The Delaware Court of Chancery has ruled in favor of Candor Compass LLC, mandating that Italian artificial intelligence firm iDentivisuals SRL transfer ownership of its emotion-recognition technology to Candor. The court determined that iDentivisuals breached a binding agreement by failing to deliver and safeguard the licensed technology.
iDentivisuals, established in 2016, developed an AI-based emotion detection tool and sought to expand into the U.S. market. In 2021, the company formed a Delaware subsidiary and engaged Ian Wilcox as an advisor and later as CEO. To commercialize its technology, iDentivisuals partnered with Candor, a legal tech firm, culminating in a term sheet for a licensing agreement. This agreement required iDentivisuals to provide Candor with access to the technology and to escrow the intellectual property to ensure Candor could continue development if iDentivisuals failed to do so. Additionally, the term sheet stipulated that any breach by iDentivisuals would result in the transfer of ownership of the technology to Candor.
Despite the binding nature of the term sheet, iDentivisuals did not deliver or escrow the technology as agreed. Unbeknownst to Candor, iDentivisuals had ceased payments to its product developers, leading them to halt work and restrict access to the product. This situation was concealed from Candor until after the term sheet was executed. Over the following year, Candor attempted to salvage the project by negotiating with both iDentivisuals and the developers but was hindered by the lack of access to the technology. Ultimately, Candor declared iDentivisuals in breach of the agreement and sought legal recourse.
Vice Chancellor Zurn concluded that the term sheet constituted a valid and enforceable contract, not merely an agreement to agree. The court found that iDentivisuals knowingly breached its contractual obligations and granted Candor’s request for specific performance, ordering the transfer of ownership of the emotion-recognition technology to Candor. This decision underscores the enforceability of term sheets as binding agreements and highlights the court’s willingness to grant specific performance in cases involving intellectual property and technology licensing.
For a detailed account of the court’s findings and legal reasoning, the full opinion is available on the Delaware Courts’ website: https://courts.delaware.gov/opinions/download.aspx?id=400720.