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Tortious interference possible in California licensing agreement

Businesses enter into agreements meant to benefit each party. If a third party disrupts such an agreement to the detriment of one of the businesses, the impacted business may be entitled to damages as a result.

A business dispute in the biopharmaceutical industry may have future implications on much larger corporations regarding their relationships with subsidiaries and the loss of expected profits. At issue is a licensing agreement entered into by a Japanese company and a California company. in which the Japanese company would create a drug that had not yet been approved by the FDA. The California company was later acquired by a Swiss company, which sought to produce a different drug and requested them to order the Japanese company to stop producing the other drug because of possible side effects. The Japanese company brought an action against the Swiss company for tortious interference with the licensing agreement and sought damages for the loss of expected profits.

Competition amongst businesses can lead to improper actions on occasion to try and get ahead. When such actions interfere with financial expectations or contracts, a business may have engaged in tortious interference. Tortious interference can occur during the sale of a company, when a business requests another business to end a business relationship or when a business breaches a contract with another company after being induced to do so. The elements that must be proven to show that tortious interference occurred are a legitimate economic expectancy or contract between two parties, knowledge of the contract or financial expectation by another party, interference by that party, interference that is considered improper and damages sustained by one of the parties as a result.

Tortious interference with expected profits can result in significant financial damages to an injured party. If a business has lost out on such income as the result of the actions or inducement of a third party, they may be able to receive the amount of the expected income if they are able to establish that each of the elements outlined above are present. A business law attorney can assist an injured party with such an action.

Source: Bloomberg Businessweek, "An Obscure Pharma Lawsuit Puts California's Tech Titans on Edge," Paul M. Barrett, Mar. 12, 2014

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