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Titleist maker teed off over Costco's cheap golf balls

Nathan Bomey, USA TODAY

The maker of one of the best-known brand names in golf balls is teed off over Costco's cut-rate rival, setting off a dispute over the discount warehouse chain's design and advertising claims.

Costco is firing back, filing a preemptive lawsuit last week arguing that it's not violating any of the patents of Acushnet Holdings, maker of Titleist golf balls.

Costco's emergence as a threat to the Titleist brand doesn't arrive at good times for the golf industry, which is already grappling with a litany of challenges that include declining interest in the sport and the demise of sporting goods stores

As golf product makers scramble to avoid new hazards, Costco is not conceding anything. In fact, the dispute raises the question of whether publicity about Costco's ball will only send more golfers on a long, straight drive to its warehouse stores.

Costco's Kirkland Signature ball was so popular that it temporarily sold out in 2016. It goes back on sale in early April "while supplies last," the company said in a statement. At a price of about $15 per dozen, the ball undercuts leading competitors, including the balls from Titleist, Callaway, Bridgestone and TaylorMade, which are typically about three times as expensive. 

The ball, made by Nassau Golf, has generated feverish interest for its multi-layered interior, urethane cover and low price, according to fan site GolfWRX.com.

If Costco, which also sells certain Callaway golf products, hooks deeper into golf sales, it could mark a seismic shift for an industry that's already in the rough following the liquidation of big-box chain Sports Authority and the struggles of department stores like Sears and Target. Warehouse clubs, including Costco, Sam's Club and BJ's Wholesale Club, will reap about 12.5% of sporting goods sales in 2017, according to IBISWorld.

Indeed, Acushnet CFO William Burke, speaking to investors in December, blamed the Titleist golf ball sales decline primarily on "retail disruptions" such as the bankruptcies of Sports Authority and Golfsmith and the fact that the Pro V1 ball was in the second year of a two-year product cycle. An Acushnet spokesperson declined to comment, and Nassau could not be reached for comment.

Titleist golf ball sales for the first nine months of 2016 fell 3.6% to $415 million, compared to a year earlier. Sales of Titleist golf clubs, on the other hand, rose 9.3% to $315 million. Acushnet will report full-year sales Wednesday. 

The decline comes against the backdrop of fewer golfers. The number of Americans who play golf at least once a year was 24.1 million in 2015, down 5% from 2012, according to the National Golf Foundation. As interest declines, the number of companies operating U.S. golf course and country clubs is falling at an annual rate of 0.4%, according to research firm IBISWorld.

U.S. golf equipment sales fell 6.5% to $3.4 billion in 2016, according to the 2017 World Golf Report by Yano Research Institute and Golf Datatech. That included a 6.5% decline in golf ball sales to $735 million, while the number of golf balls sold declined 8.8% to 28.9 million dozen. Globally, golf equipment sales declined 0.4% to $8 billion in 2016.

Seeking to shore up its portfolio, Acushnet Holdings, which went public in 2016, alleged that Costco violated its patents and distributed false advertising.

As the dispute quietly intensified, Costco filed a lawsuit Friday in U.S. District Court in Washington state seeking a judge's declaration that the company is not violating Acushnet's patents.

Acushnet's accusations stem in part from Costco's marketing that Kirkland brand products "meet or exceed the quality standards of leading national brands."

The fight also involves highly technical aspects of the golf ball's design, including whether its dimples are adequately distinguished from designs patented by Acushnet, according to a court filing.

Costco denied ever directly comparing the Kirkland balls to Acushnet's products, including the popular Titleist Pro V1 ball.

Still, Costco said in its lawsuit that "many individual golfers and golf ball testers and experts" have "concluded that it is at least comparable to balls sold by other leading national brands, including Acushnet."

Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.

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