The skin of the unkilled unicorn: legal clashes with a billionaire startup Cruise
While Gavin Belson (the head of Hooli) sued Richard Hendrix (Pegey Dudochnik) for the compression algorithm , in the real world they sawed a unicorn with artificial intelligence.
Recently, the American edition of Business Insider published the news that the deal on the purchase by the American automobile giant General Motors of Cruise Automation Inc. (Delaware C Corporation), a startup developing a self-driving car (with an estimated $ 1 billion) may be suspended due to a conflict between the founders of the startup and Jeremy Guillory, claiming a stake in the company. The latter believes that he is a co-founder and partner of Cruise. It should be noted that the planned deal is one of the most expensive in the field of high technologies in 2016 and the largest in the history of Y Combinator - the company-venture lender Cruise.
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As follows from the claim of the company Cruise Automation Inc. to the California Supreme Court , these claims are based on the fact that more than 2 years ago, the founder and CEO of Kyle Vogt discussed in e-mail correspondence with Jeremy Guillory possible options for cooperation in the development of the concept of a self-driving car. At the same time, less than a month after the start of the correspondence, Guillory refused to further exchange information. After that, Guillory made a couple of times a couple of times, sending greetings to the head of Cruise on important dates for the company. Guillory did not show any claims to the company, references to a stake in the company, possible partnership relations or partner status in the company in such messages.
Based on the text of the published article and the statement of claim, no legal documents were drawn up between the parties, however, due to the specifics of local law, the mere fact of having negotiations to conclude a transaction may be enough to declare your property right. In addition, in the funding application sent to Y Combinator (this company was the first venture financier in the Cruiser) to raise funds, the name Jeremy Guillory was listed, although at the time of the provision of funds he no longer had anything to do with the Cruiser.
At the moment, Kyle Vogt has filed a lawsuit in his own name and on behalf of the company for recognizing that Mr. Guillory has no right to a share in the Cruiser, is not a partner of the founders, has no partner rights and the right to use the intellectual property of the company.
We asked our permanent legal consultant Vladislav Lurie, managing partner of FMF Legal , to comment on this story. Below is his assessment.
In our opinion, the current situation once again confirms the need to properly design the relationship of the company's founders among themselves and with any third parties: employees, partners (real or potential), customers and investors. As this case shows, when it comes to attracting a large amount of investment or selling a company, a dispute may even arise from the fact of electronic correspondence. In order to protect oneself from such consequences and, if the startup succeeds, to focus on business rather than litigation, the founders of the company should keep in mind the following.
In many jurisdictions (and more recently in Russia - Articles 431–434 of the Civil Code of the Russian Federation), pre-contractual relations may have legal consequences for the parties. So, it is necessary to bear in mind that the parties may be liable for pre-contractual losses incurred by one of the parties to the failed agreement due to the bad faith of the other party in the negotiation process. In foreign jurisdictions, liability is assumed for the guilt made during the negotiations (Culpa in Contrahendo) - such wine combines instances of unscrupulous conduct by the party, as a result of which the other party suffered losses.
Also, in the applicable law there may be provisions on the legal force of the agreements that arose at the negotiation stage, and both official and unofficial correspondence (which is part of the proceedings in the Cruise situation we are considering).
In common law jurisdictions (USA, England), correspondence between the parties, interpreted as unequivocally agreeing on certain agreements, can be regarded as a full-fledged agreement to be executed, even before the fact of concluding the relevant agreement in all forms. In the Russian Federation, this practice is less common and at the current stage is limited mainly to the use of pre-contractual correspondence (including e-mail) as additional evidence, or as a clarification, of the existence of certain formulations and agreements fixed throughout the form at a later stage.
Also, do not forget about the need to sign a non-disclosure agreement at any stage of the negotiations, in which the rights and obligations of the parties (including employees, consultants, partners, owners - everyone who has access to such information) in against all elements of intellectual property, including trade secrets, trade secrets and other things.
