
Ask HN: Startup stole our software, and raised $2MM with it. What should we do? - qeorge
About 2 years ago, my firm developed software under contract. About 4 months later, after falling behind on payments, the customer &quot;charged back&quot; all his previous payments (via PayPal), and kept the software (it was not yet finished, but functional enough to charge customers).<p>We recouped about half the money through PayPal&#x27;s dispute process. We let the rest go, deciding it wasn&#x27;t worth trying to squeeze blood from a turnip.<p>Fast forward to today, the very same company is on the front page of HackerNews:<p>https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=8225738<p>The business&#x27; name is Pigeon.ly &#x2F; fotopigeon.com (when we worked on it it was called pichurz.com &#x2F; picturgram.com). The owners names are Fredrick Hutson and Alfonzo Brooks.<p>So, HN, what should we do? We have a signed contract with them which states that the software becomes our property in the event of non-payment. Should we assert ownership of the software? Of their business? Should we sue them? Should we reach out to their investors (Kapor Capital and Base Ventures)? Should we include Kapor Capital and Base Ventures in the suit?<p>I would really appreciate any advice HN can offer. We will of course rely on our attorney&#x27;s advice primarily, but I am optimistic that someone here has dealt with a similar situation before.<p>Thank you for your time!
======
grellas
You really need to be careful about how you approach this sort of issue.

While the advice may be trite, it is particularly apt here to emphasize the
importance of consulting with a lawyer who is strong on IP issues.

In particular, this would normally need a careful evaluation of the contract
language, which may or may not define what happens in the particular case you
describe. If it should not adequately define what happens in express contract
language, then there are default rules that potentially govern what happens.
_Those rules may or may not support your position_. I have bumped into cases
where the default rules basically say that the contract assigns the IP rights
to the customer regardless of non-payment, with the remedy for the developer
simply being to sue for payment. I am not saying that such rules govern your
case because it is not possible for anyone to really know your case absent a
proper legal review by a knowledgeable lawyer. I am saying you may be making
assumptions about your legal rights that may or may not be correct and you
should not casually just assume that they are.

It goes without saying as well that you should be cautious about using
pejorative language about the person who did this in public because of the
obvious risk of setting yourself up for a defamation claim. Again, in the end
you may be justified but why complicate your own claims by giving those who
did whatever these people did free ammunition to fight you with.

I don't mean to sound unsympathetic. It hurts to get screwed and it sounds
like that happened here. Just be careful to go about it the right way in
trying to correct the wrong that did occur.

------
rayiner
I wouldn't name and shame here on HN, because when you file a lawsuit they'll
counterclaim for defamation. No point in muddying things. You're also
susceptible to the defense that the PayPal dispute was a negotiation and
settlement of the purchase price.

Disclaimer: I'm not your lawyer, this isn't legal advice. Do get your own
lawyer to advise you on this, one familiar with licensing disputes.

~~~
sergiotapia
Screw that, name and shame away. The nasty gits deserve it!

~~~
rayiner
They might legitimately have no idea they "stole" the software. They probably
didn't read the contract carefully, and they might assume that they did "pay"
for it, albeit at a reduced price.

That said, they have every incentive to burn the $2m fighting this claim,
because otherwise they have nothing. The best result for OP would be a
negotiated sale of the software for some $$, or perhaps equity in the business
if they can stomach the risk. Nobody wins if the legal dispute eats up all the
money and sours the business.

~~~
hga
Which gets to my point, and for which a lawyer, as an emotionally uninvolved
3rd party can be far more valuable than as someone who merely knows the law:

Decide what you want to get out of this:

Do you want to destroy the company? Perhaps take them over/replace them in
some way? (A good lawyer will ask "What does this accomplish", although
deterrence is not illegitimate in my viewpoint).

Get paid for your work, with suitable interest and penalties?

Get a piece of the action of the other company?

If you're telling the truth, there's a good chance you've got them in an
exquisitely delicate situation. While they've officially raised a lot of
money, if it just happened there it's unlikely it's all been transferred to
their bank account. Even if so, you can mess them up going forwards with
justified legal action.

For those panicking over defamation, truth is an absolute defense to it, you
just have to be able to afford to get your day in court. Although I'll note
everyone who's every been in a lawsuit, on whatever side, says it becomes a
consuming thing, you've got to think about the opportunity cost. Something a
good lawyer will bring up.

