To all new founders, get a legal agreement in place from day 1 with your collaborators. Here are some amazing free resources (vetted for Canada, a million times better than nothing in the US, pass it by a lawyer if you have the money):
As a lawyer I have to acknowledge legal agreements are important; however, they are not determinative. Cruise was acquired by GM for $1B, so it goes without saying they had their t's crossed and i's dotted...again it is not necessarily enough.
Besides written contacts (express), there are agreements created by the actions of the parties (implied).
I don't have the facts beyond the article, but at the point an application is submitted to YC naming someone a co-founder, its going to be difficult to argue there isn't an implied contract in place for anything the company (or even proposed company) does moving forward. Yes legally a company that doesn't even exist can be bound by the representations of its agents.
I wouldn't be to surprised to learn Cruise had a very strong case, which might have even included written resignations, stock transfers/assignments, etc... Again I don't know; nevertheless, one could see certainly see the practicality of just paying someone to go away even with a weak case so long as there is a modicum of truth to having started the company. There is nothing worse than a client who litigates out of principle instead of with their wallet.
I having been discussing contracts a lot on HN as of late especially in regards to what people dub smart contracts and I can't stress it enough, breach of contract cases usually never end at summary judgment and can usually always go to trial because whether or not there was a breach is a question of fact reserved for judge or jury at trial.
It's worth noting that Vogt is not a new founder. He was a cofounder of JustinTV, SocialCam, and Twitch before Cruise. It might have been an error due to lack of relevant experience, but the previously problematic situation isn't attributable to a rookie mistake.
Though I am not a lawyer, my understanding is that the claims and counter claims did not really revolve around IP. Take it out of the equation and the documents [as described on the internet] might still form the basis of a claim.
I wish a good, solid, but flexible founder agreement template existed. I have not found any that wasn't overly opinionated.
edit: in light of the Cruise fiasco, the agreement should probably contain language saying the organization is being formed without any ownership interest outside of the people listed.
Well, that private settlement certainly clears it up for them. As for the rest of us, who sat on the sidelines and watched the slap-fighting, it doesn't offer a whole lot. Here's the crux I guess of the article:
>Cruise and its founder Kyle Vogt now acknowledge that Guillory was a cofounder of the company.
This is very much a sticking point that was extensively discussed in the prior hullabaloo regarding the YC-affiliated post on the matter. How this was agreed upon - the reasoning - being private isn't the most clarifying outcome for the public. I've no doubt this is on purpose for all the parties involved, and hope they are satisfied in private.
As a longtime observer of human behavior, my belief is this announcement will do nothing to quell outside speculation. If the parties involved don't want a bunch of randos-on-the-internet making up their own scenarios, there is an easy fix. Just share with the class what happened so we all may learn.
>This is very much a sticking point that was extensively discussed in the prior hullabaloo regarding the YC-affiliated post on the matter.
For all intents and purposes consider YC/Cruise/Vogt all one party. So it shouldn't be surprising that any YC post took a legal position consistent with Cruise/Vogt that: Guillory was not a co-founder and had no claim to ownership of Cruise.
>Cruise and its founder Kyle Vogt now acknowledge that Guillory was a cofounder of the company.
This is simply part of the terms of the Settlement Agreement, they didn't necessarily have to include this, but as a former commercial litigator I will give you my two cents...
Guillory demanded that, because without that he purely seems interested in money and not the credit. In a way it is part reputation (important) part ego (not important).
Nevertheless, the big arbitrator here (behind closed doors) is GM, cruise investors and $1B. GM is weighting the idea of no publicity is bad publicity with the fact they just bought a start up for $1B that doesn't have its shit together. Investors just captured their unicorn, and now have pending litigation, putting that in jeopardy for how many years. So at a certain point both GM and investors are going to put a lot of pressure on Cruise to settle the lawsuit ASAP, whatever it take, including give him credit as co-founder publicly.
There is almost certainly a clause in the settlement that limits what the parties can say about the terms and each other. ie: confidential terms, non-disparagement, and specific language that can be used in response to questions about the settlement. In this case it sounds like the things they have agreed to say are that Guillory was a co-founder and the settlement was mutually agreeable.
So, I have a stupid, flamebait question: What precisely is wrong with Jeremy Guillory's case? I read those links but I also read this related BI piece [1] and it looks like Guillory has a solid claim: there is a document of them representing the company as half belonging to him, and no one's presenting any later agreement that says when his half was bought out or invalidated.
All that Vogt is going on, it seems, is "but you were just congratulating us when we raised more money!". What does that matter?
Altman's response, in turn, is that Guillory isn't being cool about this and taking (what he deems) a reasonable offer from Vogt. Well, why would he? If he was led to believe early on that he had a full 50% stake, why is it some moral transgression not to accept less [2]?
If you don't want a now-silent partner keeping equity, then buy them out. Don't wait until the company is worth something and then try to retroactively void the equity because you don't feel like they're part of the gang anymore.
So all of that drama, name calling, sam altman posts, etc. ended with them agreeing that he was indeed a co-founder? Honestly the only people who really know what happens between two people, are those two people.
