Rebuilding software after selling product & contractor work

[codingexpert]

What is the name of your state (only U.S. law)? CA

I have sold a piece of software to a CA company, and did subsequent contract work on this software. The work was done outside the US, and paid for via a non-US bank account. The sold software is (mostly) an implementation of publicly available academic material, and uses several snippets of open source code; the distinguishing quality is the knowledge applied and the engineering quality.

Since I am an expert and researcher in the field, I created similar software after completing the contract work, for my current employer. The contracts involved did not contain a non-competing clause, but did state a full transfer of ideas and software. The new software is partially based on the same publicly available academic material, and partially on the same open source code. At the basis of the new program are several new ideas, again from publicly available sources. My employer tried to sell this software to a new client.

The CA company is now approaching me personally (but also my employer, and the new client) with legal action; initially they demanded 'seize and decist' (which we did, under protest), but continued to demand that I never create similar software again and disclose names of anyone who could have seen the new software. I fear they will not stop there.

I have several questions:

1. Did I do something wrong? The moral side is important to me.
2. Can this company forbid me from excercising my profession / specialism this way? For how long?
3. A lawyer in my country as well as a US lawyer concluded that I have the moral right to do this (but of course, they work for me / my employer, so that's not necessarily answering question 1). They also estimate that the cost of winning the case could be 100k or more. I don't have this kind of money, so does that mean I automatically loose the case?
4. In the event that the CA company does sue me and demands damages to be paid by me, what is my situation, not being a US citizen?

I feel severely threatened, even though I never meant to do harm.

- x.

 

[quincy]

What is the name of your state (only U.S. law)? CA

I have sold a piece of software to a CA company, and did subsequent contract work on this software. The work was done outside the US, and paid for via a non-US bank account. The sold software is (mostly) an implementation of publicly available academic material, and uses several snippets of open source code; the distinguishing quality is the knowledge applied and the engineering quality.

Since I am an expert and researcher in the field, I created similar software after completing the contract work, for my current employer. The contracts involved did not contain a non-competing clause, but did state a full transfer of ideas and software. The new software is partially based on the same publicly available academic material, and partially on the same open source code. At the basis of the new program are several new ideas, again from publicly available sources. My employer tried to sell this software to a new client.

What "publicly available material" did you use? Not all material that is publicly available is free to use. Not all source code is free to use. But, even if all that you used was legally available for you to use in the software you created for the California company, you appear to have transferred all rights to the completed software to the California company in exchange for money. You cannot now reproduce this software to sell to others because you no longer hold rights in the software.

The CA company is now approaching me personally (but also my employer, and the new client) with legal action; initially they demanded 'seize and decist' (which we did, under protest), but continued to demand that I never create similar software again and disclose names of anyone who could have seen the new software. I fear they will not stop there.

A demand to never again create similar software would be hard to enforce, unless by "similar" the company means "using their rights-protected material" to create additional software.

You do not have to disclose the name(s) of anyone who could have seen the software, unless there is a court order to do so.

I have several questions:

1. Did I do something wrong? The moral side is important to me.

It is possible you did something wrong, under this country's laws if not your own.

2. Can this company forbid me from excercising my profession / specialism this way? For how long?

The company can potentially prevent you from infringing on their rights-protected material so, if your "profession and your specialism" involves taking even small portions of rights-protected material and using it to create software similar to the software you sold to the California company then, yes, the company (or a court through the company) could prevent you from operating in the way you have been operating. But it depends on a lot of different facts and factors which you have not made entirely clear here.

3. A lawyer in my country as well as a US lawyer concluded that I have the moral right to do this (but of course, they work for me / my employer, so that's not necessarily answering question 1). They also estimate that the cost of winning the case could be 100k or more. I don't have this kind of money, so does that mean I automatically loose the case?

The U.S. does not recognize "moral rights" in their copyright laws like many countries do. If you are sued for copyright infringement in the U.S. and you LOSE the suit then, yes, it is possible that all costs including damages awarded could wind up being $100,000 or more. If you have a good defense to infringement (if that is what this is all about), then you might not lose the case at all.

