When Your Former Boss Sues You for Starting a Startup

IANAL, but: for all the comments stating "there are two sides to every lawsuit," let me say that oftentimes there aren't. And just because someone threatens to sue someone else does not mean the party being sued did anything wrong, it just means plaintiff wanted to sue the defendant.

I'm speaking from personal experience, a former employer threatened to sue me for unspecified 'trade secret infringement,' and it cost over $20k in legal fees to convince ourselves we were covering all our bases.

The problem is there's a basic asymmetry in these situations: it costs very little to initiate a lawsuit, or even just threaten to initiate a lawsuit. We were so scared we spent money on lawyers (and a second opinion!) before anything had even hit the court system.

Probably obvious advice we should've taken: do nothing until they'd actually filed something, then respond only to specific allegations. The burden of proof is on the plaintiff, and California has some really excellent worker protections around IP etc. Had we just ignored them it probably would've blown over.

Shred sounds like they're on top of this, but if anyone needs the name of a good IP lawyer in CA (he's in LA), message me and I'll put you in touch. I would love to refer him some business because he gave me hours of free advice, and was generally very good about keeping costs down. (Relatively speaking. Signing a check over to a law firm feels like the worst use of capital.)

Why would you need to go to these lengths (waiting 2 years and competing in a different geogrpahical region)? What have you done wrong by making a competitor to your previous companies product? I ask this because I am thinking of doing something similar due to the fact that my employer is extremely incompetent. I am the only developer of a project that I helped take from no revenue to hundreds of thousands of dollars revenue but that should be making millions of dollars revenue. Unfortunately, I am micro-managed and often just have to implement the ridiculous ideas of my boss.

If I made a competitor, it would obviously share some of the same ideas as the current project. I mean, every social network has an "add friend" function, for example. Some things are just the right way to do things, or inherently part of the business domain.

If they started patenting all of my ideas, I would expect to actually be paid a decent salary.

I know it's problematic for a number of reasons, but I'd sort of love to see YC throw their weight behind this -- e.g. "if you've worked at Smule beyond 23 Sept 2015, you are ineligible for consideration in any future YC rounds".

It always baffles me how much power goes unused in Silicon Valley, but I suppose most of that restraint is due to personal relationships between the VCs/founders.

On point #3, I think we're talking about two different things. You mentioned "noncompete" agreements, which is an important topic but unrelated.

What I was talking about is intellectual property assignment clauses. Excerpt:

Under California law, an employee cannot be required to assign any of his or her rights in an invention he or she develops “entirely on his or her own time without using the employer’s equipment, supplies, facilities, or trade secret information” unless: when the invention was conceived or “reduced to practice” (actually created or a patent application filed) it related to the employer’s business or actual or “demonstrably anticipated” research or development, or the invention resulted from any work performed by the employee for the employer (California Labor Code, § 2870) http://www.intellectualpropertylawfirms.com/resources/intell...

Unfortunately you are correct about the Smule CEO being correct (assuming he was quoted accurately).

Back in 2000 (seriously!), I was introduced to a small group of guys in Redmond, WA. These guys were former Real Networks engineers, and had their original stock certificates in frames on the walls.

The product they were building was a cross-platform media player. It would stream music/video/audio/etc. and work on PCs and Macs. They had been in operation for just a few months, and had a great prototype in place. I interviewed with them and really liked their story. They followed up days later and invited me back one more time -- presumably to talk about joining.

A few days later I'm in my car, driving to their location. I actually have a cellular phone and it starts buzzing. I pick up (yes, nobody cared about driving & talking in 2000) and it's my friend who introduced me to these guys. The conversation goes like this:

      Me: Hello
  Friend: Hey, what are you doing?
      Me: I'm on my way to meet with those guys again.
  Friend: Are you there yet?
      Me: No. Why?
  Friend: Turn your car around, and don't drive near that place.
      Me: Why?
  Friend: Their place is being raided right now. Cops everywhere.
      Me: What?
  Friend: They are taking away everything.
      Me: (turns car around, never speaks with them again)

Real Networks had filed an injunction and the company was raided on charges of stolen intellectual property. I never learned the details, but as my colleague told me later -- he's pretty sure most of what they were doing had been built at Real Networks.