Obviously, intellectual property is one of the most important assets of a technology startup, and the founders need to take all measures to protect it, in particular, it is necessary to properly formulate intellectual property protection, including know-how (production secrets), inventions, utility models, industrial samples, etc. with the correct registration of the owners. Intellectual property protection can be fixed depending on the applicable jurisdiction and type of intellectual property in the following ways: registration of a patent or copyright, the introduction of a trade secret regime, the introduction of copyright provisions in labor contracts and service agreements, other forms.
Many Western and Russian legal entities motivate their employees by providing for the possibility of their participation in the company’s capital by offering to acquire shares under certain conditions (vesting). Vesting (the right to assign title to the owner in the future) is the award of shares of a company to an employee, carried out in accordance with a pre-approved plan upon certain conditions (mainly working time in the company): for example, every year 20% of the previously agreed quantities (gradual vesting - gradual vesting), or 100% of the agreed amount after 5 years of work (cliff vesting - one-time assignment). Thus, the employee receives the company's shares not immediately, but under the condition that he works in the company for a certain period (share vesting period). In the presence of such a position, no employee (or partner) of the company will be able to qualify for the shares if a month after taking office, he quits.
In Cruise, by the way, this moment was provided for in the company's statutory and internal documents (according to its plan for employees and partners a one-time transfer of shares was provided after one year of work in the company), which currently contributes to the defense of its position in court against Guillory, who ceased collaboration soon after the start.
In addition, all employees must be signed employment contracts. If an employee has access to the “secrets of the firm” in the process of activity, or the employee produces intellectual property within the scope of his duties, then to protect such intellectual property, under Russian law, a trade secret regime must be introduced, and the creation of works in the employment contract employee who will be the property of the company.
And of course, the general recommendations for any company - the relationship between the founders of the company should be clearly regulated: the company is properly registered, the shareholders agreement is signed, the interests are indicated, the responsibilities, level of involvement and responsibilities are fixed. When submitting documents in order to attract financing to accelerators or investment funds, only the founders of the company must be indicated in the application.
Here are some of the points that startup founders should pay attention to in order to ensure the security of their intellectual property and to minimize the claims of those involved.
Recently, the American edition of Business Insider published the news that the deal on the purchase by the American automobile giant General Motors of Cruise Automation Inc. (Delaware C Corporation), a startup developing a self-driving car (with an estimated $ 1 billion) may be suspended due to a conflict between the founders of the startup and Jeremy Guillory, claiming a stake in the company. The latter believes that he is a co-founder and partner of Cruise. It should be noted that the planned deal is one of the most expensive in the field of high technologies in 2016 and the largest in the history of Y Combinator - the company-venture lender Cruise.
')
As follows from the claim of the company Cruise Automation Inc. to the California Supreme Court , these claims are based on the fact that more than 2 years ago, the founder and CEO of Kyle Vogt discussed in e-mail correspondence with Jeremy Guillory possible options for cooperation in the development of the concept of a self-driving car. At the same time, less than a month after the start of the correspondence, Guillory refused to further exchange information. After that, Guillory made a couple of times a couple of times, sending greetings to the head of Cruise on important dates for the company. Guillory did not show any claims to the company, references to a stake in the company, possible partnership relations or partner status in the company in such messages.
Based on the text of the published article and the statement of claim, no legal documents were drawn up between the parties, however, due to the specifics of local law, the mere fact of having negotiations to conclude a transaction may be enough to declare your property right. In addition, in the funding application sent to Y Combinator (this company was the first venture financier in the Cruiser) to raise funds, the name Jeremy Guillory was listed, although at the time of the provision of funds he no longer had anything to do with the Cruiser.At the moment, Kyle Vogt has filed a lawsuit in his own name and on behalf of the company for recognizing that Mr. Guillory has no right to a share in the Cruiser, is not a partner of the founders, has no partner rights and the right to use the intellectual property of the company.
We asked our permanent legal consultant Vladislav Lurie, managing partner of FMF Legal , to comment on this story. Below is his assessment.