It depends on the facts - the most important of those being in which country you reside.

4. In the event that the CA company does sue me and demands damages to be paid by me, what is my situation, not being a US citizen?

What country are you in, codingexpert? If you are not in the U.S., the California company can sue you in your own country under your country's laws (which could potentially be more favorable to you in your described situation, depending on your country of residence).

I feel severely threatened, even though I never meant to do harm.

- x.

Essentially it sounds like you have been threatened (with a lawsuit), so it is not unreasonable for you to feel threatened.

Whether you meant to do harm or not could play a (minor) role in a suit, by mitigating the amount of damages that could be awarded. But "innocent" infringement is still infringement and ignorance of the laws is not an excuse for breaking them, at least in the U.S.

I can perhaps provide a little bit more information if you provide the name of your country - but if you already have an attorney, the attorney is the best resource you have, because he knows exactly what is going on in your situation (I assume). I suggest you rely on him and his advice and not on the limited amount of advice that can be provided in a forum setting.

 

[codingexpert]

Publicly available material: academic papers, and source code clearly labeled as 'open source'. Some of this was clearly mentioned in the purchase contract, some not. The parts that were mentioned were significant and complex. The parts that were not mentioned explicitly were trivial, and not specific to the application or field.

Never again creating similar software: the new software that I mentioned already is not using any of their rights-protected material. It is merely similar in functionality. This is (in my opinion) a logical result of the quite specialized field I'm in.

Sueing me in my own country: I live in Western Europe; however the contracts were signed 'under Californian law'. The lawyer in my own country suspects that a lawsuit in my own country would still be according to Californian law, is this correct?

If the CA company sues me in CA, what happens? I can't be there to defend myself, and I can't pay a lawyer to do this for me (the defense is what the US lawyer estimated at 100k, not the damages). Will I be able to do some kind of a written defense?

Note that we gave the CA company virtually everything they wanted: we are not using the software, took down online info, and terminated contacts with the new client. I am not even sure how they would describe 'damages'...

 

[LdiJ]

Publicly available material: academic papers, and source code clearly labeled as 'open source'. Some of this was clearly mentioned in the purchase contract, some not. The parts that were mentioned were significant and complex. The parts that were not mentioned explicitly were trivial, and not specific to the application or field.

Never again creating similar software: the new software that I mentioned already is not using any of their rights-protected material. It is merely similar in functionality. This is (in my opinion) a logical result of the quite specialized field I'm in.

Sueing me in my own country: I live in Western Europe; however the contracts were signed 'under Californian law'. The lawyer in my own country suspects that a lawsuit in my own country would still be according to Californian law, is this correct?

If the CA company sues me in CA, what happens? I can't be there to defend myself, and I can't pay a lawyer to do this for me (the defense is what the US lawyer estimated at 100k, not the damages). Will I be able to do some kind of a written defense?

Note that we gave the CA company virtually everything they wanted: we are not using the software, took down online info, and terminated contacts with the new client. I am not even sure how they would describe 'damages'...

Is the CA company using the software themselves or are they selling the software to others? That can make a difference in the type of potential damages. Also the specific function of the software can make a difference in whether or not they could successfully sue you at all...or whether they are somewhat bluffing.

 

[quincy]

Publicly available material: academic papers, and source code clearly labeled as 'open source'. Some of this was clearly mentioned in the purchase contract, some not. The parts that were mentioned were significant and complex. The parts that were not mentioned explicitly were trivial, and not specific to the application or field.

Never again creating similar software: the new software that I mentioned already is not using any of their rights-protected material. It is merely similar in functionality. This is (in my opinion) a logical result of the quite specialized field I'm in.

Sueing me in my own country: I live in Western Europe; however the contracts were signed 'under Californian law'. The lawyer in my own country suspects that a lawsuit in my own country would still be according to Californian law, is this correct?

If the CA company sues me in CA, what happens? I can't be there to defend myself, and I can't pay a lawyer to do this for me (the defense is what the US lawyer estimated at 100k, not the damages). Will I be able to do some kind of a written defense?

