Ask HN: My firm wants my home-made project, what to do?
My firm wants my home-made project for its own use and might sell it as their own product in future. How should I go about giving it to them ??
13 comments
Cautionary tale: A friend and his co-founders developed a product and then sold it (and their company) to a large company with the agreement that they would get a percent of sales of "their" product. Their product (call it "Product A") sold for something like $20K a license. What the acquiring company did was to bundle it with their own $20K product ("Product B") only now they charged $40K for Product B and gave away Product A (when purchased with Product B) so they wouldn't have to pay the product creators their cut.
Happy ending: My friend and his colleagues eventually got their money in arbitration.
Happy ending: My friend and his colleagues eventually got their money in arbitration.
Your wording is very vague but I'm going to assume when you say 'your firm wants your home-project', you mean they want to buy it, rather than they are demanding you hand it over under some kind of IP rights squabble.
Do you want cash and/or stock for the sale? Or, do you want a %age of future royalties of the sale (that might tricky if they want to incorporate it into a bigger product). (Or a combination of both cash/stock and %age)
Do you want to remain involved in the project, or even moved into the team that would continue to work on this? If so you should get that contractually agreed as part of the sale.
How much do you feel the project is work, and separately, how much has the company indicated they are willing to spend? If it is more than, say, $20k I would go and see a lawyer to draw up the contractual issues. Less then $20k, you can probably do this on your own given the amount is small. You could also incentivize the lawyer to negotiate on your behalf in return for a %age of the sale - particularly worthwhile if you are not a good negotiator. It's also a 3rd party, so none of the mind games that could be used against you by negotiating with your own boss/boss's boss/etc comes into play.
You might be wise to incorporate the project into a company, transfer the IP to the company and then sell them the company.
You should also review your code to make sure you are not using any OS code that has an incompatible license with selling the code.
Perhaps you could provide more answers and people could advise you better.
Do you want cash and/or stock for the sale? Or, do you want a %age of future royalties of the sale (that might tricky if they want to incorporate it into a bigger product). (Or a combination of both cash/stock and %age)
Do you want to remain involved in the project, or even moved into the team that would continue to work on this? If so you should get that contractually agreed as part of the sale.
How much do you feel the project is work, and separately, how much has the company indicated they are willing to spend? If it is more than, say, $20k I would go and see a lawyer to draw up the contractual issues. Less then $20k, you can probably do this on your own given the amount is small. You could also incentivize the lawyer to negotiate on your behalf in return for a %age of the sale - particularly worthwhile if you are not a good negotiator. It's also a 3rd party, so none of the mind games that could be used against you by negotiating with your own boss/boss's boss/etc comes into play.
You might be wise to incorporate the project into a company, transfer the IP to the company and then sell them the company.
You should also review your code to make sure you are not using any OS code that has an incompatible license with selling the code.
Perhaps you could provide more answers and people could advise you better.
I am in the initial stages of the talks. The manager has mentioned about money being involved, I was looking for a "%age of future royalties of the sale" kinda thing. Yes the product can be of more than $20K as per me.
Having faced a similar dilemma in the past back when I was an student, the advice I got was that any kind of royalty-based agreement could easily get me screwed depending on how it was structured (and the company likely has more experience than you do on drafting such agreements). For example if the royalty is based on number of licenses sold, they can just give it away for free to customers and charge them a "maintenance fee", so you would get $0. You get the idea.
Yes. Something like x dollars per customer per year would be slightly less optimised but more robust and defensible.
Don't forget that by providing you with sales / revenue / customer management they are bringing a lot of value to the table.
Who will develop the product ongoingly? Who will provide patches and support? These might seem like obvious questions to you but they must be discussed and written in a contract.
Finally, make sure your contract includes sufficient legal protection. i.e. the product has no guarantees and you are not liable for any cost, damages or loss, direct or indirect. If things go ahead then you definitely need a lawyer to help you with this.
Don't forget that by providing you with sales / revenue / customer management they are bringing a lot of value to the table.
Who will develop the product ongoingly? Who will provide patches and support? These might seem like obvious questions to you but they must be discussed and written in a contract.
Finally, make sure your contract includes sufficient legal protection. i.e. the product has no guarantees and you are not liable for any cost, damages or loss, direct or indirect. If things go ahead then you definitely need a lawyer to help you with this.
