
Ask HN: Kicked out by co-founders – what are my options? - anon29022014
Last year I won a hackathon contest with a large group including only one other dev. After the contest we decided to keep working on the project. For a couple of months I played a central role developing the fundamental product concept, business strategy, legal approach, and the coding itself. Periodically I raised concerns that we still hadn&#x27;t formalised equity share. My concerns were dismissed.<p>I discovered two of the non-devs had applied to accelerators without asking the team, despite me making it clear that in my opinion we didn&#x27;t need outside investment. I handed over my work-in-progress and emailed the team saying I was moving to the &quot;advisor tier&quot; which the two had previously described as coming with &quot;a small share of equity&quot;, and received positive replies from them. Since then I&#x27;ve been contacted by the other dev for assistance (he&#x27;d never heard of node.js - let alone the rest of the tech).<p>Less than a month later they asked to meet to give me a &quot;token of [their] appreciation&quot;. They then ambushed me with an IP transfer agreement and told me that in their opinion I deserved no equity. I didn&#x27;t sign it.<p>I contacted them explaining that if they wanted to buy me out, and retrospectively change our relationship, I would expect to be paid for the consultancy I&#x27;d provided, and quoted a fair fee. After 7 weeks I&#x27;ve chased them a few times and received a single request to meet in person (I declined as I want written records of all exchanges). The core two and the other dev have since enrolled in an accelerator - and therefore presumably lied about owning the full IP when they gave them equity.<p>What are my options?
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drewcrawford
I'm not a lawyer.

1\. Run, don't walk, to the copyright office and register. It costs $35, you
can do it online, and if you do it in time it puts you in a better negotiating
position. I'm not going to walk through the legal situation here, just do it.
Your lawyer will thank you.

2\. If you think owning the IP was a provision of the accelerator deal, you
could probably brick the deal by writing to the accelerator yourself and
pointing out that you own the IP. I wouldn't do that without a lawyer's ok,
but I would definitely make a threat as one software engineer to another to
the founders that it's within your power to contact the accelerator and see if
the cofounders blink.

3\. Is the IP being used by them right now? And how is it being used? There
are potentially some strategies there but I would need more details. If you
don't want to share that information here then lawyer up.

~~~
kordless
As Toby Keith quoted to me one day: "A word for a third". Copyright is implied
at the time of authorship and is legally enforceable regardless of
registration. Registering the copyright lays down a legal argument for your
ownership, but it doesn't preclude other's ownership of the project. Op said
"with a large group, including only one other dev", which means there are
potentially others involved as well. I agree with your #1 suggestion and would
add the application should include the names of all involved.

Before getting the attorney involved in _communicating_ with the other
parties, I'd suggest the Op mention to the other parties his copyright to the
code/name/project is implied and he's filed for copyrights on the project for
all involved. This gives the other parties something actionable, without
getting too aggressive. They may or may not choose to do the right thing at
that point.

~~~
gregcohn
Unless this is a work of content or some kind of content (e.g. a logo design?)
is integral to the startup, copyright is not the primarily relevant IP
doctrine here.

~~~
voidlogic
Wait- how is it not relevant if you wrote the source code?

~~~
gregcohn
Apologies for slow reply, had family in town.

IANAL, so disclaiming any sort of legal advice here, but the contributions a
founder would make in helping to collaboratively create a new company --
everything from a proprietary idea to business model to naming to market entry
strategy to logo to features and functions to contributions to code -- go far
beyond copyright. With circumstantial evidence pointing to collaborative
creation, and no agreement to the contrary of joint ownership (e.g. a "work
for hire" contract) or any agreement specifying specific proportions of
ownership, a court would be reasonably likely to rule that OP is a partial
owner of the entire company. (Whether it is worth the cost of winning this
claim is another matter entirely.)

Whereas copyright is the more limited right to own a specific expression (e.g.
writing, images, code syntax) in its exact or near-exact form.

Here is the form of agreement you might sign during the formation process if
you decided, after a startup weekend, to jointly form a company:

"Developer hereby assigns to the Company exclusively throughout the world all
right, title and interest (whether or not now existing) in (i) the subject
matter referred to in Exhibit A (“Technology”), (ii) all precursors, portions
and work in progress with respect thereto and all inventions, works of
authorship, mask works, technology, information, know-how, materials and tools
relating thereto or to the development, production, use, support or
maintenance thereof and (iii) all copyrights, patent rights, trade secret
rights, trademark rights, mask works rights, sui generis database rights and
other intellectual property rights and all business, contract rights and
goodwill in, incorporated or embodied in, used to develop or produce or use,
or related to any of the foregoing ((i), (ii) and (iii) are collectively
“Intellectual Property”)."

