I hit on the Hack-a-thon craze in an earlier post. The IP that is created by the hackers in these programs has to be owned by someone, although there are still times where everyone walks away not knowing what everyone’s rights are. If nothing is ever signed by all participants and the hackathon sponsor, its unclear who owns what.
There are a couple different options. The sponsor may want to own everything, or may want to at least have a perpetual paid up license to use the IP created. The hackers should get some rights as well, but its been hard to delineate what and how it should be handled.
A friend of mine and a fellow startup lawyer, Dave Capuccilli of The Capucilli Firm has been working on a solution to this dilemma. Check out his latest iteration to a Hack-a-thon Collaboration Agreement, courtesy of Docracy. Its a great way to ensure all hackers and the sponsor get a fair shot at using the IP created.
I currently represent a few companies that were born at Hack-a-thons and Startup Labs (a similar idea but slightly different format/program), and if they had an agreement like this signed before they came to me it would have made things much smoother.
A client of mine just got a great write up in entrepreneur.com (read it here). MyMusic has a great product and have a huge promotional caimpaign about to begin – see their website here. What they needed was a software upgrade for their product, digital music stands. They came up with the brilliant idea that they could host a hack-a-thon, get the best programmers around to pull a weekend long hack-fest to upgrade their software, and give any donations received to charity. This particular one gave the proceeds to the local symphony, hence its title Hacking for Music.
As discussed in the Entreprenuer article, this particular type of program is an off-shoot of crowdfunding, but instead of funding, people give their programming talent. MSNBC did a similar write up.
To hit on the legal aspects of this, and one I stressed prior to the event, was that each hacker should sign off on an Participation Agreement which transfers all of that programmers efforts to the entity hosting the hack-a-thon.
Also look for an article in the NY Times regarding Hack-a-thon’s soon.
One of the most important things founders of a startup have to do is make sure that everyone, and I repeat everyone, that has performed services, or provided goods, ideas, etc. to and for the company signs an assignment form transferring any and all such interests to the company. This can be done in connection with a subscription agreement or stock purchase agreement where the founders are receiving shares, or in connection with an employment/contractor agreement for previous and/or current employees or contractors.
The nightmare situation, and one that does still occur, is that a few years after a company begins to make substantial revenue, a person will claim that they are entitled to a portion of the ownership of the company based on what they performed prior to the company being formed (whether it be a design, software programming, idea, etc.). The company is in the position of either having to give up some ownership of the company, thereby diluting the current owners interests, or the company has to take a stand, hire a litigator and defend any action in court. This issue has been on the front of people’s minds due to the recent Zuckerberg portrayal.
It’s easy to prevent this. Get those assignments signed and lock down all of the intellectual property as soon as you form your business entity.