Startup crisis. Dorm room style.
One of my roommates is a film student, and he is taking a class in the film school on Internet media this semester. The class is brand new and has never been offered before. They basically spent the entire semester going over web 2.0 buzzwords (blog, wiki, mash-ups, news feed, beta, social bookmarking, social network, RSS, etc). They were also assigned to come up with a "cool idea for a website" for their final grade, and they are actually expected to develop this site.
My roommate's group quickly found they had no idea where to start. He came to me with some questions, and at first I was glad to help him. I started by walking him through the steps involved in purchasing the domain name and hosting plan. Then he started asking more questions, and I eventually had to tell him that I didn't have time to help him all the time and that the class was just ridiculous.
A week later he tells me that he wants to pay me to work on his project. All I would have to do was make a working prototype. At the time it didn’t sound like a bad idea, and it sounded like fun. I thought I could make some money and help a friend out, and I would be able to copy and paste code from other things I have worked on to cover the majority of the project. So I told him I would charge $20/hr, and I agreed to a cap of $400 since it was coming out of his pocket.
Then a few days later, he comes into my room with a stack of papers. It turns out to be a 17-page contract that his dad, who happens to be a lawyer, wrote up. The contract would give my roommate full ownership of the code, ip, license, etc, and all for only $20/hr with a cap of $400. It also states that I would not be a partner or have any equity. I scan it over and quickly decide that there is no way I am going to sign it (and I still haven’t). Not to mention that I was just scared of a 17-page contract and feeling a little outgunned when his dad is a lawyer.
So a week later, he doesn’t seem to care that I didn’t sign his dad’s contract, and he pays me for the first couple of things he needed to meet in-class deadlines.
Now, the project is looking really good, and I’m starting to think that their idea combined with my awesomeness might actually have potential. What should I do?
I feel like I am too easy to take advantage of, and I wish I knew the rules on the legal side of things much better.
87 comments
[ 3.3 ms ] story [ 138 ms ] threadIf they do give you equity, make sure they're not only doing it because otherwise you won't do the project, which is the situation the last crisis poster had. If every member of the group is not really happy with the arrangement, you will have problems.
This is rather different from the Facebook case, where there was pre-existing code when Zuckerberg was engaged.
If the father really thinks it's a valuable proposition, it's in his interest to clean up the intellectual property situation sooner rather than later. I'd have a friendly word with them to say you think the whole project is much more likely to succeed if you've got equity as well. Once you've got an agreement on terms that you all feel are fair, that's the time to get the lawyers to put it into writing.
If they really want to get all legalistic on you, first think whether you want to be in business with them, second you could suggest that they pay your costs to hire your own lawyer.
It doesn't sound like anyone wants to be overly legalistic; it sounds like someone's father is an aggressive lawyer type that saw an opportunity to negotiate the best possible terms. The OP and his partners need to draft some type of agreement. I don't think there is any need to involve lawyers immediately, wait until you incorporate. For now, just get something on paper you all agree with. Send it to friend's lawyer dad to legalize if you so desire. Get a free corporate registration and registered agent from him if you can. Only a Delaware C corp.
http://en.wikipedia.org/wiki/Work_for_hire
So, I don't think you can make this work out.
But, if you wanted to try anyway, I'd suggest drawing up your own contract as a counter-offer. They aren't hard to write, and they don't have to be long. They just have to describe, in very plain language, what work you'll perform, what you expect to receive in return, and what to do if things don't work out.
Just because they have a good idea doesn't mean you have to be involved, there will be other great ideas that come your way as well.
And hell, if this is successful, believe me: you don't want to be in business with the kind of guy who a) goes to his father for help on such a simple thing and b) would think a 17-page contract was a good idea in any way.
If the project has any future beyond the prototype, your friend would be crazy not to ask you to stay involved. The time to discuss compensation and risk is then. If you want something to happen, do a good job with the project and make your partners excited by the prospect of doing more.
While doing so, tell Roomie (and RoomieDad) that you want equity. Explain that you like the idea, and think you have a lot to contribute. Also explain that if they're not interested in giving you equity, that's cool-- you haven't signed anything giving up the IP on what you wrote, and while you're happy to let him use it for his class project, you retain the commercial rights to your code.