As you can see it includes copyright but is a superset.

[edit: formatting]

~~~
voidlogic
>As you can see it includes copyright but is a superset.

Thanks, I thought you were suggesting copyright wasn't part of this set.

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greattypo
I'm surprised by all the people telling you to lawyer up; that's silly. If you
want revenge, by all means, get a lawyer, get them kicked out of their
accelerator, and make sure the venture goes nowhere. The odds of the venture
being successful are so slim – if I were you, I'd sit back, relax, and wait to
see if anything comes of it. If by some miracle its successful, you'll have
plenty of negotiating leverage to bring them back to the table and find
something fair.

~~~
gojomo
There is some merit to this approach: continue to assert your IP ownership,
but don't take legal action - just preserve the option to do so, if the
venture takes off. However, you'd _still_ want to talk to a lawyer to do this
right.

Keep in mind that while shopping for a lawyer, you get essentially 30-60
minutes of free consultation (by phone or in person). So prepare a compact
summary of the situation (documents and timeline) and then talk to a lot!
(You'd be amazed how different their opinions are, so the sum-of-many is
worthwhile.)

------
calbear81
The first step is to talk to a lawyer and stop talking about details here.
Most likely, it will be resolved through negotiation, especially if a lawsuit
may hamper their ability to move forward with the accelerator they applied to.
Also, start pulling together all documents/evidence related to the work you've
done including emails, powerpoints, records of work done at the hackathon,
etc.

~~~
anon29022014
Thanks for your reply. I understand lawyers are the last resort, I was hoping
for other interim steps before incurring legal fees.

~~~
kevinpet
Going to court is the last resort. Asking a lawyer for advice on a legal
matter is not the last resort.

~~~
anon29022014
Thats a really important distinction I hadn't made in my head, thanks for the
advice

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pbiggar
They're in serious trouble without the IP assignment. If they want the IP,
they should pay you for it.

If they go ahead without the IP, and rewrite, then they shouldn't pay you for
it.

You've tried to play nice, its lawyer time now. Get the lawyer to post a
letter, you can probably pretty quickly agree to a small equity stake, such as
3-5%. That's a small enough amount that they'll just agree to it, a large
enough number that it'll pay you off if the company goes somewhere. It seems
roughly fair for the amount of work you put in.

~~~
UK-AL
There's whole host problems that owning shares of a company, with founders
that are actively hostile against you.

Defiantly need to make the terms watertight.

~~~
Dystopian
+1 this. The time you're going to spend with a lawyer making sure that they're
not screwing you (again) on dilution isn't going to be worth the value of the
equity.

At this stage it'd probably be more worthwhile for you to lawyer up and use
the IP leverage to get them to pay your consulting rate (itemize your
statement for time spent, even if it's an estimate).

A lawyer will probably advise you to send a last invoice and then a week later
a C&D. It can be quite persuasive along with letting them know that next steps
are alerting their accelerator to the IP that you own, and then the
possibility of a lawsuit.

If you have enough documentation and the case looks strong enough a lawyer may
even agree to work with you on contingency.

[Technically the accelerator would be well within their rights to sue as well
since it's pretty obvious they didn't disclose there was an ongoing IP issue
with one of their cofounders.]

------
eli
You appear to be asking a legal question, which means you _absolutely 100%
need to speak to a lawyer_. You must not rely on advice from strangers on the
internet. People posting here don't even know what jurisdiction you're in;
they can't possibly be providing you with the best legal advice. Most good
lawyers will give you a consultation for free. Take them up on it!

~~~
anon29022014
Thanks for the advice - another poster suggested this too and I've now
requested a consultation.

------
justincormack
Don't work with them again. Forget about it. Document it, and if they are
successful you can always threaten them. They probably won't be. If its
worthwhile and you really want to, you can carry on working on it, though I
would be careful, probably start again.

------
al2o3cr
Best option: celebrate finding out that your former partners were going to rip
you off _before_ you'd put in two or three more years of work.

------
bhousel
Save all correspondence. Wait until they are about to do a billion dollar
exit, then get a lawyer and threaten to tank their deal. Settle with them for
FU money.

