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Distribution partner - unfair practice?

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H

heinous

Guest
California

Hi! 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!

C
 


L

loku

Guest
This is a very complex area of law. Your rights and obligations depend on the specific wording of your contracts and whether they have acted in good faith. To determine that one would have to know a lot of details about this. Since you have invested over $8 Million, it would be very short-sighted not to hire a local intellectual property attorney to assess this for you.
 
H

heinous

Guest
Is this a matter of intellectual property?

Hello! Thanks for your reply. We are very tight on cash at this point, so I wanted to get an idea of whether it would be worth it to engage a lawyer on this. I don't think we have the resources to actually bring a suit against this company. They are a very large company, and it would be a long battle. We want to come to a settlement.

Is this a matter of intellectual property? I always thought that intellectual property had more to do with trademarks and patents. Is it more a matter of fair business practice?

Thanks again for your reply!
 
L

loku

Guest
You are right. It is a matter of contract law, not intellectual property.

Here is where I think you stand:
If you can prove it was understood that they would actively market and sell the product, and if either (1) the contract is such that that understanding is a part of the contract, or (2) without that understanding you would not have entered into the contract, then if you can prove that they have not made a good faith effort to do that, then you could sue them for breach of contract. If you win, you can cancel the contract and collect damages for any loss you can prove you suffered. That would depend on projections of what sales would have been if they had actively marketed and sold the product.
 

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