Legal Question in Business Law in Massachusetts

Unlawful Competition; Partners Start Competitive Business

A family member of mine was brought into the company that I am currently a manager at. Two owners/partners brought my relative in; one of them was the inventor of our primary product (patent). These two owners raised funds from investors to start the company and to market the product. Unfortunately, the two partners and my family member, who became the majority stock holder, had disagreements regarding business decisions. The two owners/partners quit their operational interest in the company, but currently hold financial interest in the company.

We continued to manage operations and market the patented product. Recently, we were informed that another company with a product very similar to ours has been started. After a little research it was easily discovered that the new company and its primary product was founded and started by the original inventor of our company and our product.

My question is does our company have legal reasoning to sue them since they are currently competing against a company they started, raised funds from private investors for, and they currently hold shares in? If so, how much does it usually cost and would they be required to give a cash settlement?


Asked on 3/21/08, 12:53 pm

1 Answer from Attorneys

Re: Unlawful Competition; Partners Start Competitive Business

First it would have to be determined if the new product was based on patents or trade secrets of the existing company.

Second you would have to determine if there is a breach of a fiduciary duty and if there exists any non-compete agreements as part of the formation or termination of the other two partners.

Assuming there is a violation, and based on your limited description there is, you have a lawsuit under a number of theories from breach of fiduciary duty to unfair and deceptive business practice to perhaps wrongful conversion of trade secrets.

The cost of this type of litigation can be very expensive. As a rule I do not discuss fees in this forum.

You may not only get your legal fees but may get additional damages of lost profits and any profits the new company has obtained, plus damage to your goodwill.

You need to meet with an attorney and have him evaluate your case and give you an estimate of costs to start with, but litigation of this type is not a finite thing.

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Answered on 3/21/08, 2:44 pm


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