How a Contract Works, 3 Day Startup Style

September 5, 2012 Leave a comment

I am not a lawyer. What I offer below is my understanding of how a contract works and is not legal advice in any way, shape, or form.

Since it appears that some people aren’t familiar with the concept of a contract, here’s some background:

A contract is an agreement entered into voluntarily by two parties or more with the intention of creating a legal obligation, which may have elements in writing, though contracts can be made orally. [snip]  A contract is a legally enforceable promise or undertaking that something will or will not occur.

Source: http://en.wikipedia.org/wiki/Contract

That’s right. A contract is simply an agreement of “here is how this interaction will work.” As noted in that definition, they can be both oral or written. In our particular case, we’ve been talking about a document, so let’s assume it’s written.

Now – depending on jurisdiction, rules, intent, etc, etc – there may be ways to verbally amend a written contract but don’t count on it. At the end of the day, whatever is on that signed paper is usually what matters. But most contracts have two important clauses of interest:

  • There’s usually a clause that says something along the lines of “this agreement is the whole thing and supersedes everything else.” Basically, that means “it doesn’t matter what we agreed to previously, this is what we’re actually agreeing to.”
  • The other clause offers a way to amend the contract. It usually requires it to be in writing and agreed to by both sides. What constitutes “agreement” varies, so ask an attorney on that one.

Everything else turns into a “he said, he said” argument. At that point, an email trail between the two sides describing the changes or interpretation might be useful.

If I gave you a contract and said “sign this and I’ll give you a million dollars” but instead the contract said you owed me a million dollars, at the end of the day, I have a written document and you have what I said.

So, throughout this experience, one of that things that has struck me as odd – beyond the absurdity and ongoing secrecy – is their repeated offers to “meet in person” and “put the agreement in context” without actually sharing the agreement.

Why would someone do that?

Well.. let’s put all of the above together.

If you have a contract that you want me to sign and it has some – let’s say, questionable - clauses in it. You have a few approaches. You could:

  1. disclose the exact content and call my attention to the points in question; or
  2. give me the agreement without comment and hope I don’t notice it; or
  3. give me the agreement and provide an explanation that makes me feel okay.

So you take approach #3, I listen to your platitudes, and I sign the contract. The most common line here is “oh, don’t worry, that’s boilerplate.”

But wait! There’s the clause saying “this agreement is the whole thing and supersedes everything else.”

So that happy explanation is rendered completely irrelevant as soon as I sign the agreement. 

That’s right, the “context” is a decoy.. 

But then again, if that “context” is different from what is in the contract, we would have a paper trail – such as email – that would establish… no wait.

The “meet in person” part prevents that..

At the end of the day, we have a signed contract including your questionable clauses. I have some verbal “context” that isn’t documented anywhere and therefore totally irrelevant.. so who won that round?

Well played, 3 Day Startup.

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Why does 3DS bother with the IP Agreement?

August 30, 2012 Leave a comment

A week ago, 3 Day Startup CEO Cam Houser called me claiming he didn’t understand my concerns about the IP Agreement. I cover the absurdity of that in my Open Letter to Cam Houser, but something else he said struck me:

(paraphrased) We let people video the final pitches and post them online.

The final pitches are always a stressful time. It’s all about getting the narrative and details down pat. The presenters need to know the customer validation, understand the details, and be ready for a barrage of awkward questions from seasoned judges. This is when the teams have to play every card they’ve been dealt, discovered, or snuck into the deck.

There is huge value in recording the pitches for practice and review. I wish more groups did it.

But let’s go back to their statement from the FAQ:

3DS FAQ Screencap

Screenshot of 3DS’ FAQ

While the IP Agreement gives them 100% ownership of everything from the weekend and they can do anything with it.. if their goal is to protect the students and act in their best interest, wouldn’t they check with the teams first?

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The IP Agreement is Totally Ineffective Anyway

August 28, 2012 1 Comment

Looking at my inbox, I have links to the public customer validation/interview questions for four groups, the slide decks for six groups, and detailed code and designs for another group. Even better, I have links to the complete Github repositories* of two teams. And I didn’t ask for and don’t want any of it.

(At the time of this writing, I have confirmed that each one is findable via finding team members usernames on various services like Slideshare, YouTube, etc. Some even linked to them via their Facebook profiles.)

If I was still on the 3DS mailing list or in the Facebook group – which I removed myself from months ago – I would probably have even more.

Now remember, according to 3DS, mentors don’t have to sign the IP agreement.

