Software Ownership

[Grayspawn]

I am a UK citizen ‘Mr A’; I set up a US Inc in Delaware by the name of ‘XXX inc’ with a US citizen. He originally set it up and appointed me a Director. We allocated shares to ourselves; I was awarded X' amount of shares in XXX Inc for my UK Ltd company of which I was the sole director and this UK company effectively owned my software designs, ideas and developed templates. These then became the property of the XXX Inc (the US Inc).

My then partner Mr C (a coder) in the US venture then built/coded the software based on my ideas on behalf of the ‘XXX Inc’ for which he was allocated Y' amount of shares on the understanding that he would build the system as per my designs which were now the property of ‘XXX Inc’. Effectively he received equity in X' Inc for completing the coding.

My partner Mr C then bought T’ amount of shares for £T dollars which was deposited in a checking and savings account under the name of XXX Inc.

We both agreed not to receive a salary as we were a recent start up.

Back in September 2006 in discussing terms before we agreed on our partnership and I was sent a founders agreement from my then partner. It outlines that I would provide designs for X' amount of shares and my partner would get Y' amount for shares for building the system and managing hosting it. I did not sign this but amended the final draft to include the following paragraph. A response was never received from my partner but we went ahead with setting up XXX Inc as follows;

“In the unlikely event that ‘Mr A’ and ‘Mr C’ chose to disband the company without being sold, ‘Mr A’ shall own the product design ideas for the payments system and the right to commercialise his ideas in a further venture and ‘Mr C’ shall own any source code that he wrote for XXX Inc however ‘Mr C’ is restricted from using this code in a commercial venture or competing enterprise to XXX Inc for a period of 5 years following the disbanding of the company.

Q1/ Can I assume that in going ahead with the partnership and establishing ‘XXX Inc’ meant that the agreement, my final draft including the clause above came into force?

My partner resigned in October 2007 in a resignation letter and I quote; “I, Mr C resign from the position of Director and ‘Exec Position’ and any other employment position of XXX Inc a Delaware USA Inc. This resignation is effective immediately. Dated…..”

He has now demanded that I sign an agreement which gives him complete ownership of the code, as per the unsigned founder’s agreement which would require me to licence it from him on achieving certain milestones. In addition he has asserted that he will not release the remaining funds of ‘XXX Inc’ which he had been managing for ‘XXX Inc’. He is also attempting to switch jurisdiction to Oregon.

Q2/ As he voluntarily chose to resign from the company and the company has not been disbanded, I intend to proceed, is the founders agreement still in force, can he still claim ownership?

Q3/ Who in fact owns the code as he got shares for designing the software for the company? (the agreement was not signed)

Q4/ As he voluntarily resigned can he expect to blackmail me from company resources or as he has now resigned and is no longer an employee or executive of ‘XXX Inc’ can I formally demand that he relinquish to me all corporate documents, account details and funds etc.?

Q5/ The checking/savings account is in the name of ‘XXX inc’ into which ‘Mr C’ deposited funds. It is these funds from which he, ‘Mr C’ used to pay hosting costs/charges etc for the software. Does this not mean that the company owns the software?

Q6/ The site is still running (live) can he not just stop service or has he by his own action prevented himself from taking the site down as he is no longer an employee or executive of 'XXX Inc' and how do I prevent this from occurring?

Q7/ What steps can I take to get the code back?

Q8/ What are the advantages for him to move jurisdiction to the state of Oregon.

Any advice very much appreciated.

Thx

[randalljd]

Only signed or included language is going to be binding. Drafts or circulated documents can show what was discussed but you cannot hold someone to those terms. If you cannot agree on how to move forward a court can intervene and/or force a dissolution or other remedy.

[Grayspawn]

Thank you for you response. So if the contract is not binding who effectively owns the code; the company or the coder (individual)?

Thx