What is your suggestion for dissolving a partnership (no legal business, besides a handshake) when only a prototype has been created?

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What is your suggestion for dissolving a partnership (no legal business, besides a handshake) when only a prototype has been created?

My friend and I have an idea for a product which we have created two prototypes. She does not want to continue partnering with me. We have not put any money into this yet, just time. It could potentially be something big and maybe not. Would I need to buy her out? And if so, how much since we have no idea if this will actually go anywhere?

Asked on May 26, 2012 under Business Law, Oregon

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

If you and she jointly came up with the idea and/or developed the prototype, you should buy her out. She technically does not likely have an actual intellectual property right in the idea or product--you can't patent an idea, or trademark or copyright it; and a process, device, mechanism, etc. must be patented for someone to own it. That said, if she and you jointly developed this with the expectation, at the time, of jointly profiting by it, she cojuld be considered to have a an equitable interest in the idea and prototype; and if you take it for your use without her consent, that could be considered breach of an oral or even implied agreement between the two of you as to what you would do.

To avoid potential legal fights down the road, therefore, you should get her to sign some agreement giving you all right to the idea and prototype and giving up any right of hers to profits from it. To make that agreement binding, you  have to give her something of value--"buy out" her interest--in exchange for her agreement.

As to what would be a fair amount--there is no way to determine that from what you have written or in the abstract. Every situation is different, and even if most ideas are only marginally successful, if at all, there are some (Post-it Notes; Facebook) which in different ways are wildly successful. At the end of the day, any amount you and she mutually agree on will be acceptable.


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