Legal Question in Business Law in New York

I started a corporation with a business partner to develop a technology we filed a patent for. The business failed 2 years ago. He has now started a new company in another state using the same technology we developed that other shareholders from old corporation financed. Do I and other shareholders have legal recourse against him?

Asked on 9/18/13, 7:27 pm

3 Answers from Attorneys

Roman Fichman Esq. Law Practice of Roman Fichman Esq.
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You may indeed have recourse against your former partner. To determine that, the patent application would need to be examined as well as any agreements the former partner signed with the other partners / shareholders and/or the company.

The review is necessary to determine the proper course of action. The good news is that it's going to be rather inexpensive. Please contact my office at your earliest convenience.


Roman R. Fichman, Esq.

www.TheLegalist.com │ @TheLegalist

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Disclaimer: This post has been written for educational purposes only and was not meant to be legal advice and should not be construed as legal advice or be relied upon. No intention exists to create an attorney-client relationship or any other special relationship or privilege through this post. The post may contain errors, inaccuracies and/or omissions. You should always consult an attorney admitted to practice in your jurisdiction for specific advice. This post may be deemed as Attorney Advertising.

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9/18/13, 8:23 pm
Frank Natoli Natoli-Lapin, LLC
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It is certainly a possibility that you may have claims arising from his use of the technology. The matter will need to be evaluated before that can be concluded of course.

Once it is certain that you or your stake holders have valid claims the next step is generally to send a demand letter requesting an accounting and royalties. If this is a co-inventor, you may not have to ability to prevent his commercial use of the invention as it will depend. While the analysis and demand letter should not be very costly, legal action concerning patent infringement is extremely expensive and should be carefully considered.

I suggest you discuss your situation over with a lawyer in private. If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient.

Kind regards,

Frank

www.LanternLegal.com

866-871-8655

frank@lanternlegal.com

DISCLAIMER: this is not intended to be specific legal advice and should not be relied upon as such. No attorney-client relationship is formed on the basis

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9/19/13, 7:31 am
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You've already received two great answers from Mr. Natoli and Mr. Fichman, but I was already half way through with my own response when I noticed theirs':

You should consult an attorney as soon as possible as many civil lawsuits have a two year statute of limitations that will bar any legal action and the facts you presented mention that the corporation failed two years ago. From the limited facts presented there are at least four legal theories in which you should discuss with an attorney and such consultation may reveal more possible strategies:

1) Patent Infringement (and seeking royalty payments as Mr. Natoli describes)

Patents are property similar to real estate deeds and vehicle titles. The inventor(s) is the original owner of the patent and he retains ownership unless specifically contracting those rights away. A business is never an inventor, but inventor-employees (or inventor-business owners) may assign their rights to a company and may be required to assign their rights in an invention under the terms of an employment contract. If no such assignment or contract existed in your case then, as an original inventor, your previous partner would maintain his full rights in the patent. If the previous partner was an inventor, but is no longer the owner due to such an assignment he and his new venture may be liable for royalty payments and/or you may seek an injunction to prevent further manufacture of the protected works.

2) Winding Down after Corporate Dissolution

If the previous corporation did indeed own the rights in the patent then the dissolution of the corporation will govern who is now the owner. All business assets/debts should have been divided up among the shareholders during dissolution. The dissolution may have been certified as final while still allowing for "winding down" activities. Winding down activities include further identification of assets & debts, valuation and liquidation, and disbursement. Depending on the dissolution procedure, there could be a six month to five year window prior to the property being "abandoned" and subsequently governed by New York abandoned property laws. A patent that was not accounted for during the dissolution procedure would likely qualify as property requiring disposition or liquidation during winding down.

3) Unjust Enrichment

You mention that the corporation was intended "to develop a technology." If your former partner did not assign his rights in the invention to the, now defunct, corporation he may not be unjustly enriched to the detriment of the investors where they supplied the means to create the invention. Proving unjust enrichment is very difficult and the remedy available would most likely be limited to paying back a set sum of money instead of an ongoing royalty. Your former partner/inventor would maintain the ability to make and sell the invention.

4) Fraud (in the inducement) or Misappropriation

Fraud is similar to an unjust enrichment suit, but you are alleging that your former partner intentionally took money from the investors and fled. Misappropriation occurs where an employee intentionally takes corporate property for their own personal use. There are both civil suits and criminal charges that can be filed in either situation.

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9/19/13, 1:41 pm

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