~~~
tptacek
Truth trumps defamation, but it isn't necessarily enough to keep you out of
court; your opponent just needs to find a way to twist your words enough to
create a colorable claim. You'll win in court, but that's incredibly expensive
and slow.

I wonder how this company could have made it through DD with a venture capital
firm, since that would have involved contract review.

------
jparkside
My name is Frederick Hutson, and I am the President and CEO of Pigeonly. I was
recently made aware of this post.

In light of the defamatory nature of the poster’s statements, I felt compelled
to respond. Well over two years ago, we entered into a work-for-hire agreement
with the poster to write aspects of the software code for a beta version of
our initial e-commerce platform. Our agreement with the poster makes it clear
that we own all work product produced pursuant to the agreement. In the end,
however, we were very unhappy with the quality of the poster’s work so we
terminated the relationship and requested a refund.

In addition to my own assessment I consulted with several independent sources
including a founding member of the CakePHP project (the framework the poster
used). Everyone who evaluated the code said the same thing, to sum it up (in
their professorial opinion) the framework was not utilized correctly which
resulted in the numerous bugs and browser incompatibility issues. The truth is
even if we wanted to work with the code the poster provided we couldn't
because it was flawed. So we were left with no choice but to start from
scratch with a new developer.

The bottom line here is that through hard work and determination, we indeed
built the Pigeonly platform from scratch and in no way incorporated any of the
code produced by the poster. We are very proud of what we have built at
Pigeonly, our mission is to build great products that solve the type of
problems most would overlook.

~~~
korzun
> In light of the defamatory nature of the poster’s statements, I felt
> compelled to respond.

Useless filler.

> Our agreement with the poster makes it clear that we own all work product
> produced pursuant to the agreement.

Again, useless filler. You own the work and they need their money for work in
question.

> I consulted with several independent sources including a founding member of
> the CakePHP project

That's great. I audited hundreds if implementations that sucked. The different
is that those developers still got paid.

It's your fault for not knowing what you are doing and not having another
source involved earlier in the process to make sure things are going smoothly.

Also, you are showing your lack of experience. Project was 2 years long
(multiple CakePHP releases, I bet?) ofcourse people will say it's outdated and
written poorly.

You are also working with a low level agency (no offense) and then get the
code reviewed by 'founding member of X', what do you expect? Are you even
serious here?

> So we were left with no choice but to start from scratch with a new
> developer.

Let me audit that code, I'm 100% sure it will not be up to /my/ standards.
Will you fire the developer and sue him for the salary you paid?

> The bottom line here is that through hard work and determination,

The bottom line here is that you really have no idea about technology.

~~~
johnnyfaehell
> That's great. I audited hundreds if implementations that sucked. The
> different is that those developers still got paid.

Say you go get your car fixed. It breaks down as you drive out. There are 3
other garages right next door who all look at your car and say you shouldn't
put gum to plug a hole in the fuel pipe. Would you demand a refund? Of course
you would, you went for a professional service and you didn't get what you
were paying for.

> The bottom line here is that you really have no idea about technology.

