
Ask HN: My firm wants my home-made project, what to do? - undefinable
My firm wants my home-made project for its own use and might sell it as their own product in future. How should I go about giving it to them ??
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chrisbennet
Cautionary tale: A friend and his co-founders developed a product and then
sold it (and their company) to a large company with the agreement that they
would get a percent of sales of "their" product. Their product (call it
"Product A") sold for something like $20K a license. What the acquiring
company did was to bundle it with their own $20K product ("Product B") only
now they charged $40K for Product B and gave away Product A (when purchased
with Product B) so they wouldn't have to pay the product creators their cut.

Happy ending: My friend and his colleagues eventually got their money in
arbitration.

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dotBen
Your wording is very vague but I'm going to assume when you say 'your firm
wants your home-project', you mean they want to buy it, rather than they are
demanding you hand it over under some kind of IP rights squabble.

Do you want cash and/or stock for the sale? Or, do you want a %age of future
royalties of the sale (that might tricky if they want to incorporate it into a
bigger product). (Or a combination of both cash/stock and %age)

Do you want to remain involved in the project, or even moved into the team
that would continue to work on this? If so you should get that contractually
agreed as part of the sale.

How much do you feel the project is work, and separately, how much has the
company indicated they are willing to spend? If it is more than, say, $20k I
would go and see a lawyer to draw up the contractual issues. Less then $20k,
you can probably do this on your own given the amount is small. You could also
incentivize the lawyer to negotiate on your behalf in return for a %age of the
sale - particularly worthwhile if you are not a good negotiator. It's also a
3rd party, so none of the mind games that could be used against you by
negotiating with your own boss/boss's boss/etc comes into play.

You might be wise to incorporate the project into a company, transfer the IP
to the company and then sell them the company.

You should also review your code to make sure you are not using any OS code
that has an incompatible license with selling the code.

Perhaps you could provide more answers and people could advise you better.

~~~
undefinable
I am in the initial stages of the talks. The manager has mentioned about money
being involved, I was looking for a "%age of future royalties of the sale"
kinda thing. Yes the product can be of more than $20K as per me.

