The April 5, 1999, issue of The Wall Street Journal includes an article by Tara Parker-Pope entitled “Stopping Diaper Leaks Can Be Nasty Business, P&G Shows Its Rivals.”

Instructions Read the article and answer the following questions:

(a) How much money does the article say that Procter & Gamble and Kimberly-Clark receive in royalty payments from the sale of every package of diapers sold by competitors?

(b) How many patents are held on diaper-related inventions?

(c) How did Kimberly-Clark and Procter & Gamble resolve their long-running patent lawsuit? Why do you suppose they chose to resolve it this way?

(d) What were the results of Paragon Trade Brands’ decision to fight Procter & Gamble, rather than pay a royalty payment? What impact do royalty payments have on the profit margins of small diaper manufacturers?

(e) What would have been the accounting implications had Procter & Gamble lost its patent infringement lawsuit with Paragon? That is, what accounting entry or adjustments might have been required?

INTERPRETING FINANCIAL STATEMENTS