He shouldn't have to. When someone says they can write you some code for
money, they should be able sort everything out for you. If they can't provide
what they said they would, can you honest expect people to pay? You shouldn't
have to be technically proficient to get someone to write some simple custom
software for you. Just like you shouldn't have to know all the ins and outs of
plumbing not to get ripped off by a plumber.

~~~
korzun
Please don't use car analogy with someone who is in auto technology sector.

Two years without any auditing is a mistake of the founder, if your car is in
the shop for two years for massive amount of work you will go there to check
it out. And you better bring a friend who knows about cars if you don't have a
clue.

I will give you a better analogy, you go to a random mechanic leave the car
there for two years without checking on it. You have no clue about the problem
or the car.

Then you finally get the car out and decide to bring it to another mechanic.
What will happen in 99% of the cases is the mechanic will talk shit about the
previous shop and find every little thing that's not 'up to code'. The coolant
hoses (that were not part of the original job) are old now after sitting for
two years. Oops.

You still have no clue about anything. So you hire your own mechanic who you
think has a clue (but you can't gauge that) to do the 'fixes' and he tells you
'it's great now!'. Bullshit.

This is common in tons of other industries. With programming it's harder to
tell what 'shit code' is. Especially when you have 2 year timeline working
with a framework that changed significantly within that timeline.

Furthermore, you are missing my point. He does not have A level team to
rewrite software. Let's not pretend the magical rewrite is a super car here,
not with his team.

> He shouldn't have to. When someone says they can write you some code for
> money, they should be able sort everything out for you.

Again, missing the point. How do you know everybody else is not feeing him
bullshit? If you don't know something, don't wait two years to get third party
audit on a TWO YEAR OLD code.

Overall, I don't think you know what you are talking about either. You might
think you do just like the founder but you are not fit to run a technology
company.

~~~
squeaky-clean
The attitude of your posts is disgusting. Both the firm, and the startup made
big mistakes here. The answer should be to get a lawyer, because none of us
know all sides of the issue, and that is going to be the end result anyways. A
lawyer, or drop it. There is no need to attack the above posters for having an
opinion opposite of yours. And your analogy is worse than the one posted
above. Regardless of whether or not you are in the auto technology sector (why
do you even assume people know that about you before commenting)?

~~~
korzun
Do you have anything to contribute besides expressing your 'disgust' at my
counter point because it's not covered with kittens?

This is the place for discussion, not a kindergarden.

If they wanted to get a lawyer they would have; but this is on HN and I will
openly comment on it.

~~~
shangxiao
> This is the place for discussion

Exactly, so don't shit all over people with your superior "I'm in the auto
technology sector so my analogy is better than yours" bullshit. His analogy
and points are perfectly fine and I agree with him, but furthermore you being
a jackass makes me automatically dismiss your arguments.

~~~
korzun
No, that was more of "It's funny that you are using this analogy, because I'm
A) a car guy B) in an automotive sector".

He got me to bite. If you think this is some sort of superiority play, please
go outside your bubble.

------
mbesto
As with every dispute that comes up on Ask HN that requires legal action - get
a lawyer. (and a good one)

~~~
LTheobald
And start putting together every piece of data you can that will help your
case - emails, IM message logs, source code etc.

------
nkozyra
First things first, definitely edit the OP. You get nothing from outing them,
much less calling them "thieves" in public. Don't give them any ammo.

Second, gather your contract and lawyer up right now. The reality is you're
probably still squeezing blood from a turnip (despite the VC); your best move
would probably be asking for a licensing agreement in lieu of a bulk sum.

Third, I think it makes sense to bring this to the attention of the VCs - it
won't hurt (the way publicly outing them might) and they could possibly work
at mitigating/mediating this.

Again, $2M might seem like a lot to you, but this is mostly budgeted already.
If, like most startups, this is relatively short-lived, you may want to recoup
via a license, although this is a new contract that would need to be drawn up
fresh.

~~~
rbobby
> Third, I think it makes sense to bring this to the attention of the VCs

Don't do anything without talking to your lawyer. This advice could lead to
claim a of tortious interference.

Hell this whole post could be tortious interference.

------
dman
Find a lawyer. Dont comment any further on the matter in public.

~~~
adventured
This is the only advice to listen to. Succinct.

