Failed Acquisition Deal- can one of the Parties be stopped from launching a product similar to the other party? – Bengaluru City Civil Court
City Civil Court, Bengaluru (“Court”) in Book Your Gym Fitness Private Limited v. Cure Fit Healthcare Private Limited decided on a dispute arising due to a failed acquisition deal between the parties.
Cure Fit Healthcare Pvt. Ltd. (“CureFit”) had offered to acquire Book Your Gym Fitness Pvt. Ltd. (“BookYourGym”). Pursuant to which, a term-sheet was entered into between the parties. As a result of which, intellectual property and confidential information was shared between the parties which included business models, research, employees’ information, shareholding arrangement etc. It was proposed that CureFit will acquire BookYour Gym and relaunch the services provided by BookYourGym under its own name. During the negotiations, CureFit had asked BookYourGym to stop providing services and to lay-off certain employees. However, in the final stages of the transaction, the acquisition deal was unilaterally cancelled by CureFit by way of an email. A small amount of compensation was paid by CureFit to BookYourGym for this cancellation.
BookYourGym argued that CureFit had designed the scheme to defraud BookYourGym and to wrongfully use the plans, business model and strategy of BookYourGym to its own advantage. Additionally, CureFit also had possession of BookYourGym’s confidential information post the cancellation of the acquisition deal.
The question before the Court was whether interim injunction be granted against CureFit to restrain it from launching a product similar to BookYourGym post the failed acquisition deal.
The Court answered the question in affirmative. It recognized a potential misuse of confidential information and intellectual property of Book Your Gym by CureFit. The Court allowed interim injunction against CureFit restraining it from launching, introducing, marketing, selling, offering for sale or subscription or accessing a product similar to that of BookYourGym.
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This case arises out of a failed acquisition deal between the parties. While the final judgment in this case is still pending, the interim injunction against would serve as a good precedent to deter parties from entering into negotiations solely with the intention of imitating the other party’s products/services. As a matter of practice, term sheets usually contain confidentiality clauses. However, in order to seek additional protection against such situations, parties may consider entering into a Non-Disclosure Agreement to protect their confidential information and intellectual property.
Disclaimer: This post has been prepared for informational purposes only. The information/or observations contained in this post does not constitute legal advice and should not be acted upon in any specific situation without seeking proper legal advice from a practicing attorney.