Found+READ: Stories by Hasan Luongo

The Dangers of Moonlighting

Hasan Luongo — Tue, 22 May 2007 16:37:37 GMT

I was recently “let go” from my job of three years for violating my employee agreement for allegedy working on a side business and not properly disclosing this to my employer. In addition, I’m now fighting my employer’s claim that because I did some writing on my blog during work hours, my startup’s IP is their property.

The idea for “PromoterForce”:http://www.promoterforce.com, a web-based referral marketing system for small professional service firms, was created on my own time, with my own equipment. I did, however, make the mistake of not properly assessing the impact of posting about PromoterForce to my company blog during the workday.

While my lawyers are confident in my position (PromoterForce does not encroach on my ex-employer’s core or future business plans, or use any of their IP), the litgation is a major headache and a threat to my startup. I think other entrepreneurs would benefit from knowing about what happened to me, so they can avoid the experience themselves. Here is my account of the events as they unfolded, Blow-by-Blow.

Idea Formation:
I woke up early one morning with a burst of inspiration about a new business idea. Because it was 3:00 AM, I grabbed a pen, wrote down a few notes and went back to bed. The next morning my wife left for a day trip with her parents, and I headed to the beach with my dog, a notepad and a pen. Over a three hour period at the beach I captured the main elements of the idea, upon returning home I registered the domain name: “www.promoterforce.com”:http://www.promoterforce.com

Research:
Over the next few weeks I spent a lot of time reviewing the current offerings in the space, and came to the realization that there was indeed a major gap between what was currently available and the product I envisioned creating. PromoterForce’s referral system is a web based application for creating and managing referral campaigns for service businesses, with communication tools for satisfied customers to make referrals to their friends, family, and colleagues via eMail, face-to-face, and SMS. Promoters are rewarded with money to donate to nonprofits.

Business Plan Competition:
I wanted to test the validity of the idea so I entered the UC Berkeley Business Plan Competition. I was able to connect with a very talented MBA candidate and we worked together further researching and validating the concept and developing the executive summary and investor pitch.

Startup Blog:
I used WordPress software and a lowcost hosting package to create a simple site and a “blog”:http://www.promoterforce.com/blog for the company.

Partnership:
I worked with the owner of a very high quality web development shop to create a strategic partnership. They would provide web development services in exchange for equity in the new business.

Idea Consumes:
With all this momentum forming around the idea I found myself increasingly distracted and disinterested in playing the politics game at work. I also found myself consumed by the idea. I began dedicating a few hours in the morning before work, and again in the evening after work, to developing my idea and product plan.

D-Day:
About five months on, during which time I had spent no more than 1 to 2 hours per week working on PromoterForbce while at my day job, I was called into a meeting by my manager. Within minutes I was told my employment had been terminated. Without any formal warning, my job of three years was gone. I was shocked but upon leaving the office felt a rising sense of joy. It honestly felt as if I had been released from jail.

Legal Fight:
Just days after I was fired I receive word from my former employer’s HR manager that the company would be pursuing ownership of the intellectual property related to my new venture under the conditions of my employment contract.

Finding Help:
I quickly got in touch with the only lawyers I know and am currently working with them to resolve the matter. Luckily for me, my lawyer is part of a very well-respected Silicon Valley firm and they work with many startups.

Turning on the PR machine:
I’ve been blogging about the IP contest, and contacting third-party blogs to generate some buzz. While I have not yet named the company and am seeking to resolve the matter as quickly and quietly as possible, [my lawyers tell me] it is important to leverage all available resources in my defense.

Lessons Learned:
1) Understand the implications of using any resource your employer owns. Using something as trivial as bandwidth on their network may constitute a violation of your employee agreement. Don’t.

2) Diligently document the creation of your idea. Record as many details as possilbe, and then send all your original documents, by email and certified snailmail, to a close friend for safekeeping.

3) Limit communication to personal devices and email accounts. Only talk face to face about your idea with colleagues you know well and trust. Don’t discuss it with them over company phones or email. And remember that while many colleagues will want to help you, as soon as word about your project gets out, it will find its way to your managers.

4) Don’t underestimate the potential vindictiveness of your employer. While managers and executives may strive to appear supportive and understanding, their primary responsibility is to protect and defend their company. Once your relationship with the company is severed, all good will is out the window. Prepare for this ahead of time.

