Who Owns Source Code When a Company Folds? 490
pipeb0mb asks: "A few years ago, I worked for Chilliware, Inc. as the 'Technical Development Manager'. Some of you may remember us for the software iceSculptor, Mohawk and Mentor. Chilliware folded rather quickly and harshly back in May of 2001 due to money issues. Within days of the first layoff, everyone was gone, from the CEO and VP's to the receptionist. Now, years later, I've been digging through some old CDs, and am reminded that I still have the final production source code for the products we released in the retail channel. I've attempted to contact several folks over the past couple of years to gather information about the software and who owns it now. To no avail though. Either I get an 'I don't know' or 'No one' from the dis-interested parties. I feel like these programs are my children that never got a fair shot. I hate to see so much work wasted and lost to the ages. So, Slashdot: What do I do with this source code? It's a great deal of well commented and well written code, performed by over 100 developers in a former Soviet Republic (who formerly worked with Boomerang Software). Where do my binary children go now?" As things are now, if a company folds, the code is buried and forgotten unless someone buys the rights to it, before the source code is lost. This issue was discussed a long time ago and there didn't seem to be much in the way of answers. Have 3 years made any difference?
Lawyers (Score:5, Informative)
In short, contact a lawyer
The correct answer is, of course... (Score:5, Informative)
But failing that, try to find the principals of the company, the original owners. They owned the assets of the firm. If they don't want it try to get a "whatever, do what you want with it" from them before you try to sell or publish it.
In my experience... (Score:5, Informative)
That really depends on the definition of "folds". Some examples from my
experience...
1. Company simply stops operating.
In that case the company itself may still exist (in fact if you go to
the web site of the Secretary of State for your state you may be able
to determine if the company is still "active" in which case someone's
filing simple forms on the company each year). In that case the
company (and by extension the shareholders) own the code.
In this case you might find that the owners, who probably have little
interest in the company, and acquire the rights for a small fee.
2. Company is bought outright by another company
This one's pretty simple, the new company probably bought all the
assets of the old company and that would include the copyright on the
source code.
3. Company's assets a bought but company remains alive
This can happen when a company gets into serious trouble, as happened
with many boom companies, and is effectively worth nothing because
there are no customers. The remaining assets (e.g. physical stuff
and copyrights) sometimes get acquired by another company for a small
fee. This happened to me, and in that case the new company acquired
the assets and got the source code.
4. Company goes bankrupt
If the company owes money to people then all its assets are going to
get valued, and that will include the source code, and who gets them
will probably be in the hands of a court. In this instance see what
happened in the bankruptcy clean up.
In the case of venture backed companies there might be specific
clauses in the investment that state what happens if the company goes
under and the VCs may end up with the code.
John.
Reverted To Author? (Score:5, Informative)
I guess this would hold true so long as they didn't sell or assign the rights elsewhere.
Even then, regardless of the answer, you can still be taken to court and it will be up to a judge.
Find the liquidator (Score:5, Informative)
If someone bought the rights when the company was liquidated, see if the liquidator will tell you who, and approach them.
BeOS sourcecode and Yellowtab (Score:4, Informative)
YT has a license to use the code until 2005 or something (and that doesn't seem to include the kernel as they havn't announced any of the bugfixes the BeOS community has been longing for).
Difficult call (Score:5, Informative)
My advice? There's no way you can just release this without getting an OK (a legal OK) from whomever owns the copyright (this may be the company that auctioned the corp's assets for all you know). If you're the only known holder of this code, you're out of luck. You already posted to /. =) Otherwise you could have just released it to the wild without a peep using Kazaa or Freenet or something like that. Not ideal of course, but it would be better than having it sit on a CD for the next 20 years or whatever the IP laws dictate, and it would have been nearly impossible to trace it back to you, I think.
Tough situation, for sure.
Re:I would release it (Score:2, Informative)
Frankly, I'm in between jobs right now, and can't afford a lawyer for something like this, but am more than willing to make a few more phone calls and dig about for records.
Re:In my experience... (Score:5, Informative)
Since I was a founder of a company that went under, usually what happens if the company just "goes bankrupt" is that they do NOT go "bankrupt," as that implies that it's seeking legal protection from its creditors. Rather, it undergoes a voluntary liquidation.
During a liquidation, all "assets" are divided up amongst the shareholders of the corporation in some way that seems fair to the shareholders based on their share classes. In our case, the Series B investors (who had preferred stock) chose to give a kick-back to the Series A investors (who had preferred stock, but not as preferred as Series B), out of good will, though they had no obligation to do so. However, and this is a kicker, this only works with fungible assets (such as stuff that can be sold).
If the source code was not sold before liquidation, meaning that it is not a fungible asset, then what happens is that rights to the IP get divided up amonst the shareholders of the corporation in a way appropriate with the corporate governance of the liquidation. In other words, if Series B investors got 80% of the loot, and Series A investors got 20% of the loot, then the exact same proportion happens with the rights to the source code.
So in order to get it, you essentially have to find everybody that has a proportional right to the source code if it's not been seized by someone in the liquidation, and convince them to give over their rights to it. This usually means finding every shareholder in the corporation, and figuring out who owns their stock. It's going to be really rough.
