Divorcing a partner; keeping the secret sauce safe.
My partner left our company two years ago but she still owns 30 percent of the stock. We made no buyout provisions, and I'd like to purchase her shares. How should I handle it?
Founder of a software company in Oregon
Have Anna Nicole Smith and Jessica Simpson taught us nothing about the value of a prenup? When you look at your arrangement you see an injustice, but the law sees only the terms of your existing contract. Although you've been doing the lion's share of the work, your partner is still entitled to her hunk of the antelope.
That doesn't mean you can't reach an agreement, though. First thing to agree on: spending money to get you there. Begin by hiring a valuation expert to tell you how much your company is worth. That should cost from $5,000 to $25,000, depending on the size and complexity of your business. Next, each of you should retain lawyers with experience handling partnership disputes to help you hash out a reasonable restructuring agreement.
Unless your partner is generosity incarnate, assume that she'll want an amount equal to the current estimate of the value of her shares. If that doesn't satisfy her, you may have to sweeten the deal. If you're short on cash, ask her to accept installments over the course of several years. You could also recapitalize the company with the help of a private equity firm, which would enable you to raise cash while maintaining a meaningful ownership stake.
As with divorce, the friendlier the relationship, the smoother the breakup. Partners on good terms can often reach an amicable resolution on their own, with minimal lawyering, says Robin Duboe Seigle, director of the National Conflict Resolution Center in San Diego. It pays to make nice, so acknowledge your partner's contributions to the company and tell her that you value your relationship. Then ask if she'd be willing to sell you her shares at a fair price, based on the company's valuation. If it's skipped her attention, you can go ahead and point out that you've been running things on your own for two years. But don't bully. And don't play the martyr.
If you're in Battling Bickersons mode, a mediator can help you resolve contentious issues. Fees run an average of $250 an hour, and a typical session lasts three hours. "Mediation is often an effective way for partners to talk about their emotions and their expectations and not just legal issues," Seigle says. If you can clear your partner out and clear the air, so much the better.
If I pay someone to custom create something for me, who has the right to patent, manufacture, and sell it: the designer or the person who paid for it and thought it up?
Founder, Heidelicious Design
Unto the person who did the commissioning go the spoils. That would be you. Copyright law classifies this kind of outsourcing arrangement as "work for hire," in which case the patent belongs to the person who retained the designer.
But to be safe, you should insist on a nondisclosure agreement, says Michael McGaw, a patent lawyer at Smith & Hopen, an intellectual property law firm in Tampa. A well-drafted NDA will protect the confidentiality of secret information and make it clear that you, the inventor, own the intellectual property. If the designer leaks information or, worse, tries to claim the idea as his or her own, an NDA makes it easier for you to take legal action.
The NDA should state what information is considered confidential, explain the designer's obligation to protect secrets, and outline the consequences of breaching the contract. It's also a good idea to include specific time frames. If the situation is straightforward, a patent lawyer can probably draw something up for you in a couple of hours. For do-it-yourselfers, the United Inventors Association's website (uiausa.com) features NDA templates (though you should still run the agreement by a lawyer).
Once armed, bring your NDA along every time you interview a potential designer and ask him or her to sign it before you start talking secret sauce. Designers know that's business as usual, so one that balks deserves a raised eyebrow, says Perry Saidman, attorney and founder of Saidman DesignLaw Group, a law firm in Silver Spring, Maryland. "Designers who are not willing to accept the consequences shouldn't undertake the work," he says.
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For more partnership advice, read The Partnership Charter by David Gage. To learn more about patents, visit the website of the U.S. Patent and Trademark Office, which features how-to guides, forms, and e-filing capability.