Mar 302012
 

Here’s a question somebody recently posted to answers.onstartups.com, which should strike fear into the heart of every startup founder:

[. . . ] Since I am the lead developer, and since I have never signed anything relinquishing my ownership of the code, if I just left the company would probably fail. Since I don’t wish this upon them, I would like to find afair way to leave.What is the best approach for me to leave without harming the future potential of the company (while getting a fair share myself)?
There has been very little money spent by the other co-founders (around $2000 total), however I feel that my product (an Android application) is quite valuable, and them purchasing it makes the most sense to me.
What options are available for this purchase? What have others done in this situation, and how can I ensure my financial reimbursement while not directly harming the future potential of the company?

In another post, the same person indicated that he had not been paid anything.

So, this company’s crown jewels are in the hands of a person who’s dissatisfied with how things have been going. Even though he’s not being terribly vindictive here, this is clearly a scary situation for the company. Worse, it’s a problem they could have easily avoided by simply having him sign a simple copyright assignment before he started working.

Of course, all is not lost for the company — this individual may not own the copyright even if he never signed anything, because a “work made for hire” created by an employee is owned by the employer, not by the individual. For that purpose, we have to ask more than just “Did the company file a form W-2?”  Instead, we have to ask whether the individual was a “Servant” under agency law and, if so, whether the work was performed in the scope of his employment.  In other words, the company will have to get the lawyers involved.

In the end, a lawyer could have prepared a simple copyright assignment form for $50 – $100.  But, because the company didn’t get that done, it’s now potentially looking at legal bills in the thousands.

[Photo courtesy of miggslives on Flickr via a creative commons license.]