Try not to make it sound adversarial. Explain how psyched you are about the idea. And, when you get a revised contract from RoomieDad, get a lawyer of your own to look it over before you sign it. (Again, prostrate yourself before Mom and Dad if you have to-- it's not pleasant, but an hour of a lawyer's time is worth it.)
I agree that you don't want to be adversarial -- just explain that you're not comfortable with those terms, that you hope you can work something out with them that makes sense for everyone, and if you can't, wish them luck with their project.
Two things to remember: first, if something can't get sorted out amicably, these aren't the right people to be working with anyway, so you're better off finding that out up front. Second, if you're the only one who can deliver a product, you're always the one holding the cards.
Good luck.
Since he did the work for hire the IP rights belong to the partner, not to him. At least, he doesn't have the ability to win a court case there due to the mismatch in legal representation.
Again, do not let the dad write even one word of the contract. Signing the dad's contract will be way worse than walking away from the project.
this page probably explains the situation better than my random comments:
http://www.developerdotstar.com/mag/articles/daniels_softwar...
If his dad is a lawyer, you are going to be in a trouble if you actually get into some kind of a disagreement with the guy. He can say that you did in fact have a verbal agreement and that he showed you the papers and you agreed.
$400 is very, cery little money if there is a possibility of legal fight involved and by giving you the contract he has laready showed that he's serious about the legal stuff.
Any way you interpret it, though, it's a warning sign.
If he can't tell his father that a 17 page contract for a $400 gig is inappropriate and counter-productive, then he's no business partner worth having.
It's just not worth it. There are other ideas in the world. There are other art students. There are certainly better paying, more deserving consulting gigs. Just bail now, before you kick yourself later for not bailing sooner.
If you need a list of creative excuses I'll offer a few:
-- One of your pet goldfish died and you can't work while you're in mourning.
-- You've converted to a new religion in which the Sabbath runs from Monday to Saturday. You could work on Sunday, but that's when all your homework needs to be done.
-- You need money to finance your expensive drug habit, so you got another gig that pays $150 per hour. Unfortunately, it takes up most of your time.
-- Walk around in public with one arm in a sling. Claim, sorrowfully, that you can't type anymore. Bonus points if you switch the sling from arm to arm every other day.
I like the way you think.
Hence sort this out now before a small problem becomes a big problem :)
IANAL, but that's a bad sign.
It might be that by virtue of continuing working and continuing accepting payment, you are already contractually obligated, etc.
You should stop work and return whatever money you've accepted.
They made you an offer. You rejected it, smartly. Now it is time for your counter-offer. You already mentioned several downsides to their offer (you can't understand it, no equity, too low pay, probably lots of personal liability for you). You already mentioned that you don't even need this deal (because you are young and you could be doing other things).
I don't understand why you don't see your own leverage here. He wants you to do work RIGHT NOW. If he needs the work done right now, then he will capitulate to your demands, if you have the guts to make any. The first thing you need to do is STOP WORKING RIGHT NOW.
Then, throw away the 17 page contract and write a 1 page contract of your own, where (a) you disclaim all liability, (b) you can walk away at any time, (c) you get significant equity (if you are doing all the work, you should be getting at least 50%), and (d) you get paid a real wage ($20 an hour is not a real wage for a programmer). Give him that one-page contract and tell him to sign it if he wants you to continue working on the project.
He will object. He will want to make changes to the contract. You have the leverage, so tell him no. Definitely do not let his dad insert anything into it--you must write every word yourself, in crisp, clear, English.
If you can convince him to agree to a contract where you have no significant risk and you have significant benefits, then the deal can continue. Otherwise, you have to walk away, because his lawyer is too big of a problem. (Notice that this turns the tables so that his dad is a liability for him, not an asset.)
You might think that it is not possible to convince somebody to sign a contract where you have no risk and you receive a lot of benefits. Not True. I've done it twice on contract programming gigs. Each time, the (small) company signed the contract because they needed something RIGHT NOW. Then came back later with changes suggested (demanded) by their lawyer. I rejected all changes (think "I am not willing to sign anything except the backs of my checks"), they got mad, and they either canceled the project (1 time), or got over it (1 time). You just have to stand firm.
Personally, I still wouldn't take the deal because it sounds like your "partner" is adversarial. The point I am trying to make is that you don't have to be scared of lawyers, and there is no need to be intimidated when you have all the leverage.
> Personally, I still wouldn't take the deal because it sounds like your "partner" is adversarial.
