tech-company, intellectual-propertyThis is a story about two companies created to work on the same startup idea. Let’s call one company “Elephant” and another company “Castle”.
My situation is the following:
I tend to think that “Castle” must buy intellectual property rights from “Elephant”.
But, obviously, my cofounders prefer to say that “Elephant” generated nothing useful. And it’s virtually impossible to check how much code is going to be reused by the new company.
Which arguments I can use to convince them to buy intellectual property rights?
I don't see it as worth the time and money to fight over this right now. There isn't anything of value yet (I assume Castle isn't making money).
It sounds like Castle is "stealing" software owned by Elephant. I'll throw out a suggestion that might make you feel better though I don't know if there is any rational legal basis for it at all. Here goes:
Write a letter to Castle stating that it is using Elephant software without permission. Accordingly, you view yourself as having X% ownership in Castle. By them continuing to use Elephant software, they agree to you having this ownership stake.
After Castle starts making money, do like Eduardo Saverin of Facebook fame and get rich!
This could blow up in so many ways so treat this as crazy info you found on the internet.
It depends a bit on the ‘x’. If you spend 3 years writing 1M lines of code, and the other company intends to use it, it obviously represents a value. The IP is part of company Castle, that is: unless you’ve open sourced it or put something else in your license agreement.
There’s all kinds of ways to fight over this, including lawyers… Note that they will also just negotiate a number…
So what’s a reasonable number? You should realize that ‘value’ is very vague concept, because everyone values stuff differently. For example, I value my laptop a million euro’s. We can argue about it for ages, without making any progress… One thing is certain: your lawyer will love the argument.
Personally I’d just make a ballpark number, add some percentage on top of it and simply negotiate with the other founders without any emotion. So for example, if there’s 3 years of work and no significant customers, I’d say 3 years * 200 days * 8 hours * 50 eur/hour = 240K eur seems like a reasonable payment to Elephant. Explain your calculation, negotiate for 280K eur, settle for 200K eur or whatever you consider reasonable. Preferably one-off; but if that’s not possible, consider payment in terms. I wouldn’t go for stock; after all, you’re not on the best of terms. Realize that the alternative of the lawsuit is not pretty for anyone.
After that, drink a good glass of alcohol, cry like a baby, get it settled, take your loss like a pro and go your separate ways.
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