Q: The brief summary of my issue and the related question is contained herein.

I am in the process of establishing a partnership with another company. A new company was to be formed in which the two services (software) would be combined to create one company/service. The other party signed an NDA, I then sent a proposal suggesting the merger or creation of a new company. I also outlined the process in great detail. The other company suggested the goal is to establish a merger in the future but, for the immediate future, the relationship would be third party. More specifically, I would be paying them to build and develop a company in which they would eventually be apart of. My question is this, is there a loophole in which they could take me out of the picture by proceeding as they proposed or is it your opinion they are attempting to minimize their risk ? What I have been developing is my life's work. I do not want to leave myself exposed. Thank you for taking the time to read!

3 Lawyer Answers
Peter D. Mlynek
Peter D. Mlynek
Answered
  • Patents Lawyer
  • Moorestown, NJ
  • Licensed in Pennsylvania

A: The question of obviating disintermediation is a common one. The answer is yes, you are able to protect yourself.

It looks like you (Company "A") are paying them (Company "B") to work on your product for which you are paying them. I assume that B is providing A some service upstream that A cannot do by itself. A then sells the product to customers.

What you are asking is whether B can disintermediate you. Can B simply do the work that A hired them to do, add contributions that A would do, and sell it directly to the customer itself?

Your business attorney should be able to draft a non-compete agreement under Pennsylvania law. If your attorney can't do it, please reach out to me; I am licensed in PA.

Kevin E. Flynn
Kevin E. Flynn
PREMIUM
Answered
  • Patents Lawyer
  • Chapel Hill, NC

A: If this project is so important to you that you consider it your life's work, then you should be working closely with a business attorney with the right skills to write non-disclosure/non-use agreements that are tailored to this situation and facilitate your ability to sue for significant remedies should the need arise. This is not the time to use a form that you found on the internet and modified as you did not want to involve an attorney. You will need other documents written to cover the actual work that may come after the initial conversations. The subsequent documents need to set forth milestones and to set forth who owns the intellectual property that arises from this joint work.

Ideally, this will turn out well. Every once in a while, it does not and you will be relying on the agreements that were signed to support a breach of contract as that may be your primary legal argument.

Get help from an attorney that has a focus on business law for tech companies, not someone that does business law on the side after handling the divorce cases, wills, and traffic tickets. The Pennsylvania SBDC may be able to suggest an attorney with the relevant skill set. https://pasbdc.org/

I hope this helps.

Kevin E Flynn

Nellie T Schulz agrees with this answer

Nellie T Schulz
Nellie T Schulz
Answered
  • Philadlephia, PA
  • Licensed in Pennsylvania

A: I agree with Mr. Flynn. Your situation is too important and complicated to use a Q&A website forum for legal advice. I, too, urge you to hire your own business attorney before you enter into any further discussions with the other company, and before become obligated to pay them for any services. A business attorney would provide you with advice on how to structure transactions with the other company and would draft and negotiate the documentation that is required.

Michael Cherewka agrees with this answer

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