Ask HN: Startup stole our software, and raised $2MM with it. What should we do?
We recouped about half the money through PayPal's dispute process. We let the rest go, deciding it wasn't worth trying to squeeze blood from a turnip.
Fast forward to today, the very same company is on the front page of HackerNews:
https://news.ycombinator.com/item?id=8225738
The business' name is Pigeon.ly / fotopigeon.com (when we worked on it it was called pichurz.com / picturgram.com). The owners names are Fredrick Hutson and Alfonzo Brooks.
So, HN, what should we do? We have a signed contract with them which states that the software becomes our property in the event of non-payment. Should we assert ownership of the software? Of their business? Should we sue them? Should we reach out to their investors (Kapor Capital and Base Ventures)? Should we include Kapor Capital and Base Ventures in the suit?
I would really appreciate any advice HN can offer. We will of course rely on our attorney's advice primarily, but I am optimistic that someone here has dealt with a similar situation before.
Thank you for your time!
76 comments
[ 1.9 ms ] story [ 127 ms ] threadIf you decide to sue never talk to anyone about this again. In my experience lawyering is better left to the lawyers.
Disclaimer: I'm not your lawyer, this isn't legal advice. Do get your own lawyer to advise you on this, one familiar with licensing disputes.
First, we're trusting one person's word over another on HN; this is one of the wonderful reasons courts exist. And let's say hypothetically the person who just posted this loses in court, this nice little shaming comes back and bites them as a defamatory attack.
Hey, I just discovered a good use for a patent troll!
[1] It would be unfortunate if this drama played out on HN, he-said she-said style. Although the eventual resolution of this will be very interesting and relevant to developers and entrepreneurs so I expect to read about it here some day.
Whether or not I can share the eventual outcome of this matter, I do plan to write an article on concrete steps that developers can take to protect themselves in situations like this.
The OP's chances of recovery strictly went up when these company got funding. Compared to before, the OP has everything to gain and nothing to lose -- before, he had already written off this project as a bad project. Now, the company that has gotten funding needs to make sure that everything is on the up-and-up.
Assuming OP's story is true, it's entirely in OP's power to say "we won't license the code, FOAD," which would force an expensive and possibly fatal rewrite of the code at this late date. OTOH, with that leverage, OP can name his price. If he demands too much, the VCs might just pull the plug. If the OP's goal is revenge, mission accomplished. But revenge doesn't put food on your family.
That said, they have every incentive to burn the $2m fighting this claim, because otherwise they have nothing. The best result for OP would be a negotiated sale of the software for some $$, or perhaps equity in the business if they can stomach the risk. Nobody wins if the legal dispute eats up all the money and sours the business.
Anyway, as others have said: shut up, get lawyer.
Decide what you want to get out of this:
Do you want to destroy the company? Perhaps take them over/replace them in some way? (A good lawyer will ask "What does this accomplish", although deterrence is not illegitimate in my viewpoint).
Get paid for your work, with suitable interest and penalties?
Get a piece of the action of the other company?
If you're telling the truth, there's a good chance you've got them in an exquisitely delicate situation. While they've officially raised a lot of money, if it just happened there it's unlikely it's all been transferred to their bank account. Even if so, you can mess them up going forwards with justified legal action.
For those panicking over defamation, truth is an absolute defense to it, you just have to be able to afford to get your day in court. Although I'll note everyone who's every been in a lawsuit, on whatever side, says it becomes a consuming thing, you've got to think about the opportunity cost. Something a good lawyer will bring up.
I wonder how this company could have made it through DD with a venture capital firm, since that would have involved contract review.
More than 10 years ago, a larger company stole my start-up's work, including our typos. We (when I say "we" in this comment I mean all the people in the start-up) internally agreed to handle it through the court system. Anyway, we had a loose cannon, and at a security convention he was telling everyone he could how that other company stole our stuff (and went directly to the competitor's booth to bitch at them). A year later, people remembered that the software was stolen, but they didn't remember which party was which -- half of them thought our company was the thief. [1]
This was before the days of blogs, so you might have better luck today with the public getting basic facts right, but you're spinning a giant gun around and it just might end up pointed at your face when you are done.
[1] This was among the reasons we decided to handle it through the courts. It was also the last time said loose cannon ever went to a conference during my tenure there.
Or, couldn't you argue that the Pigeonly guys charging back themselves is an admission that they shouldn't have the IP?
