sales than central Asia, Europe and the Fast East combined. Tang’s outlook suggests that the majority of his future revenue will come from e-business and not from traditional retailers (e.g., sports trainer specialists, shopping malls, etc.) With this in mind, Tang has an eye on Mexico, as Mexican production factories employ skilled craftsmen at very cost-effective rates. First, manufacturing wages are likely to be 30% lower than in China by 2015. Second, the North American Free Trade Agreement gives Mexican goods easy access to the world’s largest market, the U.S., as well as to Canada. The Mexican free trade agreements cover 44 countries. Third, the attractiveness of transportation costs from Mexico to other countries should give Tang’s business a substantial edge over his competition.
  

In addition, your ambition has always been to study abroad and Tang has offered you a one-off payment and sabbatical for study should you be able to get Lee’s advisor, Helmut, to reach an agreement that would satisfy Mr. Tang. Should you fail to reach a satisfactory agreement on behalf of your client, you may put your client at risk of copyright infringement and a potential loss of revenue. In such circumstances, it is likely that you would also lose Mr. Tang’s respect as well as the opportunity for your foreign education, costing you your dream of studying abroad.

Upon leaving Taiwan, Lee established connections with a distributor in Europe and quickly designed a lighter, cleaner and bolder model of the original prototype, which led to positive reviews. Lee’s new product was classified as patent utility and patent design in Europe and in North America. Lee’s marketing strategies place emphasis on product functionality. Lee is also developing a shock absorbing foam-based material to be located in the shoe’s sole, an attribute that has not yet been granted a patent, but something Lee feels will make a lasting impact on future sales. Lee will use this pending patent priority to secure his intellectual property to notify potential infringers, particularly Tang, who may otherwise attempt to copy his innovation. Should infringers attempt to clone Lee’s property, then they may be liable for damages (including back-dated royalties), seizure and injunction once a patent has been issued.

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  The profits of the prototype roller-skate trainer are to be re-evaluated and divided in your client’s favor on roughly a 60–40 basis.
  
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  Since your client holds patents in Europe, you must receive a substantial percentage of the profit should Tang wish to enter Lee’s major market with his own line of sports trainers.
  
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  Lee is waiting on a patent for his second-generation trainer (the most recent innovation). Lee’s foam-based sole, which your client believes will be a game changer should his patent application be granted, is likely to affect Tang’s business.
  
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  Lee intends to expand his online market for local business customers to place their orders online. Lee has found manufacturers in Mexico and East Asia for his shoe product distribution outside Europe. Their distribution cost is 8% cheaper than the average transportation cost that Lee is currently paying.
  
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  Your client is considering releasing a third generation budget-based roller-skate trainer specifically aimed toward customers in Asia and the Far East, but Tang is likely to do what he can to prevent your client from entering his number one market.
  
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  Lee’s outlook: A major American sports brand is interested in acquiring your most recent project, which they intend to repackage and distribute to suit their existing customer base. At the same time, they wish to purchase your client’s roller-skate trainer and are particularly interested in acquiring Lee’s recently developed foam-based sole, which they may incorporate into their existing range of trainers. Your client has the option of negotiating with the major American sports brand should Tang fail to meet your client’s expectations. You have also advised your client, however, that the American sports shoe brand has, as yet, failed to make Lee a genuine offer. The American brand may be simply testing the water and wanting for Lee to set a price on his IP.
  

You have devoted the majority of your career to work as a patent clerk, and you desperately want to be promoted to a position on your company’s board. You are optimistic about your goal and believe that Mr. Lee may help you to secure additional business. By resolving Tang and Lee’s long-standing dispute, you are confident that your employers would look favorably on your application as a future board member of Fabion Richter, should you be able to find a resolution that would please your major client – Mr. Lee.

Marketing 4P strategies are:

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  Product: How is it differentiated versus your company’s competitors? What is the most the product can cost to provide and still be sold sufficiently profitably?
  
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  Place: Where do buyers look for the products? How accessible can the products be? How can you access the right distribution channels?
  
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  Price: What is the value of your company’s product? What are the price differences between your company and your competitors? Are the products established in certain areas?
  
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  Promotion: How do your company’s competitors promote their products? How does that influence your choice of promotional activity?
  

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  What are the distinguishing attributes of their positions?
  

Lee’s product is the market leader in Europe. Being more fashionable, Lee’s shoe is more likely to have greater and perhaps longer lasting appeal. Especially in the middle-income group, Lee believes what he is developing is more relevant to the North American markets. Also, this view may be supported by a major American sports brand taking interest in his product/business and, most recently, his foam-based technology, which Lee believes has enormous potential. Tang’s product is the market leader in countries where his father has established trade links. When compared with Lee, Tang’s sports shoe is cheaper to manufacture, and each pair of shoes sold generates an additional 10% profit for his business as his manufacturing costs in Southeast Asia help to save his business capital.

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  What are the points of dispute?
  

Tang’s family financed the development of the original prototype, yet Tang has not received any gratitude or recompense from Lee. Lee believes he came up with the original idea, possibly by coming from a science background. Lee believes that his most recent innovation, the foam-based sole, is a departure from the original technology. Tang may be unaware that his current resources are to a large extent related to his father’s production facilities, capital and network. Without the Tang family’s financial support in the first place, Lee wouldn’t have had sufficient capital to grow his business.

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  What would prevent Tang and Lee from establishing a joint venture?
  

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  Patent renewal and ownership of the original prototype. The patent for the prototype expires in 2019.
  
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  Tang and Lee will need to reach amicable terms instead of filing lawsuits before their patent expires or both stand to lose their existing intellectual property.
  
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  Royalties of market profits and patent infringement in second-generation trainers.
  
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  Lee may choose to sell his designs to a major American sporting brand; as far as we are aware, he would not be obligated to pay Tang anything. The consequences of such a transaction may damage Tang and Lee’s already fragile relationship.
  
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  Lee’s temper and pride may block the two companies from future collaboration.
  
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  Worst case scenario: Tang’s and Lee’s trusted representatives fail to put aside their individual concerns and find an amicable solution for their clients and pursue personal ambitions instead. The fortunes of Helmut and Wei Wei are linked to their benefactors and both stand to gain should a “Win-Win” scenario be reached. A successful resolution does not mean one Taiwanese client gaining market share or resources at the cost of the other. Tang and Lee both possess individual attributes that, if shared, are capable of augmenting or expanding their existing businesses. Should trust be attained, their relationship may be less transactional and more constructive.
  

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  What do Tang and Lee stand to gain by pooling their resources?
  

Manipulating the market could prevent the competition from establishing a foothold in Asia and Europe. By reunifying Tang’s and Lee’s resources (i.e., networks and manufacturers) and by resolving their conflicting values regarding product design and market share, they might establish a globally recognizable universal sports brand. Perhaps more could be achieved if they were to focus on their individual strengths while working under a single brand, with Tang directing the business and Lee focusing on product development. If both Tang and Lee negotiate for individual gain and focus on the transactional process of hard bargaining, they are more likely to encounter deadlock, leading toward litigation.