Law - LAW

Law - Ross D. Petty


Session 2: Oct 26th, 2011
Sunbeam case

Final Exam

Question 1

Since Carol and I are confident about the new system being a good business opportunity I will try to take some measures before pursuing it. There is a threat that as soon as we bring in this technology into the market there will be some copycats that can come up with similar solutions. Even if we try to hide our research work for this “invention” someone can try to reverse engineer our system and come up with something similar.  The options that I have for that matter are:

·         Apply for a patent for the new technology

·         Keep the new technology as a trade secret and continue selling it.

There are certain pros and cons of taking either of the approaches and I will discuss them here before I put in my recommendation.

Going for a patent:

Pros: We can apply for a patent if the system is new and we have proof that it is not just an idea and we have made it work. In my opinion we fulfill the eligibility criteria of filing in a patent. The idea is new and we have a working model for our idea. The process (method of making and the method of using) is also well defined. A patent can secure quite some earnings for us in the future because if we have our patent approved for atleast 10 years we will be the only supplier in the market for the next 10 years. I see great potential in the market for this new system and if we are able to enjoy a monopoly for the next 10 years we can reap great financial benefits.

Cons: A few drawbacks of applying for the patent are that it will take quite some time for the patent to get approved and the paperwork will delay our time to reach the market as well. Moreover this will be an additional cost that will be a burden for a small company like ours. We already are tight on cash and an additional cost of applying for the patent will have to be deeply thought of, before we go ahead with it. Moreover, if the patent is approved our technology will be available to the rest of the world to develop further on. Although they will not be able to come up with something similar for the next 10 years (assumption for the time of patent) but they can also propose enhancements or improved technologies during this period. This is a major threat.

Trade secret:

The other option is to keep it as a trade secret and continue with the business plan and selling.

Pros: This will be a less costly approach and will reduce the other hassle of filing in the patent and fighting for it. Moreover, we will not be releasing the details of the new system to the rest of the world so this somewhat protects us in a way that the new innovators will not be able to use our work for further enhancements.

Cons: The drawbacks of this approach are that we will have to use strict measures within our company not to have the details of the new system leaked. Our agreements with the partners and employees will need to have specific non disclosure agreements which ensure that the trade secret remains intact.

Recommendation: My recommendation for this system will be to keep it as a trade secret for the first year at least and then later apply for the patent if needed. Reason being it is difficult to bear the cost at the moment without knowing the market. As soon as a good deal is signed off with a customer we should go on to have this technology patented.

Question 2

When we are hiring Jen Raul as a new sales person we need to consider that she has an accent but is generally understandable. As far as legal implications are concerned we cannot discriminate anyone because of the accent. This is similar to hiring someone from a different ethnic group or disability. The law provides the disabled and people from different ethnicities to have an equal right to the employment. So for that matter we cannot deny Jen the job position only because of the accent. The selection criterion of course has to be the existing relationships that the new candidate has in the car industry and the sales experience. Jen is a suitable candidate for this job based on this criterion. However, we need to see if her accent has some implications on the customers and the fulfillment of service. If there are some implications then we need to make required adjustments.

Moreover, when hiring Jen we need to go make an employment contract that describes her complete employment benefits, details of her acting as an agent for the company. We need to have Jen sign an NDA that the trade secrets of the company will not be taken out even after she leaves the company. The liabilities and the implications on the company of her actions need to be well defined in the contract as well. Since we are hiring Jen as our “agent” the liability will be there anyway.

Question 3

The next step is to finalize the sales contract with the proposed clients and partners. For the sales contract the following needs to be considered and taken care of:

·         Final terms after the negotiation should be clearly written and signed off by both the parties.

·         Requirement of the NDA for the other party to be clearly stated and signed.

·         Sales transaction details, commissions and payment terms should be clearly stated.

·         The geography to which the contract is applicable should also be clearly defined.

·         Details of the liabilities should be clearly stated as well. How will each party will be liable for the sold system during and after the sale.

·         Term of the contract should be clearly agreed upon and the implications on each party after the term should be written down.

·         There should be a clause to handle the situation in case of a dispute.

·         Details of termination of the contract should be part of it as well along with the implications on each party for the termination.

Question 4:

The accident has a number of legal implications and since Carol has confessed that the system does not work flawlessly and there is a possibility of it misunderstanding the directions. This can result in lawsuits. But before I go ahead, I will point out certain facts that can go in the favor of our company. The system actually did not completely misunderstand the direction. A possible reason of it malfunctioning was Jen’s accent. As stated earlier Jen pronounces “L” as “R” at times so when she said “Baguette Lite” in her accent the system understood it as “Backup Right” which caused the accident.

Having said that; this does not give us enough reasoning to defend this case. If we had a clause or disclaimer which stated that the system works with a particular (American/Northeastern/Texan) accent then we would have been in a better position to defend this case. GM rep can suit us at two different levels.

1.      At a company level: making an argument that we did not disclose all relevant information about the system before the contract was signed.

2.      At personal level: for the physical injury that has been caused to him because of the malfunctioning of the system. This lawsuit will be pretty strong since a physical injury has occurred.

Expected results:

We will have to face the above mentioned lawsuits and the results are expected to go against us. We will have to pay substantial amount to the person lawsuit and our new technology will most probably be banned. At the company level lawsuit I foresee that this can defame GM in a way as well since they were going to sign a contract with us without rigorous testing. So there is a possibility that this can be settled out of court.

What could have we done to avoid this: Ideally the system should have gone through further testing before bringing into the market. There can be many design changes which can avoid the possible injuries but following are the recommendations that could have saved us from the possible lawsuits:

·         Putting up a disclaimer on the functionality of the voice recognition algorithm running in the system. Clearly stating how it works with certain accents.

·         Clearly stating how the wrong accent or wrong directions can result in severe injuries.

·         Having a waiver signed by the sales reps before giving the test drive to any of the sales representatives of the potential customers. Clearly mentioning that the system is in test phase and can be further customized and finalized after the sales deal.

·         Including any repercussions of Jen’s accent as a personal liability and not company’s liability in the employment contract that we sign with Jen. [or limited liability to the company]