Sounds like (e.g.):
1) Contract is for $10K.
2) Client pays $4K.
3) Client stops paying.
4) Client issues chargeback for $4K.
5) PayPal dispute resolution recovers $2K of the $4K chargeback.
It's possible to claim that the PayPal dispute was a settlement of the purchase price, but it seems like it would be a stretch if that actually flies in court. I doubt that the PayPal dispute resolution covered the remaining $6K that was due, rather than just the dispute over the $4K that was already paid.
Already commenting on HN is too far. It should have all been private. Do no further damage.
For qeorge: If you win in court, depending on the outcome and or any settlement, you can potentially still write about the whole thing in a blog entry if you still feel the need to be public about it.
http://i.imgur.com/agJIP.gif
2. Hire a lawyer.
It's been said, but there's not much value in discussing this in public; it just introduces risk/complication.
Are you really going to put any weight on insight gained from this thread? If not, the cost/benefit of keeping this up is out of whack.
In that case, the "benefit" become solely the name/shame which isn't an awesome reflection of professionalism, either.
You could be sued for liable or malicious falsehood.
However, I would say that your judgement in maybe panicking and posting so publicly is far from the mark. You should remove this post if you can as soon as possible. Only bad things can come of this!
Second, gather your contract and lawyer up right now. The reality is you're probably still squeezing blood from a turnip (despite the VC); your best move would probably be asking for a licensing agreement in lieu of a bulk sum.
Third, I think it makes sense to bring this to the attention of the VCs - it won't hurt (the way publicly outing them might) and they could possibly work at mitigating/mediating this.
Again, $2M might seem like a lot to you, but this is mostly budgeted already. If, like most startups, this is relatively short-lived, you may want to recoup via a license, although this is a new contract that would need to be drawn up fresh.
This seems like the best option. The VCs will want to minimize risk. If they think they can pay you a reasonable sum to make the past dispute go away, this may be your best option. It will most likely not involve expensive lawyers for too many billable hours.
Don't do anything without talking to your lawyer. This advice could lead to claim a of tortious interference.
Hell this whole post could be tortious interference.
While the advice may be trite, it is particularly apt here to emphasize the importance of consulting with a lawyer who is strong on IP issues.
In particular, this would normally need a careful evaluation of the contract language, which may or may not define what happens in the particular case you describe. If it should not adequately define what happens in express contract language, then there are default rules that potentially govern what happens. Those rules may or may not support your position. I have bumped into cases where the default rules basically say that the contract assigns the IP rights to the customer regardless of non-payment, with the remedy for the developer simply being to sue for payment. I am not saying that such rules govern your case because it is not possible for anyone to really know your case absent a proper legal review by a knowledgeable lawyer. I am saying you may be making assumptions about your legal rights that may or may not be correct and you should not casually just assume that they are.
It goes without saying as well that you should be cautious about using pejorative language about the person who did this in public because of the obvious risk of setting yourself up for a defamation claim. Again, in the end you may be justified but why complicate your own claims by giving those who did whatever these people did free ammunition to fight you with.
I don't mean to sound unsympathetic. It hurts to get screwed and it sounds like that happened here. Just be careful to go about it the right way in trying to correct the wrong that did occur.
I know your upset, and want to hit them hard – but outing them probably won't do much good in the long run.
Everyone knows that it's how well you implement, not whether you developed the idea or not. Clearly they implemented your idea that otherwise would have been nothing. If you had never written it someone else would have written is just as well as you did!
That's how the world works nowadays. Right??!?
I believe that you should always lead with your best. A situation such as this can definitely impact your business in a negative way. It's more of a one-sided allegation and your choice of wording is defamatory. At this point, consider hiring a lawyer. They may not be able to tell you what you should do, but they can definitely tell you what NOT to do, which is just as important sometimes.
Good luck.
Maybe do a little research about the project first...you come off as pretty ignorant with a statement like that.
I imagine this can't be the first time something like this has come up.
Payment + chargeback is a bit different than non-payment; complicating the fact is that you received some money from PayPal.
Aside from PayPal, did you pursue any recourse?
Does your contract have a mutual non-disclosure clause? If so, I suspect you just violated it.
I'm sure when you saw their funding event, you were upset. Bottom line: if everything had gone according to plan, you would have been paid, and they'd still have their funding event.