Another huge issue is just accounting. You need to be able to check the books or they can just choose to pay you whatever they want.
A simple cash deal is probably something you can do yourself, or with very little assistance. Anything more complicated requires an experienced attorney.
A simple cash deal is probably something you can do yourself, or with very little assistance. Anything more complicated requires an experienced attorney.
Depends on how you view the sale. If you are fully transferring rights I would just sell it to them, with the price set at 100 dollars an hour for however many hours you estimate you worked on it. If you plan on retaining rights I would ask for 20-30% of that first figure plus 10-20% of revenue generated(with some stipulation on what that number is if they give it away as a value add).
I think the question here is, how big is the company? Depending on how small or large the company is depends on everything.
If they are a small company, they probably would not be able to afford a large cash deal, and would probably try to sell you with royalties rather than a big cash payment.
A medium sized company, a nice chunk of cash and small royalties if any.
And a large company - it's an all cash deal.
I would go for a lump sum cash payment if you can take it, and if you can add royalties on top, more power to you. But again like previously stated, that can be a fishy area.
You are in an employee relationship, so you will never be able to audit books, or verify things that a normal founder would be able to easy reference check.
Get as much UPFRONT cash as you can. Consider royalties as a "bonus".
My 2 cents.
If they are a small company, they probably would not be able to afford a large cash deal, and would probably try to sell you with royalties rather than a big cash payment.
A medium sized company, a nice chunk of cash and small royalties if any.
And a large company - it's an all cash deal.
I would go for a lump sum cash payment if you can take it, and if you can add royalties on top, more power to you. But again like previously stated, that can be a fishy area.
You are in an employee relationship, so you will never be able to audit books, or verify things that a normal founder would be able to easy reference check.
Get as much UPFRONT cash as you can. Consider royalties as a "bonus".
My 2 cents.
The most important piece: if you did it once, you can do it again. Remember this.
Now the details:
http://en.wikipedia.org/wiki/Work_for_hire
You should read your contract with them. As a rule of thumb, if you are in an "innovative" job, that is you were hired to invent, than they might have a claim. Nevertheless, if you want to keep the job you will have to settle, but they don't know it? or do they? I don't know the details... Can the project run at all w/o you? Are you essential to maintaining it? You can negotiate anything. Cash, future share of an exit/profits etc. Look at their demand as a starting point of the negotiations.
Now the details:
http://en.wikipedia.org/wiki/Work_for_hire
You should read your contract with them. As a rule of thumb, if you are in an "innovative" job, that is you were hired to invent, than they might have a claim. Nevertheless, if you want to keep the job you will have to settle, but they don't know it? or do they? I don't know the details... Can the project run at all w/o you? Are you essential to maintaining it? You can negotiate anything. Cash, future share of an exit/profits etc. Look at their demand as a starting point of the negotiations.
I'm not expert, but there's a couple of things you could investigate:
Licensing: You could license it and then get a flat fee per license sold. This gets around the problem that someone mentioned about getting a % of revenue and then having the company bundle the product. Also, then you should sign you to a non-compete, which they should pay you for, so that you don't undercut them.
Sell outright: Figure out how much the software is worth, come up with a revenue model and then sell it for 3x sales, or something like that.
Licensing: You could license it and then get a flat fee per license sold. This gets around the problem that someone mentioned about getting a % of revenue and then having the company bundle the product. Also, then you should sign you to a non-compete, which they should pay you for, so that you don't undercut them.
Sell outright: Figure out how much the software is worth, come up with a revenue model and then sell it for 3x sales, or something like that.
i was in the exact same situation in a few cases, even not too long ago, just on the other side. i was the ceo.
we are in webapp development, so basically everything related to that belongs to the company.
now, one of the guys did a really cool tool in his freetime and showed it to us a couple of weeks later.
my first question to him was: how much do you want for it? even though this really had no connection to any of the things we did at the time, not even the plans we had for the future.
still, we agreed on the price and he got paid out immediately.
exactly one month later a client came with somewhat similar needs for his website, so we sold it without any update.
since the the sales price was quite above the aquisition cost, and we had to do no work on it, the guy got a compensation later to become 50/50 with the company in that subject.
me buying stuff from co-workers happened many times, i think it's great when a company has an offer or an opportunity for you, other than your regular job.