This is what stood out most in my mind as I read the OP. I wouldn't go into business with anyone that I didn't trust like my own brother. If he is trying to make you sign some 17 page contract as a college kid, imagine what would happen if there were ever any real money to divvy up.
It might be that father has told the son what is best to do (to buy all the rights for the copyrighted material), and the son trusted father's authority.
I don't know if in your country a vocal contract has any power. Right now you can prove that this material is under your copyright, but he can't prove that he payed you for _all the rights_. So in my legislation system you'd still have 100% of control over the situation.
I"d take the money you have already earned, find a cheap lawyer and make sure who is the owner of the code. If its you, take it and find another partner. If its him, give it to him and rewrite it on your own with a partner you can trust. Your roommate has to find another programmer or do the work himself. If I understand you right, it is work for his classes.
Doesn't he risk his grades, if it turns out that he has payed someone to do his college work? If that is so, he is in your hands. Ask from him whatever you want.
You should tell them the truth: you've reconsidered the potential of the project and you want to re-negotiate for continued involvement. They have the option of hiring someone else to pick up where you left off. If they exercise that option, then move on to another project. You probably learned something and made some cash.
If you ask me, the dad probably wasn't thinking "I'm gonna screw this programmer as hard as I can! muahaha!". It was probably more like "I want to make sure that my son doesn't pay some guy to make a website, then have him copy it and put up a competitor".
Just tell the truth and state your point of view and it'll probably work out fine.
And then you can all go, get a beer, and discuss some reasonable terms like everyone else suggested.
For a dormroom friendship price, he should get a dormroom friendship product. The contract indicates he is expecting a professional developer product, so he should expect to pay a professional developer price.
Having said this in these ~60 comments you probably have at least 10 different opinions and everyone seems to KNOW that their interpretation is right. Assuming half of the people here actually know what they're talking about then this is clearly insanely complicated and you need professional help.
As such my vote, for what value it has, goes behind this idea.
This film class seems like a great class, both of them are learning something. I also think that the roommates father is trying to teach him something, and its up to our young entrepreneurial hacker friend here to offer some learning back.
My parents have gotten involved in a similar way to our YC friend's roommate, and the only thing it did was make things more complicated. Yes I learned about contracts at an earlier age, but what my folks should have been teaching me was that I WILL HAVE THOUSANDS of great ideas, its not the idea that is important, its the ability to follow through on it. I fear that this 17-page contract has already jeopardized that.
I don't think any of the parties involved here should be trying to put all of their eggs in one basket. Their goal should be about fostering the relationship, if this project turns out better than a failure, then the next one has an even better chance of succeeding. I think the goal here is to try to learn as much as you can about building business relationships, and not about the project. I still do business today on handshakes, and sometimes, i move to a contract, but it all depends on the intended length of the relationship.
Unless you stated you would keep on working for free after the $400 (which I think probably would be the softest point in the verbal agreement later even if you did), the best you can do is work until that contract expires and negotiate a better written one with equity.
Let me repeat: you verbally agreed to work when he offered to "pay [you] to work on his project". You need to do the best you can to meet that agreement because you agreed to the deal.
You need to return the contract to them and firmly state you did not agree to this during the verbal agreement. If he wants you to sign something more than you already verbally agreed, he has to negotiate. Be sure he understands you want equity opportunity during any renegotiation because you are interested in the site and want to continue to work to help it grow after the contract is over.
I think that since you never did sign a written contract with your roommate that either explicitly transferred IP or contained the magic words "work-for-hire", you and/or your school still own the IP and the roommate just has a license to use it for his class project. But I'm not a lawyer and this is really the sort of thing you need a legal consultation for. Since there's a chance your school owns the IP, maybe someone in your school's technology licensing office would be willing to tell you where you stand for free. If not, your state bar association may have a referral service where you can get a brief consultation for a low (as lawyers go) fixed rate. (At least, that's what they have in Massachusetts.)
If you own the IP, then you can counteroffer from a much stronger bargaining position. That is, if you decide to pursue this arrangement at all; I tend to agree with the people who say this guy is not worth doing business with.
Legally, you’re not well off here: taking money is an implicit acceptation of the contract.
Technically he needs your help since the project is still in its infancy.
