3 ms·

I'm not familiar with any of the people involved and haven't read the pleadings. That said: * The lawsuit may make it more difficult for Shred Video to raise f

by declan 11y ago

I'm not familiar with any of the people involved and haven't read the pleadings. That said: * The lawsuit may make it more difficult for Shred Video to raise funding, but the linked writeup and YC's blog post don't exactly show Smule in a positive light. The "if we're wrong, we'll win" quote from Smule is telling. I'd want a very good explanation of this mess before entering into a partnership with Smule. * Smule is warning that any employees using company property on company time to build their own startups exposes them to legal liability. This is a perfectly reasonable position. (Note I'm not saying that Shred's founders did that, only that Smule's point is correct as far as it goes.) * California law in particular is more startup- and founder-friendly than most and makes some elements of employment contracts unenforceable as a matter of public policy. It likely doesn't apply here, but it does mean if you build and sell, say, drones in your spare time while working a California pharmaceutical company, that employer wouldn't have an IP claim (even if the employment agreement was broad). * Shred's founders should have made a clean break and not retained any hardware or access to code after they left. That's what I did when I quit my job at a large publicly traded company last year to found https://recent.io https://recent.io -- I returned the work laptop on my last day and haven't done any work for them since. But this is hindsight, I know!

ryandamm 11y ago
Just a quick correction on point 3, lest someone get too confident they're in the clear: the law about employees owning their own inventions is the default in California, but you can sign an employment contract that signs away those rights. (IANAL, by the way.) Also relevant to HN readers: a lot of those protections are moot if you're acqui-hired: the CA-specific protections about noncompete being unenforceable does not apply if you were an equity holder during an acquisition. Just an FYI. Also, the default is narrowly defined: if you do it entirely on your own time, with your own equipment, and without using any ideas etc from your employer, you're in the clear. Maybe most importantly, you're only "clear" in theory; in practice you're 'fine' for exactly as long as your (ex-)employer doesn't decide to sue you. Also, keep this in mind when it comes to lawyers and lawsuits: they produce a huge, huge amount of uncertainty. We'd like to think of the legal system in this country as a process that consistently produces just outcomes; in practice it's noisy and biased against small operations. You can be 100% morally in the right, and even 100% legally in the right, and still have a bad outcome. Specifically: I've been told at length that getting 'damages' when you're sued without cause -- that is, having your legal bills paid by the frivolous party -- is an extremely high bar to clear. Furthermore, lawsuits and appeals can drag on for months and years (particularly absent any binding arbitration clauses). Does it do your startup any good to get your money back 18 months later? Probably not, and if you die along the way they win by default. That last point is what Smule's CEO seems to be counting on when he says 'we win if we're wrong'. And I guess I'm just saying, he's correct. He's not right, he's definitely wrong, but he's correct. Just my (morbid) two cents.
- declan 11y ago
  On point #3, I think we're talking about two different things. You mentioned "noncompete" agreements, which is an important topic but unrelated. What I was talking about is intellectual property assignment clauses. Excerpt: Under California law, an employee cannot be required to assign any of his or her rights in an invention he or she develops “entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information” unless: when the invention was conceived or “reduced to practice” (actually created or a patent application filed) it related to the employer’s business or actual or “demonstrably anticipated” research or development, or the invention resulted from any work performed by the employee for the employer (California Labor Code, § 2870) http://www.intellectualpropertylawfirms.com/resources/intellectual-property/patents/is-your-pre-inve http://www.intellectualpropertylawfirms.com/resources/intell... Unfortunately you are correct about the Smule CEO being correct (assuming he was quoted accurately).
  - ryandamm 11y ago
    I think the operative phrase there is 'related to the employer's business' -- the other issue is noncompete / IP assignment clauses will be written to be broad, then they force you to win on merits: you have to prove it doesn't relate to their business, and if you lose (because courts introduce a degree of randomness), it doesn't matter what the protection was. And of course, that possibility has a chilling effect, which is sort of the point of the overly-broad IP assignment. (But yes, you're totally right, I was conflating IP assignment and noncompete... I've been tangled up in both.)

by declan 11y ago

ryandamm 11y ago

Just a quick correction on point 3, lest someone get too confident they're in the clear: the law about employees owning their own inventions is the default in California, but you can sign an employment contract that signs away those rights. (IANAL, by the way.) Also relevant to HN readers: a lot of those protections are moot if you're acqui-hired: the CA-specific protections about noncompete being unenforceable does not apply if you were an equity holder during an acquisition. Just an FYI. Also, the default is narrowly defined: if you do it entirely on your own time, with your own equipment, and without using any ideas etc from your employer, you're in the clear. Maybe most importantly, you're only "clear" in theory; in practice you're 'fine' for exactly as long as your (ex-)employer doesn't decide to sue you. Also, keep this in mind when it comes to lawyers and lawsuits: they produce a huge, huge amount of uncertainty. We'd like to think of the legal system in this country as a process that consistently produces just outcomes; in practice it's noisy and biased against small operations. You can be 100% morally in the right, and even 100% legally in the right, and still have a bad outcome. Specifically: I've been told at length that getting 'damages' when you're sued without cause -- that is, having your legal bills paid by the frivolous party -- is an extremely high bar to clear. Furthermore, lawsuits and appeals can drag on for months and years (particularly absent any binding arbitration clauses). Does it do your startup any good to get your money back 18 months later? Probably not, and if you die along the way they win by default. That last point is what Smule's CEO seems to be counting on when he says 'we win if we're wrong'. And I guess I'm just saying, he's correct. He's not right, he's definitely wrong, but he's correct. Just my (morbid) two cents.

declan 11y ago
On point #3, I think we're talking about two different things. You mentioned "noncompete" agreements, which is an important topic but unrelated. What I was talking about is intellectual property assignment clauses. Excerpt: Under California law, an employee cannot be required to assign any of his or her rights in an invention he or she develops “entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information” unless: when the invention was conceived or “reduced to practice” (actually created or a patent application filed) it related to the employer’s business or actual or “demonstrably anticipated” research or development, or the invention resulted from any work performed by the employee for the employer (California Labor Code, § 2870) http://www.intellectualpropertylawfirms.com/resources/intellectual-property/patents/is-your-pre-inve http://www.intellectualpropertylawfirms.com/resources/intell... Unfortunately you are correct about the Smule CEO being correct (assuming he was quoted accurately).
- ryandamm 11y ago
  I think the operative phrase there is 'related to the employer's business' -- the other issue is noncompete / IP assignment clauses will be written to be broad, then they force you to win on merits: you have to prove it doesn't relate to their business, and if you lose (because courts introduce a degree of randomness), it doesn't matter what the protection was. And of course, that possibility has a chilling effect, which is sort of the point of the overly-broad IP assignment. (But yes, you're totally right, I was conflating IP assignment and noncompete... I've been tangled up in both.)