Already commenting on HN is too far. It should have all been private. Do no
further damage.

For qeorge: If you win in court, depending on the outcome and or any
settlement, you can potentially still write about the whole thing in a blog
entry if you still feel the need to be public about it.

------
andy_ppp
Oh dear, airing dirty laundry in public. Maybe there were reasons why Fredrick
and Alfonzo didn't pay you? We wouldn't know as hacker news and you are
unlikely to tell us. I would suggest letting a judge decide and hiring good
legal council.

However, I would say that your judgement in maybe panicking and posting so
publicly is far from the mark. You should remove this post if you can as soon
as possible. Only bad things can come of this!

------
shannmcnicholl
How do you know that they are using any of your IP (code)?

I presume that they approached you, originally, to create software for them,
but the idea was theirs. If they terminate a contract with you, however
unsatisfactorily, they are still free to start over with another dev agency.

3 years is a long time in terms of what can be delivered in software. The
system doesn't sound all that difficult to replicate.

------
austenallred
1\. Stop talking about it publicly.

2\. Hire a lawyer.

~~~
pkfrank
I feel like this is the only right answer.

It's been said, but there's not much value in discussing this in public; it
just introduces risk/complication.

Are you really going to put any weight on insight gained from this thread? If
not, the cost/benefit of keeping this up is out of whack.

In that case, the "benefit" become solely the name/shame which isn't an
awesome reflection of professionalism, either.

------
sjtgraham
Read earlier today that one of the founders was convicted of drugs trafficking
and served four years in the pen.
[http://www.forbes.com/sites/hollieslade/2014/08/21/how-
this-...](http://www.forbes.com/sites/hollieslade/2014/08/21/how-this-man-
built-a-3m-business-a-year-on-from-four-years-in-prison/)

~~~
aepearson
What could this possibly have to do with anything?

Maybe do a little research about the project first...you come off as pretty
ignorant with a statement like that.

------
nakovet
Edit their names out of this post, this will definitely be used in court, get
a lawyer.

------
AngeloAnolin
Disputes like this at the very least becomes very costly for both parties,
notwithstanding the fact the damage each one may inflict in just trying to get
the upper hand over the other.

Considering that you've brokered into an agreement before, haven't you
explored the possibility of just resolving this amicably, with both parties
finding a common ground to ensure a win-win situation for both.

Going through the lawyers and courts should be the last resort. I know to some
degree this advice (which you could take with a grain of salt) may not hold
some ground with the others. But just the same, you've worked together before
and there should be no reason for you not to be able to settle things
properly.

------
mattwritescode
Personally I would not be posting things like this one the internet. The
reason being if you sue them and in fact they aren't in the wrong they might
decide to sue you back. Your making some very big claims.

You could be sued for liable or malicious falsehood.

------
ChuckFrank
Thank you for sharing this information. I think that while jumping into the
more expensive lawyer arena is one choice. A shot across the bow of Pigeon.ly
is a good alternative. I think hiding behind lawyers benefits only the
lawyers. As a civil society, I think people should be called out for their
poor behavior, and explain themselves. You've made your case, now Pigeon.ly
should explain themselves. A public court of opinion is, in the end, the only
court that truly matters. Or so I think.

------
rabidonrails
In cases like this, do investors usually have protections built into their
investment contract that if something like stolen IP or possible fraud wasn't
initially disclosed they can recall their investment?

