Legal And Ethical Issues In Management: Acme Inc And Beta Inc Case Study

Acme Inc And Beta Inc Case Study


Business dealings and transactions exist within a legal context and are, therefore, directed and controlled by law. Consequently, it is imperative for management to have an in-depth appreciation and understanding of the law and its role in influencing organizational strategies, attaining competitive advantage, and circumventing legal hitches. In as much as Acme Inc is failing in its corporate social responsibility by not selling the drug for immortality, it does not legally justify Beta Inc’s infringement of its patent by copying and selling the drug, even without profiting from it.  Therefore, the case between Beta Inc and Acme Inc has several legal implications as well as ethical implications. Notwithstanding Beta Inc.’s benevolent intention for infringing on the patent, such blatant infringements would significantly deter inventions and innovation in addition to establishing a culture that justifies and promotes illegal corporate tactics. Therefore, to effectively analyse the situation it is important to review the intellectual property implications, the alternative dispute resolution methods, the various ethical dilemmas of the two companies and the recommended course of action for the both Acme Inc and Beta Inc.

Intellectual Property Implications

 When an organization manufactures, utilises, or retails another organization’s patented design, invention, or operation without the permission patent holder, that organization is guilty of the tort of patent infringement (Parr, 2018). Therefore, Beta Inc. copying the drug developed by Acme Inc. constitutes a patent infringement. Additionally, the reasons for infringing on a patent, however benevolent, are not usually considered by the courts. Therefore, since Acme’s patent is infringed, it is well within his rights to sue for relief in federal court. Additionally, Acme Inc. has the option of pursuing an injunction against Beta Inc. in addition to requesting compensations for royalties and lost profits (LaFrance, Myers, Lockridge & Lange, 2018). The court could also award the winning party recompense for lawyers’ fees and costs in some cases.

In fact, in cases when the court establishes that the infringement was intentional as in the case of Beta Inc, the court has the power to triple the number of reparations granted to Acme Inc. However, Acme Inc has to prove that it has experienced irreparable injury according to the court. Additionally, for the courts to grant Acme Inc.’s request for a permanent injunction, they have to determine if it would be against the public interest (Mayer, Warner, Siedel, Lieberman & Martina, 2012).  Since Beta Inc. infringed the patent for the public interest it is apparent that the court is not likely to grant Acme’s request for a permanent injunction. This decision would give the courts the choice to determine what is equitable and ethical since it enables the court to deliberate on a decision that is likely to benefit the public, not just the disputing parties (Duffy & Hynes, 2016). However, Acme Inc and Beta Inc could pursue other avenues for resolving their dispute amicably.

Alternative Dispute Resolution

Alternative dispute resolution mechanisms have some aspects which make it more desirable in comparison to the court system. The main advantage of alternative dispute resolution mechanisms is its innate focus on attaining harmony between the conflicting parties unlike the ordinary legal system which is more antagonistic and adversarial (Blake, Browne & Sime, 2016). There are several alternative dispute resolution mechanisms applicable to the creation of harmony and understanding between Beta Inc. and Acme Inc. Some of the alternative dispute resolution mechanisms include arbitration, negotiation, and mediation. Arbitration refers to a process in which the disputing parties choose a neutral third party or panel, usually known as an arbiter, to resolve their dispute (Singer, 2018). Arbitration has some advantages that make it more preferable in comparison to litigation.

 The benefits of solving the dispute with the help of an arbiter have several advantages. For instance, since the arbiter is mutually chosen by both parties, the arbitration process is usually trusted and respected by both parties. Moreover, since the arbiter is an expert concerning the contentious topic, less time is spent clarifying the situation to them; consequently, saving time (Blake, Browne & Sime, 2016). Arbitration is also inherently private since there are no public hearings or verdicts. However, the main advantage of arbitration is its focus on creating harmony, mutuality, and interdependency between the disagreeing factions. This is important as many organizations usually seek to create enduring relationships. Negotiation is also one of the alternative dispute resolution mechanisms (Menkel-Meadow, Porter-Love, Kupfer-Schneider & Moffitt, 2018). Negotiation involves the two disputing parties deciding to settle the matter between themselves with or without the presence of their lawyers.

 Negotiations are normally voluntary and have no required procedure as is the case with arbitration. However, even in a negotiation, there are legal repercussions for dishonesty and deceit. Negotiation usually involves the disputing parties bargaining and arguing to come to a solution that serves the interest of both parties. Negotiation normally results in contracts between the disputing parties (Blake, Browne & Sime, 2016). Therefore, a negotiated resolution of a dispute is generally a contract and is thus enforceable by law. Mediation refers to the process whereby a third party, the mediator, is used as the medium through which the disagreeing parties communicate and debate, to reach a mutually acceptable resolution of the problem (Menkel-Meadow, 2015). The mediator can interact with the disputing parties, conveying their sentiments without the parties ever assembling; or, the mediator could operate with the parties assembled.

