Former employer sueing over intellectual property

[jayvee]

Hello,

I use to work for a small company handling their IT. I quit a few months ago after being employed for a few years. During which, I had developed a couple of in house applications, and they were never meant to be sold. About 2 years ago, I started a company on the side (a one man shop), and one of my company's products was based on a program I wrote for my former employer. The program in question has a similar interface to the original one I wrote for my former employer, but there are a number of distinct differences. Also my company's program was written from the ground up, using a different programming language. The internal structure of the code is completely different as well.

I started the company while working for my former employer. I kept them "in the loop" with everything I was doing . At no point did they question any conflict of interest. As of today, they are even using 2 of my company's programs, one of which they bought.

Then out of the blue, I received a letter stating that they are claiming intellectual property and they want royalties for ALL of my company's products. I refused to give them royalties and now they want to move into litigation. Due to a bad economy, my company is barely surviving, which puts me between a rock and a hard place. If I go any further with this, it will bankrupt my company, but I don't want to settle and pay them royalties.

Where should I go from here?

 

[Michael Wechsler]

Don't panic. Numerous companies try this tactic, right or wrongfully. It is up to them to prove that this is somehow their IP. I don't know the full set of circumstances here so you should definitely speak to an attorney. To begin, you'll know what your possible liability is and, second, you'll be able to fire a volley back saying "go ahead - sue me! Spend all the money you want but it will be down the toilet because you've got no claim - so think before you decide to file." Neither of you really wants litigation. If they see it's going to be a tough case, I'd find it difficult to believe they'll pursue this zealously. Best of luck.

 

[jayvee]

Thanks for your response. Like I mentioned in my parent post, I really don't have the funds to get an attorney at this point. My former employer wants "the attorneys" to talk, how can I handle this? What would happen if I just sit idle? It appears as though they are just bullying me into an agreement, which I feel they have no rights to.

 

[cbg]

I used to work for an intellectual property attorney and to be quite honest with you, at this point I would recommend at least consulting with an IP attorney. You don't necessarily have to hire one at this point but I think if the employer is talking litigation, you should at least get more specific advice than a message board can give you.

 

[jayvee]

cbg, I actually have been consulting with an IP attorney for a few months. He hasn't been much help, only interested in collecting money from me. After throwing a few thousand in his direction and not getting anywhere I figured I would do a little digging around myself, at least I wouldn't have to pay to get the answers. Frankly, I am getting better info doing this then I am paying my attorney. I am just getting ill throwing this kinda money towards an attorney and not getting anything out of it.

Anyway, I have had a few "negotiation" letters sent back and forth between me and the other party. My attorney basically took what I wrote up, stamped his name on the letter charged me a bunch of money and mailed it to my former employer.

It is evident, my former employer is not budging, each letter I receive from them they want more and more royalties, the amount they are requesting is obsured, and there is no way I can settle with what they want.

So what I was wondering, what repercussions can I expect if I simply sit idle? Do you have any advice as how I should deal with this situation, besides spending more money, that I don't have, to get a different attorney.

Thanks

 

[cbg]

If you simply sit idle, you are in effect gambling that the employer may decide to do nothing. If you win the gamble, then its no harm no foul. But if they actually do go ahead and pursue this, you need to be prepared.

 

[Michael Wechsler]

If you simply sit idle, you are in effect gambling that the employer may decide to do nothing. If you win the gamble, then its no harm no foul. But if they actually do go ahead and pursue this, you need to be prepared.

cbg has given you some very good points. When you say "no money" I'm not sure what that means. You've got a choice. You can respond to the employer by stating (a) my attorney isn't having an expensive conversation with your attorney. From my vantage point, you don't have any claims and my work is completely different. If you think you've got claims, send them over to me - which he may have already done and then you can get it evaluated as cbg says. (b) You can take a strong position and state you've evaluated his claims and he doesn't have a position. Your work is completely different, there are no responsibilities you had to him, legal or otherwise, etc.

Most important - I haven't heard yet why your employer believes he has claims against you other than your work ends up being similar and competitive to their product. Does he claim you had a non-disclosure agreement with them that is violated? Patents? Copyrights? Non-compete agreement? Anything specific? That is the general path you need to go in figuring out what to do.

 

[jayvee]

What I mean by "no money" is I actually have 2 employees and the company is bringing in just enough to pay for our salaries and the lease for our office. Because I am trying to grow the company, I am actually paying myself less than my 2 employees. So, in order to continue to pay an attorney, I would have to get rid of one of my employees, which I am trying to avoid. Thus stating I don't have any money.

Anyway, here is a little info about what my former employer claims. They do have an IP policy, and it states any inventions, or research conducted by individuals must be disclosed to them and are required to sign an agreement in accordance to the policy. Since my former job description didn't include research and development, I was never asked to sign any IP related agreements and never did. Furthermore, the application I created for them, was not an invention, there have been similar products on the market for the past 10+ years. They just didn't want to pay for one, so I volunteered to recreate the application for their internal use. Now, they claim that it doesn't matter if I signed their IP/research agreement or not, because it falls under the "umbrella" of the overall employment agreement. I spent many hours reading through all of their employment agreements that I signed and there is absolutely nothing related to IP/research.

Recently, they tried to claim that I used their equipment to create my company's products since I still worked for them when I started my company. Which is absured, I did all the work at home on nights and weekends, they claim they have proof, but have not provided any. So they are now trying to claim IP stating I used their equipment.

 

[Michael Wechsler]

I still think you may be better off spending a few hundred dollars on an attorney to make it go away with just a letter to them that will tell them that they have no claim. There is no need for an expensive conversation.

The "proof" may be more bluffing in order to scare you into turning over your company and IP to them. It happens all the time and, if you're telling us the whole truth here, then you've got little to worry about. They bear the burden of proof in going to court.

What's your other alternative? Probably writing to them a letter stating that, per discussion with counsel, it's clear that they have no claim. How are you communicating thus far?

 

[patenmet]

like others said attorney, but

1) They have no patent rights, either do you, they have expired
2) I see

Also my company's program was written from the ground up, using a different programming language. The internal structure of the code is completely different as well.

If that's true, they are out of luck, and you're good to go.
Although patents may be out the window, copyrights wouldn't be, and similar products are fine, but SAME CODE may not be, depending on the uniqueness.

See http://www.gimp.org/
and
http://www.openoffice.org/

Adobe/MS can only enforce patented features or generic ones.

This is broad info....seek an attorney who specializes in software copyright, not a general one.

 

[patenmet]

PS good luck, thats crap what they are trying to do.

 

[KrunchTime]

If you were employed by a company in a "work for hire" situation then they own the copyrights to the intellectual property that you create. If you were hired as an "independent contractor" then YOU would also own copyrights. Sounds like you re-wrote the program from scratch so you are probably protected. If you are incorporated then keep a bare minimum of money and assets in the company. Let this guy sue for chump change. It costs about 10 G's just to file a suit.