Ask HN: Ever been screwed around by a bigger company?

[sun_ra]

We are a small startup and have run into some trouble with a client over software. While starting up, we had a client that didn't have faith that we could deliver a product to them so we agreed to deliver them a product for a very low (insultingly low) cost. There were no conditions set up before we started that we would provide source code, just a verbal agreement that we would give them the finished software and that they would go on to sell it for us.

The reason we agreed to do it for such a low price is that they promised they would sell it on to their customers and we would then get to bill them for their subsequent sales. They have reneged on this and have decided they want the source code and will go on to develop it themselves.

So we designed it for them, and they love it, and they want to own it, source code and IP. We never agreed to this and we want to get paid for our work. The two options we are considering are to offer to sell them the IP and source for a decent amount of money, or to productize the software ourselves.

Just wondering what your thoughts were, if anyone has any legal considerations or precedents, or if anyone has dealt with a similar situation.

[CyberFonic]

"A verbal agreement is not worth the paper it's written on." - Sam Goldwyn.

If they acted unethically once, they'll act unethically again, and again. You'd have to hire some very heavy hitting negotiator to have any chance of a decent return by selling the IP, etc. Chances are they'll dither and eventually not cough up.

If you are really confident that your software is so much in demand by the marketplace, why not sell it to their competitor(s)? If there are more than one, then you'd white-label it and license the software to them. If there are no suitable competitors then productizing is a possibility. If you do decide to go down that path, please read and follow the ideas in Steve Blank's blog and book "7 Steps to Epiphany".

[ayers]

I love that quote from Sam. If you learn nothing else from this experience, I hope it is that you need to have everything in writing. Such an important thing that many of us sometimes forget amongst the pressures of everything that is going on.

[ScottBurson]

Um... it's The Four Steps to the Epiphany.

[sun_ra]

Got it. Will give it a read, cheers http://www.stanford.edu/group/e145/cgi-bin/winter/drupal/upl...

[CyberFonic]

Yeah RIGHT!, my memory doesn't have ECC !

[aces]

I wouldn't sell it to them outright. Potentially they have done due diligence on selling your software and have decided to buy the software from you and sell it themselves. If you are willing to take the risk, push them to license the software from you as a framework. Take a look at the models that ATG (now oracle), and sword-ciboodle crm have. They are established enterprise models where the framework is licensed to a company and the company is free to make changes of their own (but not resell). When you put in future updates you can sell them new licenses for the later versions.

[sun_ra]

A good idea and we have approached them about licencing but they are not interested. They are very gung-ho about getting their way.

[aces]

Then the question at this point is are you willing to take the risk and walk away and at what level is your confidence at in your ability to market and finish the code you currently have. You own the copyright to anything you make unless you explicitly give that right to them. I don't know what terms you signed with them however, sounds like you still retain the copyright. So I would try to negotiate them to an agreement where they can "own" the code to make whatever changes they would like (at the "own" price that they gave you), but with the caveat that they can not resell said code or offer a competing product into the marketplace. If they aren't being duplicitous this should be acceptable. If they are, well then at least you have your answer and you can base where you want to go from there (as in asking for a higher price based on potential revenues, etc). Just to give you a baseline, I've been in cases where the situation was similar and the work for building something specialized for resale was valued at $150-200 an hour (consultant hours). Just keep in mind though I have no idea what you are building and who the company is.

[gyardley]

So say 'no'. Say it a hundred times if you have to. They cannot force you to hand over the source.