~~~
ridruejo
Having faced a similar dilemma in the past back when I was an student, the
advice I got was that any kind of royalty-based agreement could easily get me
screwed depending on how it was structured (and the company likely has more
experience than you do on drafting such agreements). For example if the
royalty is based on number of licenses sold, they can just give it away for
free to customers and charge them a "maintenance fee", so you would get $0.
You get the idea.

~~~
ra
Yes. Something like x dollars per customer per year would be slightly less
optimised but more robust and defensible.

Don't forget that by providing you with sales / revenue / customer management
they are bringing a lot of value to the table.

Who will develop the product ongoingly? Who will provide patches and support?
These might seem like obvious questions to you but they must be discussed and
written in a contract.

Finally, make sure your contract includes sufficient legal protection. i.e.
the product has no guarantees and you are not liable for any cost, damages or
loss, direct or indirect. If things go ahead then you definitely need a lawyer
to help you with this.

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stonemetal
Depends on how you view the sale. If you are fully transferring rights I would
just sell it to them, with the price set at 100 dollars an hour for however
many hours you estimate you worked on it. If you plan on retaining rights I
would ask for 20-30% of that first figure plus 10-20% of revenue
generated(with some stipulation on what that number is if they give it away as
a value add).

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mtjl79
I think the question here is, how big is the company? Depending on how small
or large the company is depends on everything.

If they are a small company, they probably would not be able to afford a large
cash deal, and would probably try to sell you with royalties rather than a big
cash payment.

A medium sized company, a nice chunk of cash and small royalties if any.

And a large company - it's an all cash deal.

I would go for a lump sum cash payment if you can take it, and if you can add
royalties on top, more power to you. But again like previously stated, that
can be a fishy area.

You are in an employee relationship, so you will never be able to audit books,
or verify things that a normal founder would be able to easy reference check.

Get as much UPFRONT cash as you can. Consider royalties as a "bonus".

My 2 cents.

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DodgyEggplant
The most important piece: if you did it once, you can do it again. Remember
this.

Now the details:

<http://en.wikipedia.org/wiki/Work_for_hire>

You should read your contract with them. As a rule of thumb, if you are in an
"innovative" job, that is you were hired to invent, than they might have a
claim. Nevertheless, if you want to keep the job you will have to settle, but
they don't know it? or do they? I don't know the details... Can the project
run at all w/o you? Are you essential to maintaining it? You can negotiate
anything. Cash, future share of an exit/profits etc. Look at their demand as a
starting point of the negotiations.

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steve8918
I'm not expert, but there's a couple of things you could investigate:

Licensing: You could license it and then get a flat fee per license sold. This
gets around the problem that someone mentioned about getting a % of revenue
and then having the company bundle the product. Also, then you should sign you
to a non-compete, which they should pay you for, so that you don't undercut
them.

Sell outright: Figure out how much the software is worth, come up with a
revenue model and then sell it for 3x sales, or something like that.

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hagyma
i was in the exact same situation in a few cases, even not too long ago, just
on the other side. i was the ceo.

we are in webapp development, so basically everything related to that belongs
to the company.

now, one of the guys did a really cool tool in his freetime and showed it to
us a couple of weeks later.

my first question to him was: how much do you want for it? even though this
really had no connection to any of the things we did at the time, not even the
plans we had for the future.

still, we agreed on the price and he got paid out immediately.

exactly one month later a client came with somewhat similar needs for his
website, so we sold it without any update.

since the the sales price was quite above the aquisition cost, and we had to
do no work on it, the guy got a compensation later to become 50/50 with the
company in that subject.

me buying stuff from co-workers happened many times, i think it's great when a
company has an offer or an opportunity for you, other than your regular job.

it might not change a thing during workdays, though. :)

anyway, i suggest you go for it, try to get best offer you can get, but if you
name the price make sure you don't look like a fool by settling in a fraction
of your first offer, so price it right!

we'll try to help you if you ask :)

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drallison
Presumably you have, in place, an employment agreement and an Intellectual
Property agreement. You should review them and, if necessary, discuss the
situation with a lawyer who is experienced in this sort of thing. You also
need to know what your employer's intention is. If your "home-made project"
was not excluded in your employment/IP agreement they may feel they already
own the product.

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wmartono
based on what i understand, though most of the people might not agree with me

1\. if you are developing something, even tough as side project on your
offtime, it is usually own by the company you work for (it will be on your
employment contract most of the time)

2\. On the other hand, if you think you can make money on your project, and
based on what i heard in_California

[http://en.wikipedia.org/wiki/Non-
compete_clause#Exceptions_-...](http://en.wikipedia.org/wiki/Non-
compete_clause#Exceptions_-_valid_non-compete_agreements_in_California)

Non-compete agreements are automatically void as a matter of law in
California, except for a small set of specific situations expressly authorized
by statute.

3\. but the company is going to argue that you get the idea of developing the
side project based on your current project

4\. so at the end its a matter of getting what you want from the company vs.
making the situation into a terrible one.

You can ask for promotion with more money, or options and even run the project
as a stake holder.

that all depends on how you and your company react to each other.

~~~
Mankhool
To your Point 1.with the exception of only Nevada if I am correct.

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rhizome
If this is all the detail you can provide, you should just go ahead and get
off the internet and talk to a lawyer.

~~~
doctorwho
Don't hand over anything. Take a copy of your employment agreement to a lawyer
before you say another word about this to your employer.

~~~
rhizome
We don't even know if this is a contentious idea. Another reading indicates
that the OP _wants_ the company to have the project.

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robflynn
You left out some important information.

Are they trying to force you to give them your home-made/side project as they
believe they are entitled to the software due to your employment? Or, are they
interesting in purchasing the product?

~~~
undefinable
Nope they arent forcing anything and yes they have shown interest in buying
the product.

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varikin
Did you work on it at anytime during work hours or on work computer or other
property?

Are they offering to buy it from you or just claim that it belongs to them
because you are an employee.

I don't have any answers, but these questions are important.

~~~
undefinable
Nope never worked on it during work hours. It was coded at my home in my
personal desktop. Its not related to anything with what the company is into.
They are just looking at it as a future product of the company,

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abbasmehdi
Yippie! Try to look at them as a "first customer". Good job!

~~~
undefinable
Thank you. :-) They would be the first and last then I guess, cant quit my job
and cant search for more clients alone.

~~~
abbasmehdi
Just have them make the same mistake Bill Gates had IBM make (not sign an
exclusivity agreement), and then think about what to do next. Opportunities
might unfold if you keep an open mind.

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atomicdog
>How should I go about giving it to them ??

You don't "give" it to them... They're out of order if that's what they expect
you to do.

