Will This Lawsuit Come Back to Haunt Best Buy?

Electronics retailer Best Buy (NYSE:BBY) has had its share of ups and downs lately, and now the struggling company has a lost lawsuit to add to its woes. Best Buy has lost a $27 million case by jury against Techforward, a start-up that alleges Best Buy effectively stole the “Buy Back” concept from them.

What Did Best Buy Do, and How Bad Is It

Techforward was initially hired by Best Buy to develop software that calculated the buyback value of electronics for the company’s Buy Back program. The program functioned like a warranty, allowing customers to return a product for an amount of store credit equal to a specific percent of the purchase price.

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As Josh Kopelman, co-founding partner of First Round Capital, which invested in Techforward, put it in a CNN post: “We had just finished a pilot test in several Best Buy stores and the results were very strong – and now, before we moved forward with the national rollout, Best Buy was asking us to provide them with access to our proprietary analytical model. This model was our crown jewel — we had invested years and millions of dollars building it. But we had signed a non-disclosure agreement with Best Buy – and they had assured us the information would remain confidential and was critical to moving forward.”

Techforward had been providing services to other retailers such as Dell (NASDAQ:DELL) and RadioShack (NYSE:RSH), but a few months after the pilot tests, Best Buy bailed on Techforward at the last minute. The company collapsed in the wake of the decision. Best Buy then launched a Buy Back program of their own, allegedly using Techforward’s developments, and the rest is the lawsuit history.

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