Legal Question in Civil Litigation in California
Patent owners in dispute over loan
I licensed a manufacturer to make and distribute my patented food product. I own 80% and the manufacturer owns 20 % of the patent. In our signed agreement, he hired me as a consultant to market the product. Over the last 2 years he loaned me $3000. In our signed agreement, it states,� repayment of the loan to be negotiated at a later date and he is amenable to write of the loan if I sell X amount of the product in 6 months�.
After 4 months, we had a disagreement and he fired me. Then, he changed the office locks thereby preventing me from completing my side of the agreement. He says I did not live up to our agreement and I say he broke the contract by firing me and forbidding my access to my client information.
While I actually placed the product in national distribution after only 3 months, he is suing me for the loan . He is now selling his company and he says he will not release any past sales data to me until � this matter is resolved� . I have notified his representative twice that I needed it for the law suit .
Can you advise me ?
2 Answers from Attorneys
Re: Patent owners in dispute over loan
It is difficult to know exactly what to say without a copy of the agreement in front of me, but here is what I can tell you:
Every contract contains an implied covenant of good faith and fair dealing, which obligates each party not to undercut the other's rights. One party locking the other one out and preventing him from performing is a classic example of a breach of this covenant -- provided, of course, that the party locked out reasonably needs to get in in order to perform his end of the bargain.
Your loan agreement is awfully vague and may not be enforceable. This doesn't mean you can keep the money, but it may mean that he is entitled to demand its immediate return. I would need to see exactly how it is written and would also need to discuss how you and your partner acted after the agreement was reached. I can't offer a more definite analysis based on what you have provided.
(This, by the way, is a good example of why agreements should be drafted by attorneys where possible.)
You are probably entitled to the sales data, but if he won't give it to you then you can get it through discovery in a lawsuit. You sound like you are planning to sue him anyway; while he may be wrong to withhold the information, you will have the power to force him to turn it over after you file suit.
I may be able to represent you in this matter; please let me know if you would like to discuss the case further.
Re: Patent owners in dispute over loan
Sounds like you definitely need a litigator. I cannot give you a simple answer to your question since it involves a lot more than just a quick answer.
This sounds like it involves more than just repayment of the $3,000 loan. Is the manufacturer paying you royalties pursuant to the agreement? If not you have to make the point that his sale is at risk due to his breach and that he may not have the rights to license the product. Alternatively, he may be obligated to make reasonable royalty payments.
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