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nanidin
You could just let the idea develop, and if it turns out successful, pull a
Winklevoss and reap the benefits without doing any more actual work on the
project...

------
majc2
1\. Tell them you're going to tell the accelerator about the IP dispute

2\. Just tell the accelerator that you believe they're infringing your IP.

3\. In future, get some form of paperwork signed early - I've used
[http://www.seedcamp.com/2011/09/seedhack-founders-
collaborat...](http://www.seedcamp.com/2011/09/seedhack-founders-
collaboration-agreement.html) in the past.

------
vinceguidry
Crappy situation.

If you're a developer about to go into business with non-devs, especially
young people who haven't started anything before, you need to be aware that
the fact that "without you, they have nothing" isn't going to do you any
favors. If you don't take a leadership position and continuously maintain that
position, they are going to look at you like you work for them. Then get all
mad and afraid when you start making demands that you think are personally
reasonable to make given your status as the pig and theirs as chickens.

Once that starts happening, you're in for a rough ride. These interpersonal
dynamics make startups much harder than you'd think they should be. I don't
think that people like Peter Thiel quite appreciate this when they recommend
going into business as a good alternative to college. Experience really does
count for a lot and if you don't have it, you could easily find yourself in
situations like this, where suddenly you have to lawyer up on people you
thought were your friends.

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ashreef
1\. Don't get angry, and never do something stupid

2\. Send them email clarifying all your rights/claims and list all what they
need to do to compensate you (money? ask higher than what you want)

3\. if they start negotiating the numbers, start negotiating till you reach a
good deal that satisfy you. (negotiate slowly, no equations, and always get
advice from friends who have good negotiation skills)

4\. if friendly negotiations fail, ask your lawyer to take legal action.

A best practice is to have a lawyer from day one. it's a lot of money but
worth it. (always ask your lawyer before saying/doing something. your lawyer's
job is to prevent you from doing something stupid).

Also, don't let that stop you from moving forward with your life. you built
something once, and you will do better with your next startup.

[Been there, done that]

~~~
saaaaaam
It's not always worth it. You can spend a lot of money on lawyers chasing
something that is worth nothing, and end up with nothing but a lawyer's bill.

------
primitivesuave
The legal path is difficult and very subjective. If you used github or some
other kind of version control, make sure you keep the repository history
intact in its original form.

If there's no money behind this idea, you're probably not going to get paid
regardless of whether there was a written agreement in place. This is assuming
you did the one base step of forming an LLC or corporation - if not, they can
be personally liable for paying you as an employee.

Sorry you got burned, it happens to the best of us. Good luck on your future
ventures - the best revenge is to be way more successful than those two.

------
alain94040
It looks like you had agreed to an advisor position, so why are you feeling
ripped-off now?

It's pretty clear that there is a disagreement about how to run the business,
and some of the team members would rather get funding, possibly so they can
hire more obedient developers.

Every time I get asked about such a scenario, I ask the same question: who of
the team is most likely to take this idea to success without the others? Are
you the one who is repraceable? It looks like two founders think so.

At this stage, my strongest recommendation is to leave your ego out of it. Do
you believe in the chances of the current team? If so, join them and leverage
your IP for the best deal. If not, move on and don't look back.

------
saaaaaam
You can spend time and money fighting for this, which may well land you with a
small percentage of a company that may or may not go somewhere - and a small
percentage that will doubtless be diluted over time - or you can move on with
your life and forego that stress and expense.

Only you know how far the project can go with what, to be honest, sounds a
fairly chaotic group of people steering it. If you really think it's worth
fighting about then go for it, with the awareness that you may expend time,
money and emotional effort but still end up with nothing much. Otherwise, move
on and make something else, and something better.

------
gnicholas
It is possible that your team orally established a partnership (see
[http://business.ca.gov/StartaBusiness/DefiningaBusiness/Gene...](http://business.ca.gov/StartaBusiness/DefiningaBusiness/GeneralPartnership.aspx)
if you're in CA). State law will determine what interest each of the partners
has in the event that no written agreement exists that lays this out. You
should definitely talk to a friend who is a lawyer, or reach out through
LinkedIn to find one you can trust. Good luck, and feel free to find me at
gmail if you want to chat further.

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yeukhon
> After 7 weeks I've chased them a few times and received a single request to
> meet in person (I declined as I want written records of all exchanges).

You can do this in person, with video tape and an attorney witnessed it. No?

Write to the accelerator organization and get an attorney to handle this
matter.

I might even go as far as revaling their names and make this into a public
issue. The more pressure they receive from your side, the more willing they
will work with you. But that's dangerous so use that as last resort.

------
fsk
What is your estimate on the value of the startup? If it isn't much, write it
off as a learning experience and move on.

The amount you pay a lawyer might be more than the value of your shares in the
startup.

If they are dishonest, being a minority shareholder in their startup isn't
worth much anyway. There's too many ways for them to cheat/dilute you later.

------
chasing
Save that IP transfer agreement (unsigned). It indicates that they think you
own the IP. Useful if push comes to shove.