Nevertheless, in either condition, the focus is entirely upon the disputing parties coming up with a mutually acceptable agreement on the best way to resolve that particular dispute. Summarily, mediation involves using a mediator to come to an acceptable agreement, consequently, solving the dispute (Blake, Browne & Sime, 2016). However, mediation differs from arbitration since the arbitrator has the mandate to impose his decision on the disputing sides while a mediator can’t impose a decision but can only aid the two parties to come to an agreeable solution (Menkel-Meadow, 2015).  Considering these alternative dispute resolution mechanisms, it is evident that Beta Inc. and Acme Inc. should opt to solve their dispute through mediation since it seeks to find a solution that is fully agreeable to both parties without settling for the decision of a third party like in arbitration.  

Ethical Dilemmas

Acme Inc. is facing several ethical dilemmas with the main one being whether to over-quote the damages incurred as a result of the direct infringement of its patent. The court is bound to have a challenging task establishing the exact amount used by Acme Inc in the development of the drug and consequently how much Beta Inc. needs to pay in damages. Since Beta Inc intentionally infringed on a patent held by Acme Inc for the benefit of the public, Acme Inc is torn between bringing charges against Beta Inc or just excusing them. Equally, Beta Inc is also split between admitting or refuting the blatant infringement of Acme Inc’s of the patent. Beta Inc is also plagued by the ethical dilemma of whether to utilise a false defence in court to overturn the patent claim or not. However, ethical theories play a significant role in determining the right decision regarding the ethical dilemmas experienced by Acme Inc and Beta Inc. 

Ethical Models

Generally, ethical reasoning regarding business is traditionally characterized by two rudimentary approaches. While one approach describes ethical behaviour as a duty, the other deals with ethical behaviour in terms of its outcomes (Kagan, 2018). Apart from these two approaches, there are some theories explicitly designed to determine and define the social responsibility of businesses. Duty-oriented ethical ideals are usually adopted from discovered truths, like religious precepts or obtained from pure philosophical deliberations. For instance, in the Judeo-Christian tradition, which happens to be the most popular religious tradition in America, the Ten commandments create a fundamental foundation for moral behaviours (Bialecki, 2017). Discovered truths used to set the foundation of moral behavior is significantly dependent on religion.

Religious directives are absolute to the behaviour of their believers. For example, the Ten Commandments are absolute decrees to its believers and cannot be excused even by benevolent intentions since the act itself is innately immoral and therefore wrong (Bialecki, 2017). Therefore, according to religious ethical standard Beta Inc is at fault regardless of its benevolent intentions. On the other hand, duty-oriented ethics can also be derived from philosophical deliberations. This theory was fronted by Immanuel Kant. According to Kant, humans are qualitatively distinct from other sentient beings since they are imbued with moral integrity and the aptitude to rationalize and function reasonably (Baron, 2018). As a result, an individual’s deliberations need to be appreciated. Therefore, the treatment of human beings as a means to an end is a blatant infringement on their basic humanity.

Kantian ethics is centred on the evaluation of the results if everyone in the society was to behave in the same manner (Baron, 2018). This categorical imperative is applicable in any situation. For instance, In the case where Beta Inc copies and manufactures the drug developed by Acme Inc, Kantian ethics would analyse the consequences if all companies were to copy infringe on each other’s patents. Therefore, according to Kantian ethics, if all organizations were to copy the drugs made by other companies the consequences would be catastrophic since innovation and creativity would be deterred due to the copying. Therefore, according to Kantian ethics, Beta Inc would be at fault too.  Duty-oriented ethical standards are also supported by the theory of principle rights which forges the relationship between duty and rights (Vaughn, 2015). Therefore, those who believe in principles of rights as a determinant of ethical standards, right theorists, usually decide on the right ethical decision by reviewing how the decision affects the rights of others.

 Therefore, according to right theorists, Beta Inc is justified for infringing on Acme Inc’s patent. Conversely, outcome-based ethics, usually defined as Utilitarianism, concentrates on the impacts of an action instead of the nature of the action (Mill, 2016). According to the utilitarian standard of ethics, an action is morally correct when it is beneficial to the majority of people. Likewise, an action that adversely impacts the majority is considered morally wrong. Therefore, according to utilitarianism, Beta Inc is justified in infringing on Acme Inc’s patent since the production of the drug results in immortality for the community. Therefore, according to Utilitarianism, the best course of action would be a collaboration of Acme Inc and Beta Inc for the continued production of the drug with a slight increase in its price to cover the charges of Acme Inc in developing the drug.


Organizations exist in a legal context and are therefore significantly influenced by laws. However, organizations are also under pressure to make ethical decisions. In the case where Beta Inc copies the drug developed by Acme Inc; consequently, infringing on Acme Inc’s patent has a legal implication while Acme Inc’s refusal to retail a drug that would be beneficial to the public has ethical implications since the Acme Inc is not fulfilling its corporate social responsibility. Litigation would result in punitive measures against Beta Inc while destroying the business relationship between Acme Inc and Beta Inc. Therefore, it is advisable to utilise any mediation since it is focused on coming up with a solution for the dispute. In religious ethical theory, Kantian ethic theory, Beta Inc’s infringement of the patent is not justified whereas in the principle of rights theory and utilitarianism theory Beta Inc had an ethical obligation to copy and sell the drug. From these theories, it is determined that the best resolution for both Acme and Beta is to form a collaboration that produces and sells the drug at slightly higher prices to compensate Acme Inc for the costs of inventing the drug.


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