Co-founder wants to start another company with my IP

[senidesantjagi]

I started a company in 2019. The company was exploring IP created by me prior to incorporation. The IP is registered and copyrighted to me only. The IP is a machine learning model that is able to predict the probability of treatment successes.

We raised £2 million round. Due to a number of disagreements we decided I would sell my IP to the company for a number we both agreed on. I spent £5K and 6 months drafting a settlement agreement and IP assignment deed. However, at the last week of negotiations we disagreed on a clause of the deed. This clause was added by him and his lawyers at the last week of negotiations. We decided we couldn’t come to an agreement and it was best to dissolve the company.

Now, my cofounder is starting a new company, with a similar name, same mission, and the same lead investor and £2m funding. He claims he is not using my IP.

I think it is copyright infringement. Even if he just reproduced my model with another dataset or method (he would have had time to reproduce it during these 6 months because he had access to more than 50 pages describing the methods. I had to share my methods because we were exploring ways to bring it to market, but I never shared the raw data and the raw code with him).

This whole thing happened last week.

1 - I have not signed the strike-off documents yet

2 - his new company is not registered in the company’s house yet.

What should I do? Should I ‘wait and see’? Should I be more proactive and stop him now?

[The_DaveG]

I would imagine that copyright infringement is difficult and expensive to both prove and defend in court.

I would suggest 2 things:

1) Speak directly with the investors. You have some type of relationship with them. Let them know what happened. Let them know that you're not releasing the IP. That you've gone through this process and your former co-founder who is both negotiating in bad faith and in their name. I would imagine that the prospect of a costly lawsuit will force a resolution or they will pull funding. Even if you do not sue today, there is still time down the road. They could become successful and you can go after them then.

2) Go on with life. Start your company. Pick better co-founders. Become successful. Don't spend years of your life obsessed with something that didn't turn out.

These are hard learned lessons that I wish I knew 10 years ago.

[senidesantjagi]

Thank you. I will take this advice and contact the investors.

[Iolaum]

Is the investor aware of the legal risk the new company is under if you aggressively sue them? He may be willing to settle things if that increases the chances of the new company staying afloat.

[senidesantjagi]

My cofounder told me they are aware and that “they don’t see me as critical person to the business” (quoting). He also told me they don’t want to talk to me. I doubt any of that is true, but not 100% sure. I could reach out to them, but would that be a good idea? And how could I do it in the best way possible?

[Iolaum]

Speaking with the investor directly is necessary for this. From my limited (books and movies) understanding of law, a protracted legal battle can tie up resources in a company. Even if they win it will slow them down. Note to mention all that taking place in a bad economic environment (Covid-19). You need to plan with your lawyers how much legal pressure you can put, given your resources and the proof you have of the damage done to your IP. You can then make best and worst case scenarios of how much that legal pressure will hit the offending company and discuss those scenarios with the investor. If you can both see a mutual beneficial way to avoid that legal mess you could end up with a deal.

P.S. If you were to start a company like your co-founder is doing, would you also have the same IP problem he has? Cause if not maybe the investor can invest in you, if you wanted to try that?

Obviously there are a lot of unknowns so don't take anything I wrote here at face value. Do your due diligence.

[senidesantjagi]

I could start a company without my cofounder. I already have plans to do so, but I won’t use the same business idea or IP. I have a different vision (hence our conflict to start with). I agreed he could keep the IP and I would be free to do something else, in exchange of a ‘buy out’. But after 6months of negation he kept adding new terms to the buyout and the last one, to which I couldn’t agree, were very restrictive covenants of 24 months. His argument was that he didn’t want to let me use his money to start my own business in competition with him. I could approach the same investors, but with something new, something fresh. The IP is mine, and my plan is to license it to another business at this stage.

[battery_cowboy]

Consult a lawyer

[senidesantjagi]

I am already doing that. Each lawyer has a different strategy. Some are more aggressive than others. I wanted to hear Thoughts from The community.