I imagine this can't be the first time something like this has come up.

~~~
Domenic_S
Sounds like the perfect use case for insurance, kind of like title insurance
in real estate.

------
bdcravens
Seems to me that your damages would be limited to the amount you originally
agreed to. The fact that they had a funding round and press shouldn't matter.

Payment + chargeback is a bit different than non-payment; complicating the
fact is that you received some money from PayPal.

Aside from PayPal, did you pursue any recourse?

Does your contract have a mutual non-disclosure clause? If so, I suspect you
just violated it.

I'm sure when you saw their funding event, you were upset. Bottom line: if
everything had gone according to plan, you would have been paid, and they'd
still have their funding event.

------
partisan
I can appreciate the frustration you must be feeling. Working with clients
seems to highlight the best and worst of humanity.

I believe that you should always lead with your best. A situation such as this
can definitely impact your business in a negative way. It's more of a one-
sided allegation and your choice of wording is defamatory. At this point,
consider hiring a lawyer. They may not be able to tell you what you should do,
but they can definitely tell you what NOT to do, which is just as important
sometimes.

Good luck.

------
e15ctr0n
As a general rule, consultants should always develop code on their own servers
and transfer the code to the client only when full payment is received. In
this case, I realize that the ship has sailed, but I'm sure there is a lesson
to be learned.

------
gscott
I would do a DCMA take down notice against the web host and send it to whoever
funded him as well. He did not pay in full. He not only stole the code but
committed credit card fraud. If he has a parole officer I would try to find
out.

------
olssonm
Nobody can give you much more advice than to collect all your
papers/email/documents regarding this and discuss it with a lawyer.

I know your upset, and want to hit them hard – but outing them probably won't
do much good in the long run.

------
rmena123
My question is why are you caring about it now, if it was 2 years ago? Now
that it made HN.. now you care? Its funny how it didn't matter the past 2
years. If it was a real issue you would of gotten a lawyer already, get over
it and keep on doing business. I'm tired of everything becoming a lawsuit over
nothing that mattered in the first place.

The only ones who will benefit in the long haul are the lawyers, don't waste
money. Every lawyer that wants the case will tell you, you have a case and we
got this, lawyers love to drag things out. Long and expensive process.

Another question... How did they get all the code for the website if they
hadn't paid in full? If my clients don't pay they never get any code on the
server they own.? So you gave it all up before payment?

------
shahocean
I can understand your feelings but you gotta hire very GOOD lawyer! Keep Calm
and Fight Legally!

------
oddtarball
Have you seen the Forbes article about this? Sounds like you're dealing with
an ex-con.

[http://www.forbes.com/sites/hollieslade/2014/08/21/how-
this-...](http://www.forbes.com/sites/hollieslade/2014/08/21/how-this-man-
built-a-3m-business-a-year-on-from-four-years-in-prison/)

------
pskittle
i'm sorry for your loss. however you need to consult a lawyer to understand
where you stand and what your options are. i'm not sure there a lot of them on
hn. goodluck

------
ajan
Ouch! You should finish the software and launch a competitor.

~~~
johnward
Yeah if they stole a semi finished product I'm sure OP could blow them out of
the water with feature. Thought the alleged thief has a jumpstart on
marketing.

------
gomesnayagam
we are in the same boat, amazon zocalo is our app.collablayer.com ditto , we
are adding another set of feature to come out of this nightmare.

------
jordsmi
I find it funny how there's so many articles about this guy who was in prison
then does right and starts this company. Then this comes out...

------
wehadfun
So a company started by felons stole software from you.

------
throaway53261
I know this isn't Reddit or 4Chan, but I've never felt more compelled to post
the following:

[http://i.imgur.com/agJIP.gif](http://i.imgur.com/agJIP.gif)

~~~
dalacv
Yup...[http://i.imgur.com/NnoGhN1.gif](http://i.imgur.com/NnoGhN1.gif)

------
bindirector
oh cool, and they're taking this opportunity to cash in on vulnerable and
disenfranchised populations. real winners here.

------
0p9o8i7u
What like you own what you worked on?!?? Fuck that! Patents and ownership of
property is fucking stupid! This is hacker news!

Everyone knows that it's how well you implement, not whether you developed the
idea or not. Clearly they implemented your idea that otherwise would have been
nothing. If you had never written it someone else would have written is just
as well as you did!

That's how the world works nowadays. Right??!?

~~~
jordsmi
If the contract says they own it, they own it. That's how the world works