~~~
voidlogic
This! Give this to your lawyer for safe keeping ASAP.

------
balls187
What is your desired outcome?

------
zik
They probably already read YC so when they read this and see all the potential
avenues you have against them they're going to come running with some kind of
settlement I'd say.

------
ATLobotomy
(Lazy) Devil's advocate:

[https://news.ycombinator.com/item?id=7324236](https://news.ycombinator.com/item?id=7324236)

------
ahp
start over; build it better than they are.

------
digita88
You will be surprised to know that this is more common than you may think so
don't take it personally. I have been on the giving and receiving ends.

\--- GIVING END ---

Armed with research "how to kick out a co-founder" you approach this person
and tell them that you are letting them go. The first time I did this, I never
gave them notice and blocked access to the work. They never mentioned this to
me, and they have never talked to me ever again and have therefore effectively
burnt a bridge - it was so bad, I did a presentation at an event once and the
guy walked out to "buy his meds".

The second time I've had to do this, I am nicer now and gave this person
written notice in advanced as well as an opportunity to draft an agreement as
well as an actual discussion of said agreement.

\--- RECEIVING END ---

Now, I was on the receiving end although the mental dissonance was not so
great as it was a partnership. I knew that it was not going well BUT being on
the receiving end is complete rubbish. Even after nearly 3 years, I wouldn't
event want to have coffee with these guys.

\--- BACK TO YOU ---

You mentioned that you played a central role in the product concept, strategy,
legal approach AND coding which means that these two 'non-devs' were not that
essential. Which begs me the question as to why you were not the one to kick
them out in the first place. The only excuse would be if the original concepts
have changed over time it would also require you to change your mind in
regards to the development of it. It's like being in a rock and a hard place
for the 'non-devs' if they need to get permission or approval from the coders
(ie you) regarding the product. It's a power thing. The non-devs don't want
permission from you. And you know that you don't have to code their
suggestions. You are the product because y'know, you're the dev! Maybe that's
another reason why they wanted to kick you out - they simply just don't want
you in their group (starting to sound a bit like high school...). I had a
discussion with an entrepreneur friend of mine (business guy) and his answer
was "the technical guys will always think that they can do it all themselves".

Keeping in mind the unpleasantness of this situation there are some things
that you did good. For example, not signing the IP transfer agreement (and
keeping it) which indicates that they recognise your IP in the first place.
Asking for equity share to be written down. Reacting in a mature way by
requesting to be paid for your consultancy fee - although keep me updated if
you go through with this. It has happened to another friend of mine - he was
with their company for several months, the business guys had senior positions
in big companies like BSkyB, used his savings to move to another city. When
things didn't turn out, he tried to claim a consultancy fee but was laughed
off! I swear anyone who has managed to work within the upper rings of big
corporations is a sign of psycopathy!

Now what are your options? Open up a start-up featuring your product. It is
still your IP. You may need to get 'non-devs' on board so this time around try
to have some sort of written agreement in place. The thing with this current
group is that if the non-devs play their cards well, they'll hold up the front
well enough to get some investment, and through that be able to purchase
coding talent to fill in the gaps. Eventually, down the track, the product
that was previously 'yours' will turn into 'theirs'. Welcome to the circle of
life!!

You can also nurse yourself with the fact that most start-ups will fail
including this one. So if you think that the product is good enough, then yes,
go ahead and start-up. Don't focus too much on your new competition and just
add this in your things to learn pile.

Another thing to keep in mind is that if you startup with this product it will
only provide a bit of extra validation and will probably push the other start-
up to do better. So think about doing this in stealth mode and go public when
ready. I know because this move has been done ;)

