When Your Former Boss Sues You for Starting a Startup

Feeling for you man - been there (recently). You'll get a lot of sideways looks from people who have no reason to doubt you. Ignore it. People always assume the person doing the suing MUST have a good reason. It's the same reason people jump ship whenever someone is accused of a crime: until it happens to you, nobody wants to believe something this destructive can happen without cause. But it does - every day.

As a side note: everyone saying categorical things like "never walk away from a former employer with code on your computer" - remember that they don't know what they're talking about. Categorical statements in these situations are never correct. This is about a life lived honestly and in good faith being turned around on you - don't feel like you did anything wrong, just take opportunities to learn.

Lastly, to everyone giving Smule the benefit of the doubt remember: this means nothing (NOTHING) to Smule and everything to the Shred Founders. If Smule turns out to be right (which seems ridiculously unlikely), then it still means nothing to them. If they are wrong, which seems to be the case, they're destroying a company and lives at the same time. Keep the stakes in mind when you're considering the situation.

I am with you Shred team - this is a ridiculous and unfortunately all-too-common occurrence. Startups are difficult enough without all the lawsuits etc.

Here is a thought, why don't you just freeze on that old code-base and start afresh? I work with video extensively and know what you are doing can be done using open-source components and it shouldn't take much time. I can volunteer my time & coding chops to help out a fellow entrepreneur

Here are my thoughts.

Let's assume the poster's former employer is trying to sue them into submission. That's a plausible claim as that kind of thing does happen.

Well, if true, that strategy is clearly working.

Why do I say this? Because no competent lawyer would let their client post something like this. It can only hurt you. Make any statement of fact that helps the plaintiff and they'll use it against you. Make a statement that doesn't help them? Well they were going to dispute that anyway so who cares?

So I can only conclude the Shred Video doesn't have competent legal representation and thus is probably going to be or are being bled dry by litigation unless they can find a source of funding, which, as noted, is more difficult with a lawsuit hanging over your head.

One thing I've consistently done is when I've left a job I've never taken any hardware with me nor a single line of source code. It can only hurt you. Obviously I don't know if that were a factor here but the poster has stipulated one of the founders did have a Smule laptop with company source code on it. Woops.

Consider this a lesson learned: either don't offer to help your former employer when you're working on something else or get them to release any current or future claims to your company or IP before you do. Also, you probably want to get paid upfront. A separate contract should govern such work and it should state clearly that the former employee has access to the source code at the employer's request and the employer relinquishes any claims resulting from that source code. Employer might not go for that. Fine. Walk away.

As Paul Sutter stated, this is an emotional appeal. I too suspect there was fault on both sides here without knowing the facts.

One question I have is: when did the founders start working on what became their startup? That matters. If there's a crossover with their employment then that's potentially a problem.

In California the law is pretty generous with side projects so this might actually be OK but here's the thing...

If the plaintiff through discovery finds source code commits to the project that occurred before they finished working for Smule then even with Californian law they have a problem because the plaintiff has now established:

1. The founders started working on this before terminating employment; and

2. They claimed otherwise.

It's (2) that gets you into trouble because it hurts your credibility when making any other claims.

This is why any competent lawyer will not allow you to make such public statements. Let me repeat: it can only hurt you.

The founders are making the mistake of trying to win this in the court of public opinion. That doesn't matter for this particular plaintiff I suspect. So they've just given him a bunch of ammunition as every statement will be carefully parsed and fact-checked and any inconsistency will be used against them. Even if a statement is ambiguous and was intended one way but can be interpreted another (that can be disproven), it's a problem.

I had a threat of a lawsuit once that basically amounted to someone using the threat of it to get out of paying a fairly substantial amount of money. Not life-changing but certainly annoying. The lawyer I spoke to at the time (side note: free legal consultations where you shop around a potential case can really help) gave me this advice:

"Don't respond (to emails, phone calls, etc)."

If they file suit, they file suit and you can deal with it then. Until then don't give them any ammunition.

Other facts that may matter here are any patents Smule has or are pending and if the founders are listed as inventors. Something like "algorithmically annotating a video to music" is the sought of nonsense patent the USPTO might grant and may later be invalidated as being overly broad and generic but again that puts you in the position of having to either show non-violation or to invalidate the patent. Neither is quick or cheap.

The case you cited in your last link could have been decided after I read whatever it was I read. It could be that it's pretty hard to make and keep such lists as trade secrets, or maybe what I read referred to just a list of customers with all that other information, but I remember it being pretty definitive, and, generally agreeing with your initial points, startling.