Earlier this week, a Texas jury dismissed a software company’s lawsuit against Sun Microsystems which sought damages in the amount of  $100 million. In the lawsuit, the software company alleged that after Sun had initially contracted with them to jointly develop certain software, Sun decided about 3 years later that they wanted to go with a different vendor, and transferred the development of the project  to Oracle. Further complicating matters, particularly in terms of untangling which company performed which aspects of the research and development, is that several key employees left the software company to become Sun’s employees during this 3-year pre-development stage.

In addition to claiming that Sun stole their proprietary trade secrets and technology and breached their contract, the software company apparently also claimed that Sun engaged in unfair competition, and actively interfered with the software company’s existing contracts.

The significance of this news story to the small business owner should be obvious: before you embark on a joint project, particularly with a much larger partner, it is critically important that each side’s proprietary technologies and rights, as well as each side’s role in the project is, to the extent possible,  clearly delineated. In this fashion, it should be  relatively clear-cut when the contract has been breached.

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