Looking at the mentors referenced in the various messages, I see the vast majority of them mentor other startups or for groups like 1 Semester Startup, Startup Weekend, and Lean Startup Machine.

Therefore, the people who are the most likely to make statements like “I’ve seen other groups try X” or “Have you considered Y?” are also the ones with the best information on 3DS ideas and groups. It’s up to their own honor to not stray too close to that information.

I know many of the mentors and do not believe they would consciously share confidential or proprietary information but it’s inevitable that they run into a similar idea. While I was at the event, I thought of a few Austin-local startups working on near-identical products. And since the event, I’ve met new groups working on similar concepts. When many of us face similar problems, we create similar solutions.

Am I putting myself at risk if I recommend something a 3DS group did? Do I have to prove I didn’t interact with that group?

And to make things really interesting..

  • I know of a group from a 3DS event who refused to sign the agreement and attended anyway.
  • I know of a group from a 3 Day Startup event who saw an idea from another group and decided to take it forward on their own.

If 3DS can’t police their own participants who should be under the IP agreement, what’s the point?

In fact, if they’re not doing anything to enforce their own rules and standards now.. do they really even apply?

* At the time of this writing, neither Github repository has been touched in 4 months so I doubt either group has applied to 3DS to get their IP back and take the idea forward.

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Come on, tell the truth

August 27, 2012 Leave a comment

After the Non-response Response from 3DS, I found this comment interesting:

Come on Cam, tell the truth

There are only a few ways to interpret this:

First, he could have missed the numerous emails where I asked for clarification and details on the agreement. Since he responded to a few of them, that seems unlikely.

Alternatively, he could have missed my ”IP Agreements at Hackathons” blog post where I raised this issue plus a number of others. Since a number of 3DS participants forwarded it to their board and he published the Non-response shortly after, that seems unlikely.

Alternatively, he might not have considered me a participant. True, I wasn’t registered as an attendee. I attended as a mentor. But I was quickly assigned to help a couple teams. For those that were there, I started in the orange conference room just off the presentation space. Further, I received a thank you email from one of the 3DS founders, so that seems unlikely.

Finally, he could be.. let’s say.. “bending the truth.” This is the only alternative that I can think of but at the same time, I don’t like that one. I want to believe that the people running groups like this – especially those focused on students – are trustworthy and play above board. Like it or not, people in these positions end up as examples and role models for the rest of the community.

Regardless, if their “standard process” is to “provide them (or their attorney) with a copy of the document,” then they’ve failed miserably for months now because I am not the only one to ask.

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3DS threatens others hackathons

August 24, 2012 Leave a comment

When I first published my “IP Agreements for Hackathons” post, I reached out to a number of IP and startup attorneys for additional guidance and background. My main concern was legal exposure, primarily for myself but also for partners, sponsors, and attendees of the various events I attend and organize.

While their reactions were pretty wide ranging, all of their concerns revolved around a single point:

At the end of the day, 3 Day Startup owns everything from that event.

So what does that mean for other event organizers? To be blunt.. nothing good. I was advised to take one of three approaches for 3DS attendees/mentors who participate in other events:

(Going forward, I use “we” in the sense that events usually have a few of organizers. I’m not referring to any particular group.)

First, we could vet their contributions. Before anyone pitches at an event, we would have to determine if they’ve participated in a 3DS event. If not, no problem. If so, we would have to review their idea and make sure they actually “own” it. Further, anything a mentor who worked with 3DS would be subjected to the same. This is going to be hard because it requires deep knowledge of 3DS events, pitches, demos, and everything else. Even worse, we would have to do this in near-realtime during the pitches and before the voting.. and we’ve seen how much they like sharing information.

I’d rather punch myself in the face.

Alternatively, we could implement “don’t ask, don’t tell.” We remain as ignorant as possible but if a team lets it slip that their came from 3 Day Startup, we’d have to immediately confirm ownership or kick them out. Either way, it creates a problematic situation at best. What happens to the rest of the team? Are the people banned or just the idea? Most hackathons don’t have the legal/policy procedures in place to handle something like this.

Self-face-punching sounds even more appealing.

Finally, we could outright ban 3 Day Startup participants. This is the only way to be completely confident that we don’t have to kick people out or vet ideas, but we’d still have to vet both attendees and mentors. Granted, that’s not horribly difficult but people could simply not tell us.. and we’re back to the second scenario.

And this just feels slimy.

I really have no clue on which is the best – and least community-damaging – approach but since last week was the first of the fall hackathons and there are many more to come,  we need a solution.. NOW.

Of course, this is discounting the possibility that the 3DS organization will do something. So far they haven’t.

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