What rights do early stage co-founders have before legal docs are signed?

1. Hackers Code of Collaboration
WORKSHOP SPONSORS
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2. Hackers Code of Collaboration
Presents
Presented by:
Matthew Herd &
Elizabeth Rosenthal
2

3. Expert
Panel
• Louis
Rappaport
• Attorney
from
Blank
Rome,
LLP,
concentrating
his
practice
on
business
and
corporate
matter
• Speci?ically
emphasizes
emerging
and
middle
market
businesses
• Fred
Wilf
• Attorney
from
Wilftek,
LLC,
concentrating
his
practice
in
the
?ields
of
technology,
intellectual
property,
business
and
commercial
law
• Rick
Nucci
• More
than
15
years
experience
as
an
entrepreneur,
Chief
Technology
Of?icer,
and
President
of
the
Philly
Start
up
Leaders

4. 4

5. Introduction
• How
many
people
have
been
involved
in
an
entrepreneurial
project?
• How
many
people
have
been
to
a
hackathon
or
start-­‐up
weekend?
• Does
anyone
know
the
difference
between
hackathon
and
startup
weekend?

6. Survey
of
Entrepreneurs
• Assume
someone
carries
on
a
project
started
at
one
of
these
events
• Who
can
use
the
materials?
• Who
cannot
use
the
materials?
• What
are
the
restrictions?
• Who
has
the
right
to
participate
in
a
future
company?
• When
should
you
form
a
legal
entity?

7. SnapChat
Story
• One
founder
with
idea
who
brought
in
a
business
focused
co-­‐
founder
who
in
turn
brought
in
a
coder
• The
2
newer
co-­‐founders
then
proceeded
to
force
out
the
initial
idea
founder
• The
2
newer
co-­‐founders
changed
the
name
to
snapchat
&
developed
the
company
to
what
it
is
today
• Initial
idea
founder
suing
the
2
newer
co-­‐founders
for
ownership
for
his
part
in
the
initial
company

9. Facebook,
Part
I
• Winklevoss
twins
allege
that
they
hired
Mark
Zuckerberg
to
code
the
project
• Zuckerberg
took
the
project
and
made
it
his
own,
cutting
the
Winklevoss
twins
out
• The
Winklevoss
twins
sued
because
Zuckerberg
stole
the
idea
and
ultimately
settled
their
claim

10. Facebook,
Part
II
• Eduardo
Saverin
served
as
Facebook’s
Chief
Financial
Of?icer
and
business
manager
during
the
website’s
launch
in
2004
• Later,
Saverin
appears
to
have
been
removed
from
the
company
and
his
ownership
interest
diluted
• Saverin
sued
Facebook
and
won
a
settlement
worth
approximately
$2.2
bn
as
of
the
Co’s
IPO

11. Thoughts?
• How
would
you
suggest
we
avoid
this
issue
in
the
future?
• What
happens
if
you
work
with
a
couple
people
during
a
weekend
event
and
create
an
idea,
but
then
you
go
off
and
start
a
company
that
ends
up
being
really
successful?
• Any
suggestions?

12. Intellectual
Property
Breakdown
• Patents
=
right
to
exclude
others
from
making,
using,
or
selling
your
invention
• Copyrights
=
any
original
work
of
authorship
• Trademarks
=
any
words,
logos,
or
symbols
which
identify
the
source
of
goods
• Ideas
=
not
protected
on
their
own
• Just
because
you
thought
of
an
idea,
doesn’t
mean
you
are
entitled
to
ownership
of
the
company
• However,
if
you
do
work
on
something,
you
may
have
intellectual
property

13. Default
Law
I
• Absent
an
agreement,
the
creators
of
a
patentable
idea
must
join
together
to
?ile
for
a
patent.
Once
issued,
any
inventor
can
use
or
license
(non-­‐exclusively)
for
their
own
pro?it
• Copyrightable
works
also
owned
by
creators
and
can
be
licensed,
but
they
must
account
to
each
other
for
pro?its

14. Default
Law
II
• By
default,
the
company
has
no
rights
to
the
intellectual
property
created
• Must
be
assigned
by
the
creators
to
the
company
• No
requirement
that
creators/founders
keep
information
and
inventions
con?idential
• Intellectual
property
is
not
the
company!
• Ideas
≠
ownership
of
the
company
• Thus,
participants
have
no
right
to
participate
in
the
company

15. Possible
Solutions
• Unanimous
/
Majority
Consent
by
Creators
• Absent
unanimous/majority
consent,
the
Founders
shall
not
engage
in
any
of
the
following
activities:
• Make
any
website
or
code
or
services
available
to
the
public
for
a
fee;
• Accept
paid
advertising
on
any
website;
• Accept
revenues
of
any
kind;
• Incur
any
debt
or
seek
or
accept
any
outside
?inancing;
or
• Incur
any
?inancial
or
contractual
obligations
or
liabilities
of
any
kind

16. Possible
Solutions
• Free
Use
by
all
Creators
• The
agreement
is
between
Hacker01
and
Hacker02.
We
agree
as
follows:
• Each
of
us,
individually,
is
free
to
use
any
programming
concept
shared,
discovered,
or
created
during
the
_________
project.
• Each
of
us
hereby
grants
a
full,
non-­‐exclusive,
free
license
to
the
other
to
use
any
code
or
binaries
from
the
above
project.
This
means
that
each
of
us,
individually,
is
free
to
use
anything
we
create
for
the
project
above
as
part
of
a
separate
larger
project
with
a
signi?icant
amount
of
additional
functionality.
• In
the
event
that
the
project
above
is
successful,
we’ll
take
reasonable
efforts
to
come
to
a
new
agreement
with
the
goal
of
creating
a
separate
entity
to
manage
and
develop
the
project
further.

17. Possible
Solutions
• Idea
creator
owns
all
intellectual
property
• Absent
consent
by
the
project
originator,
the
Founders
shall
not
engage
in
any
of
the
following
activities:
• Make
any
website
or
code
or
services
available
to
the
public
for
a
fee;
• Accept
paid
advertising
on
any
website;
• Accept
revenues
of
any
kind;
• Incur
any
debt
or
seek
or
accept
any
outside
?inancing;
or
• Incur
any
?inancial
or
contractual
obligations
or
liabilities
of
any
kind

18. Proposed
Approach
• To
avoid
the
?ight
down
the
road
between
the
original
creator
of
the
code
project,
business
idea
etc,
we
propose
some
rules
of
thumb:
• When
this
is
an
evolving
idea,
agree
that
all
participants
are
free
to
use
the
IP
• When
starting
to
narrow
it
down
to
a
‘real’
business
venture,
assign
all
IP
to
the
venture
• In
any
event,
there
is
no
right
for
participation
in
the
company
• Remember
that
IP
assignments
are
defensive
&
not
offensive

20. Hackers Code of Collaboration
WORKSHOP SPONSORS
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21. The ELC is accepting client applications for Fall 2014
drexel.edu/law/ELC
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