
Dan Brecher
Counsel
212-286-0747 dbrecher@sh-law.comFirm Insights
Author: Dan Brecher
Date: March 3, 2014
Counsel
212-286-0747 dbrecher@sh-law.comJust last month, Toyota and BMW announced the formation of a joint venture to develop new products and technology, including a new fuel cell and a joint platform concept for a mid-size sports vehicle.
In basic terms, a joint venture is an association of two or more entities (or persons) that combine their resources and expertise to operate a single business enterprise. The parties generally have the right to control the operation of the enterprise and share in the profits and losses.
Joint ventures are advantageous in a wide variety of circumstances, such as: when one party holds a patent that another seeks to commercialize, when one company holds a strong market share in a sector that another company wants to enter, and when two or more parties seek to share the cost of developing complimentary products and services. Joint ventures have several other obvious benefits, some of which include:
As with any business decision, there are also risks to consider. The biggest hurdle for most joint ventures is the negotiation stage. In fact, many joint ventures fail before an agreement is ever signed. Unless both parties are willing to sacrifice at least some of their self-interest, the venture will likely be unsuccessful, costing both sides both time and money.
Before launching the new venture, the parties must resolve a number of legal issues, including the structure and management of the joint venture, the financial contributions of each party, the mutual goals and objectives of the parties, the duration of the partnership, and the protection of intellectual property. Another key issue us to have an agreed end game objective, or, at least, different objectives that do not materially conflict.
If you have any questions about joint ventures or would like to discuss the options for your business, please contact me, Dan Brecher, or the Scarinci Hollenbeck attorney with whom you work.
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