Note that we gave the CA company virtually everything they wanted: we are not using the software, took down online info, and terminated contacts with the new client. I am not even sure how they would describe 'damages'...

There are several countries in Western Europe, and all have different laws.

If the California company sues you in your country, it will be (generally) be under your own country's laws. In at least a couple of countries, there are some exceptions built into their laws that will allow for U.S. law to apply even in their own country.

If you are sued in California, however, U.S. law will apply.

In what country in Western Europe do you reside?

 

[codingexpert]

Is the CA company using the software themselves or are they selling the software to others?

They use the software 'in the cloud', while 'my' (my employer's) new software is designed to be used as middleware.

In what country in Western Europe do you reside?

I live in the Netherlands.

Suppose they sue in CA and win; how would a verdict be enforced?

 

[justalayman]

3. A lawyer in my country as well as a US lawyer concluded that I have the moral right to do this (but of course, they work for me / my employer, so that's not necessarily answering question

morals have nothing to do with this. What did they say about your legal rights? That is all that matters.

 

[codingexpert]

morals have nothing to do with this. What did they say about your legal rights? That is all that matters.

I'm not a lawyer, so forgive me the wording. What the US lawyer and Dutch lawyer said is that I would 'probably win the case', but this would involve an expensive code comparison, and $100-200k in legal cost. The US lawyer was only briefly consulted (for now), since the fees are so high compared to Dutch fees. The Dutch lawyer is convinced that a case like this would be straightforward in the Netherlands, and even if the company could block the new product, they could not block further endeavours; Dutch law protects employees / contractors quite well and is quite harsh on blocking carreer paths.

 

[justalayman]

Dutch law protects employees / contractors quite well and is quite harsh on blocking carreer paths.

I do not see this as blocking your career path. You are free to go be a program designer if you so choose. What this suit is about is twofold:

the contractual rights of the plaintiff

whether you infringed upon the plaintiff's IP rights

If the lawyers mentioned said the plaintiff could block the current product, then it sounds like they are telling you you will lose the case at hand.


this suit is not about blocking your career endeavors (non-compete). It's about you breaching your contract with them and you using something you sold all your rights to to them.

. The contracts involved did not contain a non-competing clause, but did state a full transfer of ideas and software.

from your own statement. They are not suing you due to a non-compete. They are suing you because they claim you are using the ideas or software you transferred all rights to them.

 

[LdiJ]

They use the software 'in the cloud', while 'my' (my employer's) new software is designed to be used as middleware.



I live in the Netherlands.

Suppose they sue in CA and win; how would a verdict be enforced?

That really didn't answer my questions....at all.

 

[quincy]

... What this suit is about is twofold:

the contractual rights of the plaintiff

whether you infringed upon the plaintiff's IP rights ...

I agree with justalayman that this does not appear to be just about IP rights but also about the agreement you made with the California company. That makes it impossible for anyone here to tell you what the California company can or can't do to enforce their rights to the software you sold them. What is required is a personal review of the contract you signed with the California company.

Often, for example, one provision in a contract, when software rights are transferred, will be that all rights to any subsequent versions of the software (new or modified functionalities) are transferred as well.

I still question the "open source" and "academic papers" you relied on for your software being free from third party actions. IP rights claims can exist in open source material. Your contract should have a provision, if the California company was smart in drafting the terms, that you will be held responsible for any claims initiated by third parties against the California company if the software you created for them has infringed on the IP rights of others.

Without knowing more about the contract and the actual dispute that has arisen as a result of the software you created for the California company, however, you need to rely on the advice and direction of the attorney you have in the Netherlands.

Although I quickly skimmed through the Netherlands Copyright Act of 1912 and its most recent amendments, I am not seeing anything that jumps out at me that will provide you a better defense to infringement than the U.S. Copyright Act would. Again, however, this is based on only a quick skim of the copyright laws in your country and on incomplete facts as to the nature of the dispute you are in with the California company.

The following is a link to an English version of the Copyright Act of the Netherlands: http://www.wipo.int/wipolex/en/text.jsp?file_id=249663.

Good luck.