Tell me more ×
Answers OnStartups is a question and answer site for entrepreneurs looking to start or run a new business. It's 100% free, no registration required.
up vote 2 down vote favorite

I am currently generating the majority of my income from providing freelance support, development and consultancy time to users of another companies software product. I work directly with companies who are licensed to use the product and also through "distributors" that are permitted to use and sell the software. In this capacity I have access to software and documentation that is available to all distributors and license holders but would not be available to competitors. I am now actively developing my own product that will compete directly with the other companies product. I have very little in the way of contractual restrictions with my employers and certainly nothing that prevents me from producing a competing product.

I can't afford not to work for the 6-12 months it's likely to take to get my product off the ground and it's also hard for me to avoid this existing product (and other similar products) because they are so prevalent in the sector that I work and because I have spent the last 10 years specialising in them.

I'm financially prepared to cease my contracts once we go public but am concerned that I might be opening my company up to future litigation by continuing to work so closely with the competition without being open about my own plans. Any thoughts?

share|improve this question

3 Answers

up vote 4 down vote

You are already in trouble, I think.

You can see a lawyer about laying the groundwork for separating your own effort from that of your future competitor from a copyright/patent perspective.

But you are on the hook for trade secrets lawsuits, since you already have inside knowledge.

If I were you, I would do things in this order:

1) Get acquainted as much as possible with the following terms:

  • Copyrighted work
  • Patented invention
  • Trade secret

2) Be honest with yourself and see which one you could be accused of violating/stealing. Realize that being merely accused and having to devote resources to defending yourself might alone bankrupt you.

3) If you have any questions or gray areas, talk to an intellectual property lawyer about them.

4) Reevaluate if you should:

  • Be doing the work you are currently doing (with so many ties and so much private knowledge of your future competitors)
  • Continue with your new venture

I think the most dangerous one for you is the trade secret risk. Do you have access to information that a normal person would not have? Is what you are implementing something someone without the proprietary knowledge you have would develop independently? You see that this last question is highly subjective, and the subjectivity of the whole thing is what makes this so dangerous for you.

But, as always, consult a lawyer.

share|improve this answer
+1 on everything. Remember that even if you're in the clear -- and it sounds like you're NOT in the clear -- they can and probably will sue you anyway, because they have plenty of reason. This will cost you 100's of 1000's of dollars and time, even if you win. If you lose it could penalize you for the rest of your life. Not worth it. – Jason Jan 21 '10 at 1:01
And you can't use the excuse "But in Cali employment contracts preventing me from working on other things have been thrown out." That's for non-competing projects which employers (unfairly) want to own even when it's on your own time. This is not the case for you. – Jason Jan 21 '10 at 1:03
up vote 1 down vote

I agree with gmagana.

Check your contract carefully. I know you state you don't have anything that permits you writing a competing product, but you need to check the detail.

The most interesting part is that you have access to information that is not public and therefore deemed sensitive. You need to progress with some sound legal advice, and so you should seek it.

share|improve this answer
up vote 0 down vote

Thanks for the advice everyone. I've now had a chat with an IP/Tech lawyer (which hasn't turned out as expensive as I feared!) and will be going through the issue in more detail with them next week. I've obviously been able to share all the detail with them and the initial opinion is that I'm probably ok.

You were definitely right to recommend I speak to someone but I should have said that I'm based in the UK as that may make a difference.

Thanks again.

share|improve this answer

Your Answer

 
discard

By posting your answer, you agree to the privacy policy and terms of service.