5) Don’t be bullied. Companies don’t want long legal fights, and good CEOs are experts at talking tough. They will set arbitrary deadlines in your negotiations and warn you against engaging in a legal fight, but don’t loose your cool. Most importantly, don’t let them scare you. This is happening because you have developed something they want.

Dangers of Moonlighting II

Hasan Luongo — Wed, 06 Jun 2007 14:04:51 GMT

It’s with great excitement that I’m writing this follow up article. Over the last week we have been in close communication with the CEO of my former employer, and I’m pleased to announce that we have negotiated a fair and equitable settlement to our dispute over who owns my startup’s intellectual property. I chronicled the contest in my first piece, “The Dangers of Moonlighting”:http://www.foundread.com/view/the-dangers-of.

As the founder, getting this matter resolved without an exhaustive and expensive legal fight is extremely positive. And I can now move forward and build a successful company, unencumbered by any outside claims to PromoterForce, or it’s related IP.

Starting from where I left off in “Chapter I”::http://www.foundread.com/view/the-dangers-of, let’s look at how the situation got resolved, Blow-by-Blow.

The Letter
A few weeks after being let go, I received a formal letter from the law firm representing my ex-employer. The letter demanded that I assign ownership of the “PromoterForce.com”:http://www.promoterforce.com/ domain and all related IP to my former boss’s company. The letter included a very short term timeline to comply, and was written to sound authoritative and tough. But after reviewing the details of the letter with my lawyer and some friends in the startup community, it became clear that it was meant to be inflamatory: dates were set deliberatlely close in order to light a fire of fear under me; and there were many extraneous claims, I suspect to make me feel like I had done something far worse than merely found a startup and post to my blog during work hours.

Direct Negotiation
After resolving the minor issues outlined in the letter and formally engaging legal representation of my own, I called my former boss directly to discuss alternatives for resolving this matter. I was pleasantly surprised by his willingness to discuss the issues in an objective way and we made excellent progress towards an alternate outcome to prolonged litigation.

Resolution
Over the next two weeks were able craft an agreement that seems to serve both of our needs. He will get some work from me via a consulting agreement I recently signed, which makes him feel he has been compensated for any unintended encroachment by me of “company time.” I get this resolved quickly and can move ahead with PromoterForce’s IP, free and clear,of any further dangerous distractions so I can focus on the challenges of building an amazing company.

Lessons Learned

1) (Even a little) Time Heals Fresh Wounds
Don’t respond in haste to any requests. Be responsive but let some time pass for engaging in negotiations. The simmering down of emotions is of great benefit to both parties. Taking a step back from your immediate emotional reactions, lets you clear your head and respond in a rational and objective manner.

2) Negotiate Directly with the Boss
As my lawyer thoughtfully pointed out, “lawyers tend to get in the way…try to reach out to your boss with a thoughtful proposal to resolve the issue.” (He earned his fee with this advice!) While it is true that you need a good lawyer, do try to resolve the matter directly before you have a professional representative fire back on your behalf. This not only reduces the costs involved, but it gives you an opportunity to hear the other party’s concerns and to be heard yourself without an intermediary to confuse things. Letters from lawyers are carefully crafted and can raise all kinds of unproductive, even emotional, responses. But talking one-on-one without attorneys reduces the emotional friction and saves you time, pain and money.

3) Think About the Situation from All Angles
As an early stage entrepreneur, all your energy should be focused on building a great product, getting it to market, and earning revenue. Everything else is a distraction. The point of all your efforts is to build a successful company. Some day soon you may find yourself in a similar situation, except next time you’ll be the employer. Thinking about my PromoterForce situation from a my ex-employers perspective really helped me craft a proposal that addressed both his needs, and mine, which got the negotiation process moving in a positive direction.

4) Always Be Gracious
Life comes at you fast, if you get mired down by minor set backs, or loose your cool, you’ll end up bitter and battered. As I embark on my most exciting professional adventure yet, it’s important to acknowledge the stepping stones that I crossed to get to this point in my life. I never would have imagined that my relationship with my previous employer could end on such a sour note; I would like to take this opportunity to apologize to former teammates there for any harm I may have caused them, or the company. After all, the diverse range of experiences I had there, and the many people I worked with and learned from there, all contributed to my confidence and desire to start “PromoterForce”:http://www.promoterforce.com/. Thank you.

My ultimate lesson: Learn from the bad experiences, replicate the successes, and always, always be gracious.