Meaning
Actions filed after a product or service has reached the market focus on the distribution of the newly created value. This post commercialization litigation typically arises when former partners or early contributors believe they were not fairly compensated before the venture became profitable. The presence of revenue makes the cost of a lawsuit worthwhile for the claimant.
It marks the transition from building a product to defending the proceeds of that product.
Timing Factor
Lawsuits are rarely filed when a company is failing or has no assets. Once a firm achieves a high valuation, post commercialization litigation becomes a strategic tool for those seeking a share of the exit. The delay between the original event and the filing of the suit often spans several years.
Damage Calculation
Claims in these cases are based on the current market value of the enterprise rather than the value at the time of the alleged breach. This makes post commercialization litigation particularly dangerous for founders, as the potential payout can be massive. Damages might include back pay, lost equity or a share of intellectual property royalties.
The calculation must account for the time value of money and the risk taken by the early participants.
Defense Resource
Responding to these claims requires diverting attention from business operations to legal defense.
