From past experience, if it is a good idea for a company, and the sole problem is that the founder is a psychopath, I'd just steal all the code you've written and form your own company and poach the investors. Worked for Zuckerberg. Of course, YMMV.
It's not really stealing of source if you wrote it and there's no contract saying it belongs to them.
I know in Canada at least, unless otherwise stated copyright stays with the creator (in a contractor relationship, other way around for employees) and you've simply licensed them use of the code. So you're only bound to anything you've verbalized (that can be proven) and written down (think emails). I know our copyright laws are a bit different from the US though, so it's worth being prudent first (always is :).
It doesn't matter if there's a written contract... if you are working on a venture together with some sort of verbal understanding, in California (I'm assuming in the rest of the USA too) that is just as legally binding as a written contract (At least according to the two lawyers I've talked to... you should obviously talk to your lawyer about your options as circumstances may be different).
I'm pretty sure what you say is correct, which means that the verbal agreement for equity also holds. It follows that if no equity is given, the contract is breached and the code can be taken elsewhere.
Not so clear cut. You would need to be very careful if you tried to pull this. Look at the facts he explained. The investors are just coming in now, and the founders are saying that the stock agreement depends on the investors' lawyers. That's actually pretty reasonable in a situation where you have a bunch of inexperienced founders getting money from experienced investors. The investors might force the founders to agree to different terms in their own stock agreements as well. It's not at all clear that the founders have breached anything yet. If he was to take the code elsewhere, that act could actually be considered the breach.
If he was to take the code elsewhere, that act could actually be considered the breach.
And if he breached, what would he have to give back to the founders that was given to him for the code?
Also, if the code was given in return for equity (or the promise of equity), then he is an owner and should have a say in the decision to accept the investment and negotiate the terms.
I agree that the final stock agreement depends on the investor's lawyers (provided everything works out), but how the equity is divided before that is between the founder and the coder.
If a court determined that he breached, there could be damages for losses to the company based on his breach, i.e. it could go beyond him just giving back what they gave him. This is really the kind of thing where you need a lawyer's guidance based on very specific facts.
My point is that they haven't given him anything, thus there is no contract. The company can try and sue him for breach of contract but the issue is whether or not a contract actually exists. Of course a lawyer should always be involved to make sure that everything is ok legally.
> It doesn't matter if there's a written contract... if you are working on a venture together with some sort of verbal understanding, in California (I'm assuming in the rest of the USA too) that is just as legally binding as a written contract
That is true, but only if you can prove there was an oral agreement. That is why written agreements are considered better, you have physical proof.
With an oral agreement you'll need to convince a judge or jury that both sides agreed to said contract, otherwise you could be SOL.
As it works here in the US, you can take anything you've personally wrote and go your own way with it unless the following exists... You've signed or >>cleary<< declared that you are relinquishing ownership of it to them, they own a patent to the work you're doing for them and thus they have priority over it, or you've been paid and on the terms of payment was that you were providing them with code. The last one about being paid is still arguable but worth noting as you can argue that they were paying you for a license to the code you were writing and you just happen to be more open to share information and listen to their opinion on the matter.
In a situation like this, if the idea is stellar enough (and you understand it enough) that you could do the idea without them and it would likely be successful, I would take it and form your own company, potentially file for patents on anything new, and look immediately for investors.
In the world of business there are two key things which separate one from another, and both must be present. The first is material, code, visual/displayable proof of concept, prototype, or product. The second is money to execute and grow the material and code. With those two things, you'll have the upper hand against them at any time. Some will argue in the long run, if they manage to survive being beaten out in the beginning by product and money, that they may have a greater vision or business sense to execute it more efficiently, but the success would be unlikely. From your description of them I would think they would quickly crumble under the matter and the fact that you did what he's so scared of and he drove you to do would render him utterly useless/dysfunctional.
THAT IS JUST MY POSITION AND TAKE ON IT. I AM NOT A LAWYER AND DO NOT CLAIM TO BE CURRENT OR ABSOLUTE IN MY LAW KNOWLEDGE. THE ABOVE IS JUST MY OPINION AND VIEWPOINT ON THE TOPIC IN QUESTION.
They have filed a provisional patent and this is an interesting point. Again however I've not been paid ever for anything. Never at any point have I declared that I would relinquish ownership of the code. The recent one sided contract they gave me had these terms in there. I obviously didn't sign that.
I think you might be over-reacting to these provisions. It's entirely normal that you sign over ownership of the code to the company in exchange for your equity. That's in every form stock agreement. Are you using an experienced startup lawyer? It sounds like maybe you are not. You don't need a big fancy law firm, but you do need a lawyer who is very familiar with startups and standard terms. You should confirm that your lawyer has worked with many clients who have negotiated with startups.
> It's entirely normal that you sign over ownership of the code to the company in exchange for your equity. That's in every form stock agreement.
Yeah, but he's being asked to sign over ownership, in order to begin the process of receiving equity. If he signs that, they have every opportunity to screw him, which they do not have now.
all my lawyer did back in the day was structure equity for Internet companies. He worked for one of the top firms. Trust me this guy is an ace in the hole. He like me is worried these guys have lied before and are doing it once again.
Were not asking for anything outrageous, we just want to know what is In the stock agreement. When you're told sign here and well tell you by those that have lied multiple times, that is the problem
