Situation: A company has a long-term client that stopped a project suddenly 6 weeks ago with no explanation. Later, the client called saying that they do not intend to pay for work completed to date. Would you pursue either arbitration or injunctive relief to settle this dispute?
Advice from the CEOs:
If you have evidence of acceptance of a project contract or other documentation that the work proceeded under agreement with the client, this strengthens your position.
There may be other circumstances of which you are unaware such as financial or cash flow difficulties. Inquire through discrete channels to clarify this. Knowledge of the inside situation provides leverage as you negotiate a settlement.
Do you want to retain this client? If they have been valuable over the years this may just be the behavior of a single individual. If this is the case, work with your key contacts to bring this situation to light and try to solve the problem without legal action.
Because you have a long-term relationship with the client, focus your communications on the President rather than the VP who shut down the project.
Established your documentation, and complete your research on whether the client has cash flow problems; then call the President to work out an amiable resolution.
While you are justified in feeling miffed about the situation, business is business, and in this case it appears that your long-term relationship and the value of the ongoing business with the client outweigh the emotion of the present situation.
Focus on resolution of the dispute between the parties and do everything possible to resolve it between the companies rather than through legal avenues. This will help preserve the relationship with the client. Provided that you continue with this client, clean up the portion of the contract specifying notification and acceptance requirements and other areas of the contract that require attention.
Situation: A company sued a customer for non-payment. The customer had a long history of slow payment or payment only on threat of denial of service. The customer countersued and has offered to settle for a $7,000 payment. How would you advise the CEO to respond to this frivolous lawsuit?
Advice from the CEOs:
One option is to let the countersuit go to trial. The challenge is that if this ends up before a jury the outcome is a crapshoot and can be very stressful. You may win, but at a higher cost than to settle, and if the other party declares insolvency you may never recover your costs. You also have to deal with the distraction of the suit.
Another option is to respond very aggressively through your lawyer. This sends a message to the other party and may prompt them to lower or drop the settlement demands. If this doesn’t work and you aren’t a gambler, give up the $7K and walk away. However, if there is a way to make this the most expensive $7K that the other party ever collected, go for it.
You may decide on principal to prosecute the case to send a strong message to the market that others should not fool around with your company.
To prevent this situation in the future, assure that you have clauses in all your agreements to prevent future repetitions of this situation. Specify binding arbitration in the case of payment or performance disputes. Arbitration can be more effective and timely than litigation.
Situation: We have a competitor who is infringing our key intellectual property. Counsel tells us that we have a case, but to expect the process to take 2-3 years and to cost $2 million minimum. I’m concerned that if we start down this path, we will drain the company of both time and cash. What should we consider going forward?
Advice from the CEOs:
The risk here isn’t just your IP; it’s the value of the company!
Example: if your current valuation based on your IP is a 5x multiple of revenue, and if 60% of your IP is at risk, 60% or more of your valuation may be at risk.
Under this scenario, you cannot allow the infringement to go unchallenged.
The hard reality: can you withstand, in time and of money, a large and distracting suit?
If the infringer is larger, they may be gambling that you won’t sue. Remember, the loser pays the winner’s out of pocket costs, plus damages.
If your case is good, you may be able to get a lawyer to represent you on contingency.
If you decide to sue, it must be a surprise. If not the infringer may outmaneuver you in setting venue, etc. through countersuit.
Get a second opinion, and as much independent advice as possible without showing your hand.
Key Question: Can you show your IP and research predates your competitor’s?
Is there a middle ground or a settlement scenario that makes more sense than an all-out suit?