Settling != agreeing the other party was right. Lots of times it makes financial sense to settle even if the other person was completely wrong.
e.g. When you have a legal issue holding up the close of your $1bn deal and you have to choose between paying up so you can get your deal closed, or dragging it out over 1-3 years in a protracted legal battle that risks never getting the deal done.
Surprised I found this on Techmeme and not here.
No matter what the outcome actually became, this was a shtfest, rollercoaster, HBO drama, discussion, and learning experience all in one.
[+] [-] fraserharris|9 years ago|reply
http://wiki.velocity.uwaterloo.ca/Legal
@sama - could YC spearhead creating US versions of the founder IP agreements?
[+] [-] will_brown|9 years ago|reply
Besides written contacts (express), there are agreements created by the actions of the parties (implied).
I don't have the facts beyond the article, but at the point an application is submitted to YC naming someone a co-founder, its going to be difficult to argue there isn't an implied contract in place for anything the company (or even proposed company) does moving forward. Yes legally a company that doesn't even exist can be bound by the representations of its agents.
I wouldn't be to surprised to learn Cruise had a very strong case, which might have even included written resignations, stock transfers/assignments, etc... Again I don't know; nevertheless, one could see certainly see the practicality of just paying someone to go away even with a weak case so long as there is a modicum of truth to having started the company. There is nothing worse than a client who litigates out of principle instead of with their wallet.
I having been discussing contracts a lot on HN as of late especially in regards to what people dub smart contracts and I can't stress it enough, breach of contract cases usually never end at summary judgment and can usually always go to trial because whether or not there was a breach is a question of fact reserved for judge or jury at trial.
[+] [-] brudgers|9 years ago|reply
Though I am not a lawyer, my understanding is that the claims and counter claims did not really revolve around IP. Take it out of the equation and the documents [as described on the internet] might still form the basis of a claim.
[+] [-] whamlastxmas|9 years ago|reply
edit: in light of the Cruise fiasco, the agreement should probably contain language saying the organization is being formed without any ownership interest outside of the people listed.
[+] [-] 6stringmerc|9 years ago|reply
>Cruise and its founder Kyle Vogt now acknowledge that Guillory was a cofounder of the company.
This is very much a sticking point that was extensively discussed in the prior hullabaloo regarding the YC-affiliated post on the matter. How this was agreed upon - the reasoning - being private isn't the most clarifying outcome for the public. I've no doubt this is on purpose for all the parties involved, and hope they are satisfied in private.
As a longtime observer of human behavior, my belief is this announcement will do nothing to quell outside speculation. If the parties involved don't want a bunch of randos-on-the-internet making up their own scenarios, there is an easy fix. Just share with the class what happened so we all may learn.
[+] [-] will_brown|9 years ago|reply
For all intents and purposes consider YC/Cruise/Vogt all one party. So it shouldn't be surprising that any YC post took a legal position consistent with Cruise/Vogt that: Guillory was not a co-founder and had no claim to ownership of Cruise.
>Cruise and its founder Kyle Vogt now acknowledge that Guillory was a cofounder of the company.
This is simply part of the terms of the Settlement Agreement, they didn't necessarily have to include this, but as a former commercial litigator I will give you my two cents...
Guillory demanded that, because without that he purely seems interested in money and not the credit. In a way it is part reputation (important) part ego (not important).
Nevertheless, the big arbitrator here (behind closed doors) is GM, cruise investors and $1B. GM is weighting the idea of no publicity is bad publicity with the fact they just bought a start up for $1B that doesn't have its shit together. Investors just captured their unicorn, and now have pending litigation, putting that in jeopardy for how many years. So at a certain point both GM and investors are going to put a lot of pressure on Cruise to settle the lawsuit ASAP, whatever it take, including give him credit as co-founder publicly.
[+] [-] GavinMcG|9 years ago|reply
[+] [-] pmorici|9 years ago|reply
[+] [-] neurotech1|9 years ago|reply
http://blog.samaltman.com/cruise
And the related HN comments:
https://news.ycombinator.com/item?id=11490188
[+] [-] SilasX|9 years ago|reply
All that Vogt is going on, it seems, is "but you were just congratulating us when we raised more money!". What does that matter?
Altman's response, in turn, is that Guillory isn't being cool about this and taking (what he deems) a reasonable offer from Vogt. Well, why would he? If he was led to believe early on that he had a full 50% stake, why is it some moral transgression not to accept less [2]?
If you don't want a now-silent partner keeping equity, then buy them out. Don't wait until the company is worth something and then try to retroactively void the equity because you don't feel like they're part of the gang anymore.
[1] http://www.businessinsider.com/cruise-cofounder-fires-back-2...
[2] than the corresponding amount modulo later dilution
[+] [-] seibelj|9 years ago|reply
[+] [-] jamiequint|9 years ago|reply
e.g. When you have a legal issue holding up the close of your $1bn deal and you have to choose between paying up so you can get your deal closed, or dragging it out over 1-3 years in a protracted legal battle that risks never getting the deal done.
[+] [-] phonon|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] throwaway6497|9 years ago|reply
[+] [-] unknown|9 years ago|reply
[deleted]
[+] [-] taylorhou|9 years ago|reply
Cheers.
[+] [-] SuperKlaus|9 years ago|reply