Talk it out with your friend; proceed with a friendly conversation. Offer to give back the money, explain the possibilities of being together in this project and go for at least 50/50 equity with respect to the fact that you made a mistake. Mainly don’t be apologetic, at the same time don’t look down on him and avoid as much as you can the lawyer dad during the discussion. He has as much to lose as you do.
First - YOU own all the rights to the code, since you created it - even if they paid you. If you sign that contract, THEY own all the rights to the code.
Second - It is up to you how you want to proceed, but if you want to own the rights to the code, just keep working without a contract.
Third - DON'T involve any other lawyers or write up your own contract or call the school's tech transfer office. This is only going to set up the situation to favor the other guy or the school. Remember, YOU own everything.
Fourth - The lawyer dad knows all of this and that is why he wants you to sign the contract. Lawyers are assholes - DON'T let him bully you into signing anything.
Are you absolutely certain of that?
I'm not an attorney myself (nor am I trying to be flippant or argumentative), but it seems the combination of verbal contract, his continuing to do the work specified by his roommate, and his acceptance of payment may create problems for the O.P.
Lawyers are assholes - DON'T let him bully you into signing anything.
Very true: standard legal M.O. on the first contract document is to try to get away with anything.
I.e., they will expect you to push back and remove some terms (and if you don't, that's a bonus win for them).
Most programmers want to avoid any sort of conflict and confrontation, especially with lawyers. You're correct in assuming that this may create problems. The potential problem in this situation is that the lawyer dad is going to be an asshole and try to intimidate the programmer. This sucks, and the programmer should maybe back out of the project if he wants to avoid this.
You don't have to take anybody's word for it. Most of title 17 is reasonably accessible:
Ownership:
http://www.law.cornell.edu/uscode/17/usc_sec_17_00000201----...
See especially the definition of "work made for hire" here:
http://www.law.cornell.edu/uscode/17/usc_sec_17_00000101----...
A “work made for hire” is— (1) a work prepared by an employee within the scope of his or her employment; or
I read that as: if someone hired you to write some code for them, then the code you write seems to be work made for hire, in which case they own the copyright.
"But if the creator of the work is not an employee, but instead a freelancer, than the "work made for hire" requirements of the independent contractor prong must be satisfied. This means that the work must be specially ordered or commissioned by the publisher, the work must fall into one of the nine enumerated categories of work, and there must be a signed writing between the parties where they agree that the work will be considered a "work made for hire."
Your roommate is paying you to do his homework
and
In order to "earn" that money, you're providing him with work that was already done before.
Am I the only one who thinks there is something fundamentally wrong here?
This thing was f*cked up before it started and needs to be terminated. Now.
If your roommate is in college to learn something, leave him alone and let him learn.
If you want to start a business, either drop out of college and start it or do it outside of class.
If you are as "awesome" as you claim, then find one of the 12,309,384 other ideas out there and run with it.
Nothing good will be harvested from bad seeds planted.
Oh, and while you're at it, read this:
http://paulgraham.com/good.html
There's nothing wrong with selling copies I don't think. What about that girl who made millions selling the same sparkly MySpace skin to thousands of different high school girls? I've mostly copy and pasted old stuff and changed it to fit this project. So it's not really work I've already done. Think of it like when the Quake 3 game engine is customized for Jedi Knight II or something.
As long as that's what your buyer thinks he's paying for, right.
But if he thinks he's paying for custom work and you deliver something already made for someone else, I'd call that a problem.
a) If the film school is a college, couldn't your roommate get expelled for cheating?
b) Would not the college own the IP anyway?
b) I really don't know
Only if OP were employed by the school for the creation of that IP. University research grants often have a commercialization clause in them that requires some involvement of the school in the event a product results from the research...but independently funded projects certainly do not fall into this category.
Basically, you must complete your original verbal agreement, or his lawyer father may come after you for breach of contract. You do not have to enter into any other contracts. If he (or his dad) don't like this, ask them if they will cancel the contract, in which case you're off the hook completely.
If you want to be a part of this venture beyond your original agreement ($400 for the contract work), come back with your own proposal (ideally, a co-founder size equity stake).
It makes sense for you to get a co founder position, since it appears that you are the only one who can create the site, plus they will need someone to keep up the site and implement changes as they need them.
The downside is that from what I can see this person might not be the best choice for a co founder. Especially if he undervalues the need for a technical co founder on a "web 2.0ish" startup. The upside is that you do have access to an inexpensive lawyer.