1.21.2013

Are You A Small Business With A Big Idea?

So you own a small business and you have a great and innovative idea. You realize though that you need to form strategic partnerships with larger businesses. So you identify the right partners, they endorse your idea and your business is a huge success.  This is the ideal scenario and if the right approach is taken, it’s often what ends up happening. Sometimes though things don’t go so well and small businesses end up with no partnership and someone else taking control of their ideas.

One of the most well-known cases of big business stealing from an entrepreneur occurred in the 1970’s. Robert Kearns, a former mechanical engineering professor at Wayne State University in Detroit, Michigan approached Ford Motor Company and Chrysler Corporation with an idea that he had. Kearns had developed intermittent wipers for cars and wanted to partner with auto manufacturers to commercialize the technology. Ford and Chrysler however were hesitant to enter into the partnership because Kearns wanted to be able to manufacture the windshield wipers himself (and most likely maintain control of his idea). So what ended up happening? The auto manufacturers produced the windshield wipers on their own, violating the terms of the discussions Kearns had previously had with them and also infringing on the patent that he’d filed on his invention. These actions sparked a court battle which dragged on from 1978-1990 between Kearns, Ford and Chrysler. Kearns eventually won a settlement and recognition for his invention, but in the process he lost money, his family and his dream morphed into what some would call an obsession. Kearns’ story has become one of the best known patent infringement cases in recent history. Though Kearns’ story may represent an extreme example of what can go wrong, it does highlight the need to tread cautiously when entering into partnerships with other businesses, particularly very large and powerful corporations. It is important to conduct the necessary due diligence when approaching these negotiations. 


You must identify what kind of track record the entity you’re considering in its partnerships and clearly identify what each of you stand to gain as well as your incentives to comply with the agreement. It is also important to seek appropriate legal counsel and have a clearly defined agreement to which both parties agree to adhere. This applies when the partnership is formalized and in the early stages when an idea is being pitched. Keep in mind though that you must strike a balance. You want your potential partners to be aware that they need to be transparent, but at the same time they are often bigger and more powerful than you are. The immediate gain of the partnership will most likely be in your favor, hence it is imperative to ensure that your approach does not put them off from the very beginning and preclude any potential discussions.

Have you had any experience (positive or negative) in establishing a partnership? Share it with us!!


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