Dive Brief:

• Costco is driving hard against a "threatening letter" it received from golf equipment company Acushnet alleging that Costco’s Kirkland Signature golf ball infringes on 11 patents and promotes false advertising, according to a lawsuit Costco filed last week in a U.S. District Court.

• "We have asked the Court to protect our right to continue to sell our Kirkland Signature golf ball against challenges made by Acushnet under patent and advertising laws,” Costco said in a written statement cited by Golf Digest. "The success of the ball with our members and the favorable comments it has received from reputable reviewers apparently have caused Acushnet to believe that our ball directly competes with the Titleist Pro V1 and Pro V1x balls."

• The Kirkland balls, which sell for $1.25 each, have been compared to premium best-selling Titleist Pro V1, which retail for about $4 each, according to a previous report by The Wall Street Journal. The balls have attracted arbitrage sellers on marketplaces like eBay and are sold out at Costco, which told Golf Digest that limited supplies will once again be available in early April.

Dive Insight:

The controversy over Costco’s golf balls demonstrates that sometimes disruption comes from simply building a better mousetrap — by making a top performing one and selling it for a lot less money.

Costco is already well known for its merchandising prowess, offering a host of premium products at low prices. But its Kirkland Signature golf ball has been a particular hit, giving players a performance ball at such a low price that The Wall Street Journal compared it to grocery retailer Trader Joe’s infamous “Two Buck Chuck” wine. That’s presenting the warehouse retailer with challenges on several fronts — its supply chain is maxed out, so it’s disappointing customers with sell-outs of the balls. And Acushnet is clearly bothered by the threat to its higher priced products. 

It’s not the first time that Costco has faced legal trouble over allegations of false advertising or knockoffs. Last year the retailer was found to have infringed on Tiffany’s trademark through the labeling of its diamond rings, and took steps to address the matter by removing the Tiffany name and clarifying details about the rings to its customers. But Costco isn’t similarly acquiescing to the accusations over its golf balls, and in fact did Acushnet one better by being the one to go to court over the matter.

“In 2016, Costco introduced its KS golf ball, a golf ball that Costco sold at approximately $15 per dozen. The KS golf ball sold out quickly, and was praised by golfers and experts as a golf ball of tremendous quality and value,” Costco said in its complaint. “Many reviewers compared the KS golf ball to higher-priced ‘tour quality’ golf balls sold by national brands, such as Titleist, Callaway, and TaylorMade. Even though the Costco KS golf ball has sold out, Costco plans to continue to sell the KS golf ball.”