QUESTION
If a group of friends decide to start a business and 2 quit -- destroying the 1st business -- to open another in the same field, what is this called?
Asked on Aug 16th, 2011 on Business Law - Washington
More details to this question:
I and 3 friends started a business together. It was still small and we were going though writing up business plans and getting the paperwork to submit to get an LLC and make it all official. One of the guys got offended because he wasn''t the lead and he bad mouthed me to one of the other team members and they both quit unexpectedly. The company was sunk without their talents based on the 1st & 2nd year business goals we had set and marketing campaigns we were creating. A few weeks later, I found out that they started their own business in the exact same field using some of the same ideas we had worked out in the previous business. Unfortunately I did not have anyone sign an NDR or a non-compete cause we were very good friends at the time. (lesson learned there) But I have emails and meeting notes that show their original intent on making the previous company work. Is there anything I could do about this? Any legal terms for this kind of action?
2 ANSWERS
Labor and Employment Attorney serving Atlanta, GA
2 Awards
The legal term would be called"entrepreneurship."
Ideas cannot be copyrighted. Only the expression of an idea can be copyrighted. If they change the expression but steal the idea, there is little that can be done to penalize them. This is why you need to get mutual non-disclosure, trade secret protection, and non-compete agreements before you start drawing up business and marketing plans.
Sometimes, however, in situations such as you describe the departing partners can be found liable for the tort of "misappropriation of a business opportunity." The facts you provide don't indicate that there were any business opportunities that the group had identified or expended efforts to get before the two "friends" left you out in the cold.
It is often said that one should not do business with relatives or friends.
Michael A. Caldwell
404-979-3150
Answered on Sep 08th, 2011 at 6:27 PM
Corporate Law Attorney serving Boca Raton, FL
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I believe on these facts you would have claim for "misuse of a corporate opportunity", as well as infringement of the prior company's proprietary rights. Even if the prior company is 100% defunct, it's rights did not vanish. They would reside in its shareholders and the new business cannot use the same ideas of the old business without fairly compensating the old business and/or its stakeholders.
Hope this is helpful.
Answered on Aug 22nd, 2011 at 11:15 AM