Legal Question in Business Law in California
Unfair business practice?
We are a small company, and we entered into an agreement with a very large company. It was an OEM agreement by which we developed and provided a product. They paid an NRE, however the NRE did not cover the entire development cost. We agreed to this because it was understood that the partner would actively market and sell the product. Over the past two years, we have put about $8 million into the development (over and above the NRE), and to date we have recovered almost none. Only one unit was sold in the US. They originally projected 100/month in the US alone.
Also, we signed an agreement with the European distribution arm of this large company that gave them exclusive distribution rights in the whole of Europe. In the past two years, they have not sold a single unit and have refused to launch the product. They have also refused to give up exculsive rights. So we have been effectively prohibited from making any sales in Europe.
Do we have any legal grounds here? Can we declare unfair practice or any kind of obstruction?
Thanks for your time!
4 Answers from Attorneys
Re: Unfair business practice?
A full analysis of your legal posture would require going over your written agreements with the larger firm and the circumstances surrounding their negotiation. One possibility is fraud, which might be proven if they knew they were misrepresenting the marketplace or their intentions with respect to the product at the time the contract was negotiated.
If, however, the larger company simply changed its corporate mind about the product, or about doing business with you, after the fact, you will have a more difficult case, perhaps involving establishing some kind of a business tort such as interference with prospective economic advantage.
An intellectual property issue or an unfair competition issue may exist as well; finding it would require substantial additional information about the contract, the product, and the market position of the companies.
You may also have a combined legal and business decision regarding the opportunity, if any, to take the product to the marketplace yourself, or with a different partner. If the potential as as great as was once thought, you may want to expand your horizons re marketing, if you can.
Re: Unfair business practice?
You can claim variety of Business torts such as Unfair competition, fraud , misrepresentaion, Unfair Trade practice along with breach of contract issues. Since your company is lot smaller, so unequal bargaining power, covenant of good faith and fair dealing issues may apply. I need to see your agreement before..I can give specific advise. Feel free to contact me at 213-820-AMYG
Re: Unfair business practice?
The issue is how do you get out from under these now onerous (suffocating) agreements and into marketing opportunities for your products before the tech landscape so changes as to become moot?
What your situation requires is he input and analysis of an attorney that can do the kind of analysis and consulting that a general counsel would do. What you require is risk analysis of all of the alternatives and then a plan of action that can be implemented on multiple fronts, simultaneously.
If this makes sense to you, we should talk. Perhaps we can provide you what you need on terms that are viable given you financial limitations.
I look forward to hearing from you.
Re: Unfair business practice?
Every contract carries with it an implied promise of good faith and fair dealing. Depending on the contract and the negotiations, and relation between the two, a requirement for best efforts marketing and or distribution may be found.
Joel Selik
800-894-2889
www.4thelaw
LITIGATION
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