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Can anybody comment on how technology transfer between two firms works where one firm is say 80% musk + a + b and the other, say, 40% musk + x + y + z ?

Both firms are technically separate, right? I suppose x,y,z would mind if Musk just took the tech to Boring company. And a,b would mind if he chose Tesla (if it were not the best)?

Or are people flexible in this regard? In the initial stages?




Law school answer: if Musk is on the board of Tesla and wants a deal to happen with BoringCo, but also has an interest in BoringCo, Musk discloses the conflict, recuses himself from the vote, and a + b plus x + y + z have to approve the deal.

Conflicts of interest are common for board members -- you choose board members for their connections. So it's not surprising for a board member to bring up an opportunity that is advantageous to the company, but where they also have some personal interest on the outcome.

That's a problem, though, because there are divergent interests: Musk should rationally vote his 80% in favor of the deal even if it decreases the value of the company, as long as it increases the combined value of his share in the two companies. If he did that, a+b would have a winning shareholder lawsuit, because it violates a board member's duty of loyalty to put personal interests above the interests of the company.

So we neutralize that possibility by disclosing everything and allowing the non-conflicted members to vote on the deal. If both sides approve it, we can assume that it individually increases the value of both companies, Musk has done his job as a well-connected board member, and no one has a legal claim based on the conflict of interest.


Very well explained, thank you. I was assuming things will happen as if they were "separate companies" but had no clue about the recusal and how the board room operates vis-a-vis new deals and voting.


I would think that everyone (besides Musk) in the two companies would prefer clean lines of origination and transition for IP between the two companies. This means there would be a typical contract between two companies: Company B licenses for a fee the tech from Company A; or Company B acquires for a price the tech from Company A; or, as I saw at my previous startup employer, some kind of partnering arrangement to further develop, together, Company A's tech. I have no idea how it's decided which company owns what in the case of additional development between both companies.

The point is: they agree on a contract that hopefully keeps ownership well delineated in the event of an ownership change, or outside lawsuit, or ... whatever legal event may come up.


Would it be ok for the companies to agree to license (non-exclusive perpetual bla bla) all technology free of cost? Would that be legal?


Most certainly legal. If certain investors don't like it, they can try to change it or maybe sue the company over the decision, but there's nothing about a "non-exclusive, royalty-free, perpetual" license that has questionable legality.


They're not flexible. They want their pound of flesh. That said, if the contract terms between the two companies are agreeable to those people, or if the contract was negotiated under a process no prone to conflicts of interest, then all is good.


What about a contract signed between two parties (Tesla, TBC) in which TBC acquires some of Tesla's technology for a symbolic price? Would that have any problem?


Other Tesla shareholders could well have a problem with this, up to the point of suing Tesla management for it. Tesla management has a duty to make the deal with terms that are as beneficial to Tesla as possible, and if they breach that duty, the shareholders can sue them for the loss.

For the initial projects, it's possible that Tesla will license tech to TBC for a nominal price, because they can justify it as expanding the market -- if TBC is initially successful, it will greatly expand the market for that tech.


I think the Tesla board is fine with the technology sharing between Musk companies because Tesla often also benefits from SpaceX technology sharing.


Didn't Tesla open all of their patents?


Tesla opened some of their patents, and only if you in return give all of your patents to Tesla.

This is also why no carmaker except for Mercedes has used Tesla patents at all, and Mercedes simply bought 5% of Tesla to get the patents.


All patents are open.

Tesla offered to share them with other auto OEMs, if they sign up to agree to Tesla's terms.




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