

Ask HN: Co-founder set up a new company using our IP and enployees - ts-hn

A co-founder set up a new company using IP from our company and fired and rehired our employees. They&#x27;ve now gone through techstars and have raised several million. Unfortunately we cannot afford to go down the legal route, what are our options? Are there legal companies that will provide us with a service like no win no fee? If so which ones are recommended? Thanks!
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trcollinson
I am not a lawyer, talk to one. As has been said previously, there are lawyers
who will give you at least a basic consultation for almost nothing. If you
have a case, there are a number of routes that take a "contingency based"
payment structure. If you have no case, the lawyer won't take you.

Now with that said, some non-official legal opinion. So you had a company
previous to this incident which had IP and employees? And a co-founder left,
built the same exact company, with the same exact IP, and same exact
employees? And then that co-founder got into techstars? And then that co-
founder secured several million dollars in funding for said new company? And
now you would like to sue this co-founder?

Maybe you see where I am going here. This is not exactly an open and shut
case. Usually if a co-founder (or anyone else from within an organization for
that matter) suddenly leaves with a substantial amount of IP and employees
this raises the legal red flag right away. Yet you have come AFTER the company
moved forward, received seed funding, received a series A round, and is now
running at least presumably more successfully than it was before. That is not
a good legal position to be in for you.

Second, although I have no idea what techstars seed round due diligence looks
like, I am absolutely sure that the Series A round had a rather large legal
due diligence process which included checking on the IP and making sure it was
more or less clean. The start up world may be the wild west of funding but
investors don't just handle over millions of dollars and hope for the best.
This is not to say that a company can't lie, they can, some might, and often
they do get caught during due diligence.

Sorry, the whole story sounds a bit fishy. If you are in fact in a small group
of people who were "left behind" this could be entirely legal and even a
viable business strategy. I have seen companies where a reverse merger
acquisition has been made to move profitable employees and IP while leaving
behind substantial debt and less profitable employees. I wouldn't call it
ethical, but it is viable and certainly legal in some cases. Every situation
is different though. Consult an attorney (or 3, because legal opinions are
just that, opinion, until a ruling or a settlement is made), see what your
options are, and move on.

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davismwfl
Are you also a co-founder or just an employee that didn't get taken along.
Only matters in terms of standing nothing else, e.g. an employee wouldn't have
standing to go after a co-founder for doing this AFAIK, but a fellow co-
founder or investor could likely. If you are an employee with vested shares,
then technically you might have grounds to go after him for causing a
devaluation of your stock. But that only counts if it actually has/had real
value at the time he left.

In the end, all this depends, and IANAL but if the IP was developed before the
company was legally formed and never properly assigned to the company then it
might be a little tougher to go after him if he originally created it. At the
same time, if the company paid to develop features etc and was formed legally,
then there could be a claim, again it is likely messy.

You can absolutely find some good attorneys to at least sit with you in
consultation and figure out where you stand. Honestly, even if it costs you
2-4 hours of their time that would be worth it.

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therealwill
Even if the co-founder did not sign a non-compete you should still be
protected by the trade secret act.
[https://en.wikipedia.org/wiki/Uniform_Trade_Secrets_Act](https://en.wikipedia.org/wiki/Uniform_Trade_Secrets_Act)

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tptacek
It is unlikely that a noncompete would matter much in a situation like this.

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peri
You need to talk to a lawyer about this. There are plenty of good lawyers out
there who will give you a short consultation without costing you much. There's
unfortunately not enough detail here for good advice to come from HN and
you're likely to prejudice any proceedings if you reveal too much here.

In short: get to a lawyer. Search for grellas's posts about who to talk to
cheap.

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brudgers
I apologize for being a bit confused. Please help me understand.

What is/was your role in the original company?

What was the cofounder's role in the original company?

How was IP assigned in the original company?

Why is the "legal route" not an option?

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ansible
You can't afford not to go the legal route.

Did this co-founder sign non-compete and confidentiality and IP assignment
agreements?

