This makes me very cross – which is why I’m warning you about it

As many of you know here at Virtuoso Legal, we’re driven by results. We love to see our clients use IP to their commercial advantage and prosper as a result.

But sometimes life doesn’t work out that way and over the years we’ve faced some infuriating cases where our client has been wronged and?they?don’t have the money to pay for redress.

This happened a couple of weeks ago - and with our client’s permission - I’m sharing the story because it’s a warning to everyone.

Our client (Elastothane Limited) supplied and sold a whole range of specialist polyurethane and similar coatings. These coatings are used in a variety of extreme environments and are sold throughout Europe.

Over time, our client has worked with a subcontract manufacturer (Leeson’s Polyurethanes) to enhance and create new and existing coatings. The manufacturer originally agreed that all the formulas and IP belonged to our client and were confidential. Or at least they did until their factory burned down and our client asked for the formulas to be provided so that he could carry on and source supply elsewhere.

That’s where their US parent company stepped in with in-house Counsel and refused to return the formulas, resulting in our client being unable to use all the improved formulations he’d devised over the last 4 years.

The fire was of course unexpected – and devasting, not least for one long term employee by the name of David Boswell who sadly lost his life. Leeson’s plant is gutted and a rebuild will take some considerable time. Very sad for everyone concerned.

Now of course we could ask the Court for redress here from Leeson’s – an interim injunction to make sure the confidential information isn’t leaked and obtain the information back to our client so that at least his business isn’t decimated too.

Except when your business faces a crisis like this, who has a spare ￡25,000 to pursue a Court action? Think about it – no income and no goods to sell. (Temporarily at least until a new manufacturer is instructed.)

So, what can every business learn about this situation?

1. Make sure you have an expressly clear contract with your supplier – covering all eventualities including express obligations of confidence and ownership of?all IP
2. Make sure you keep formulas updated and within your control at all times
3. Use more than one supplier/manufacturer
4. Look at legal expenses insurance that could cover these kinds of legal costs

Like most business people, Dan from Elastothane may be down but he’s not out.

However, a setback of this kind would have been much easier to deal with if he’d had a better agreement with his manufacturer. If we’ve learned one thing from this pandemic, we’ve surely learned the importance of supply chains and disaster recovery planning. Dan isn’t the only client who has been stitched up by their supplier.

Make sure that next time, it’s not you.