In our opinion, the current situation once again confirms the need to properly design the relationship of the company's founders among themselves and with any third parties: employees, partners (real or potential), customers and investors. As this case shows, when it comes to attracting a large amount of investment or selling a company, a dispute may even arise from the fact of electronic correspondence. In order to protect oneself from such consequences and, if the startup succeeds, to focus on business rather than litigation, the founders of the company should keep in mind the following.
In many jurisdictions (and more recently in Russia - Articles 431–434 of the Civil Code of the Russian Federation), pre-contractual relations may have legal consequences for the parties. So, it is necessary to bear in mind that the parties may be liable for pre-contractual losses incurred by one of the parties to the failed agreement due to the bad faith of the other party in the negotiation process. In foreign jurisdictions, liability is assumed for the guilt made during the negotiations (Culpa in Contrahendo) - such wine combines instances of unscrupulous conduct by the party, as a result of which the other party suffered losses.
Also, in the applicable law there may be provisions on the legal force of the agreements that arose at the negotiation stage, and both official and unofficial correspondence (which is part of the proceedings in the Cruise situation we are considering).
In common law jurisdictions (USA, England), correspondence between the parties, interpreted as unequivocally agreeing on certain agreements, can be regarded as a full-fledged agreement to be executed, even before the fact of concluding the relevant agreement in all forms. In the Russian Federation, this practice is less common and at the current stage is limited mainly to the use of pre-contractual correspondence (including e-mail) as additional evidence, or as a clarification, of the existence of certain formulations and agreements fixed throughout the form at a later stage.
Also, do not forget about the need to sign a non-disclosure agreement at any stage of the negotiations, in which the rights and obligations of the parties (including employees, consultants, partners, owners - everyone who has access to such information) in against all elements of intellectual property, including trade secrets, trade secrets and other things.
Obviously, intellectual property is one of the most important assets of a technology startup, and the founders need to take all measures to protect it, in particular, it is necessary to properly formulate intellectual property protection, including know-how (production secrets), inventions, utility models, industrial samples, etc. with the correct registration of the owners. Intellectual property protection can be fixed depending on the applicable jurisdiction and type of intellectual property in the following ways: registration of a patent or copyright, the introduction of a trade secret regime, the introduction of copyright provisions in labor contracts and service agreements, other forms.
Many Western and Russian legal entities motivate their employees by providing for the possibility of their participation in the company’s capital by offering to acquire shares under certain conditions (vesting). Vesting (the right to assign title to the owner in the future) is the award of shares of a company to an employee, carried out in accordance with a pre-approved plan upon certain conditions (mainly working time in the company): for example, every year 20% of the previously agreed quantities (gradual vesting - gradual vesting), or 100% of the agreed amount after 5 years of work (cliff vesting - one-time assignment). Thus, the employee receives the company's shares not immediately, but under the condition that he works in the company for a certain period (share vesting period). In the presence of such a position, no employee (or partner) of the company will be able to qualify for the shares if a month after taking office, he quits.
In Cruise, by the way, this moment was provided for in the company's statutory and internal documents (according to its plan for employees and partners a one-time transfer of shares was provided after one year of work in the company), which currently contributes to the defense of its position in court against Guillory, who ceased collaboration soon after the start.
In addition, all employees must be signed employment contracts. If an employee has access to the “secrets of the firm” in the process of activity, or the employee produces intellectual property within the scope of his duties, then to protect such intellectual property, under Russian law, a trade secret regime must be introduced, and the creation of works in the employment contract employee who will be the property of the company.
And of course, the general recommendations for any company - the relationship between the founders of the company should be clearly regulated: the company is properly registered, the shareholders agreement is signed, the interests are indicated, the responsibilities, level of involvement and responsibilities are fixed. When submitting documents in order to attract financing to accelerators or investment funds, only the founders of the company must be indicated in the application.
Here are some of the points that startup founders should pay attention to in order to ensure the security of their intellectual property and to minimize the claims of those involved.
Source: https://habr.com/ru/post/301072/
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