it might not change a thing during workdays, though. :)
anyway, i suggest you go for it, try to get best offer you can get, but if you name the price make sure you don't look like a fool by settling in a fraction of your first offer, so price it right!
we'll try to help you if you ask :)
we are in webapp development, so basically everything related to that belongs to the company.
now, one of the guys did a really cool tool in his freetime and showed it to us a couple of weeks later.
my first question to him was: how much do you want for it? even though this really had no connection to any of the things we did at the time, not even the plans we had for the future.
still, we agreed on the price and he got paid out immediately.
exactly one month later a client came with somewhat similar needs for his website, so we sold it without any update.
since the the sales price was quite above the aquisition cost, and we had to do no work on it, the guy got a compensation later to become 50/50 with the company in that subject.
me buying stuff from co-workers happened many times, i think it's great when a company has an offer or an opportunity for you, other than your regular job.
it might not change a thing during workdays, though. :)
anyway, i suggest you go for it, try to get best offer you can get, but if you name the price make sure you don't look like a fool by settling in a fraction of your first offer, so price it right!
we'll try to help you if you ask :)
Presumably you have, in place, an employment agreement and an Intellectual Property agreement. You should review them and, if necessary, discuss the situation with a lawyer who is experienced in this sort of thing. You also need to know what your employer's intention is. If your "home-made project" was not excluded in your employment/IP agreement they may feel they already own the product.
based on what i understand, though most of the people might not agree with me
1. if you are developing something, even tough as side project on your offtime, it is usually own by the company you work for (it will be on your employment contract most of the time)
2. On the other hand, if you think you can make money on your project, and based on what i heard in_California
http://en.wikipedia.org/wiki/Non-compete_clause#Exceptions_-...
Non-compete agreements are automatically void as a matter of law in California, except for a small set of specific situations expressly authorized by statute.
3. but the company is going to argue that you get the idea of developing the side project based on your current project
4. so at the end its a matter of getting what you want from the company vs. making the situation into a terrible one.
You can ask for promotion with more money, or options and even run the project as a stake holder.
that all depends on how you and your company react to each other.
1. if you are developing something, even tough as side project on your offtime, it is usually own by the company you work for (it will be on your employment contract most of the time)
2. On the other hand, if you think you can make money on your project, and based on what i heard in_California
http://en.wikipedia.org/wiki/Non-compete_clause#Exceptions_-...
Non-compete agreements are automatically void as a matter of law in California, except for a small set of specific situations expressly authorized by statute.
3. but the company is going to argue that you get the idea of developing the side project based on your current project
4. so at the end its a matter of getting what you want from the company vs. making the situation into a terrible one.
You can ask for promotion with more money, or options and even run the project as a stake holder.
that all depends on how you and your company react to each other.
To your Point 1.with the exception of only Nevada if I am correct.
If this is all the detail you can provide, you should just go ahead and get off the internet and talk to a lawyer.
You left out some important information.
Are they trying to force you to give them your home-made/side project as they believe they are entitled to the software due to your employment? Or, are they interesting in purchasing the product?
Are they trying to force you to give them your home-made/side project as they believe they are entitled to the software due to your employment? Or, are they interesting in purchasing the product?
Nope they arent forcing anything and yes they have shown interest in buying the product.
Did you work on it at anytime during work hours or on work computer or other property?
Are they offering to buy it from you or just claim that it belongs to them because you are an employee.
I don't have any answers, but these questions are important.
Are they offering to buy it from you or just claim that it belongs to them because you are an employee.
I don't have any answers, but these questions are important.
Nope never worked on it during work hours. It was coded at my home in my personal desktop. Its not related to anything with what the company is into. They are just looking at it as a future product of the company,
Yippie! Try to look at them as a "first customer". Good job!
Thank you. :-)
They would be the first and last then I guess, cant quit my job and cant search for more clients alone.
Just have them make the same mistake Bill Gates had IBM make (not sign an exclusivity agreement), and then think about what to do next. Opportunities might unfold if you keep an open mind.
[deleted]
How did 'they' become aware of it? I would talk to a few lawyers.
>How should I go about giving it to them ??
You don't "give" it to them... They're out of order if that's what they expect you to do.
You don't "give" it to them... They're out of order if that's what they expect you to do.