Just been through this... (Score:3, Informative)
Code is an interesting case when assets are sold. Normally, a physical object can only be sold once. But rights to code could potentially be sold many times. Selling it many times may diminsh the value to each buyer. If you wish to Open Source the code, this might exacerbate the value decline if there are other interested buyers so you will have to be careful about exactly what rights you will have. As always, consult an atty.
creditors and dead code (Score:5, Informative)
You are of course correct. Again, asking /. for legal advice isn't sound advice. However, I'll tell you what would happen, basically. If you tell that lawyer you have something from this company of value, it should technically belong to the company's creditors - I assume it went out of business for a reason, correct?
What will likely happen is that the lawyers for that company won't be interested in developing the software - but they'll be damned if they'll just give it to you and see you do something with it of value. Likely, they'll tell you to fork over the code and decide to archive it in case anyone wants to screw with it. No one likely will.
There are basically three options you have. The first two certainly involve getting a lawyer.
1. Buy it from them. Problem there is that they will not know how to attach a value on it, so they will pick an arbitrarily high one. Remember, if no deal is struck, they get it back once you admit to having it. They also don't want to get fired when they sell it to you for too little. Not reaching a deal won't get them fired, and burning the code is probably best for them.
2. License it from them. Give them some money up front and a cut of whatever you get. This will cut your upfront costs, but they will likely want a huge cut. However, they won't be as afraid, at least, since they get more money if you do. Nobody looks too bad.
3. Pretend you don't have it, and do a "dirty room" re-write of it. Effectively plagiarize it and assume that anyone else involved with it won't remember, won't notice, etc. Then, if you do anything of value with it, worst case scenario is they sue you, you settle, everyone's happy. Bet you wish you hadn't posted this now, huh?
The problem is that, as the article poster mentions, this is a software dead-end, and it's very hard to revive dead code. The current owners don't want to look like idiots when they get pennies for valuable code that they didn't correctly value. They'd rather bury it, which is your problem now.
Note that this is not to be construed as actual legal advice. You'd have to be an idiot to listen to me, particularly since option 3) is pretty illegal. ;)
Re:Reverted To Author? (Score:5, Informative)
This is not a general precedent. C&G were just nice guys to the end.
Re:Still going. (Score:2, Informative)
There's no one to support it, no patches, no updates.
Re:creditors and dead code (Score:5, Informative)
Contact them. Ask to have a fair market value assigned to the intellectual property, if it was not done so, and you may license it from them @ that price. They will use an external company to do this valuation.
Typically the IP with no programmers left is not worth very much. You may be able to buy it outright for very little money.
Certainly you do not own it, you probably signed employee agreement stating you wouldn't have this code around home anyway
Transvirtual's PocketLinux/JVM (Score:1, Informative)
Contact the receivers (Score:3, Informative)
If you know what you are doing, use a court-document search program like PACER. http://pacer.psc.uscourts.gov/
Re:Reverted To Author? (Score:2, Informative)
Possible starting point and contact information. (Score:3, Informative)
This press release [businesswire.com] may give you a starting point and possible contact information:
Perpaps Ms. Dittoe or somebody else at Dittoe Public Relations can point you in the right direction.
Re:creditors and dead code (Score:5, Informative)
Getting a tax shelter is probably worth more that trying to get $$$ from out of work developers.
Valuation could be based on what it cost to create the code. $1M in valuation could be worth $300K real cash as a tax shelter.
One of the reasons Microsoft pays almost zero corporate income tax is because of all of those software donations to schools at full retail. Copy CD for $1, donate to school as $800 MS Office license. $800 x 40% corporate tax bracket equals $320 in taxes saved. $320 is really created by this transaction, without it the $320 would have to be sent to the government. MS does hundreds of millions of dollar worth of these donations each year. It also has the added plus of brain washing everyone to use their software.
California law on abandoned property (Score:5, Informative)
This comes up all the time, often when someone leaves property behind when they move. You'll need some simple legal advice, but there's a procedure, which involves a police report and the publication of some notices, and if nobody steps forward and claims it, it's yours.
Re:Not you (Score:2, Informative)
If I work on a contract basis for a company, I technically own the Copyright until handing it over to the company buying my "product".
There are all sorts of legal issues though. For example, if I am a contractor, but working on a company provided computer, and they don't pay me... they *might* own the code I wrote because it was on *their* computer.
So on and so on... it is always best to consult a lawyer when it comes to issues like this though.
"Wills" (Score:5, Informative)
Well, they do, actually. There are preferred creditors, less preferred, and non-preferred. The first are banks, the last something like common-stockholders. There is a VERY well-defined pecking order - basically, the higher ups basically get what they want until the debts are satisfied, and if there's anything left, you go down the chart.
The problem here is this guy's code is like Grandma's shitty costume jewelry - it wasn't worth Grandma putting in the will, and before she died, no one really makes a fuss about it. They likely didn't even notice it when the family divvied up Grandma's grap when she died. But if anyone actually wears Grandma's shitty old necklace to a family reunion, say, then everyone's going to get all pissed asking you how come you got Grandma's necklace. Then, the oldest sister wants it an pulls rank, and a nasty fight ensues. Yay.
Same thing here. Everyone assumes that code is comepletely worthless, and doesn't even want it - that is, until you come along, mention that you have Grandma's necklace from the estate (ie, the source code from this project) that you weren't really entitled to. Now, everyone else ahead of you in the pecking order (ie, the preferred creditors) wants the code, simply because it now might have value. Remember, they don't care if they make money off of it - but if you do, that means they could have, and somebody's ass is grass.
And, if there is no hope for this particular after the fact problem, or for corporations to put in general legal safeguards for tidy disposal of property without the need for expensive lawyers, then is there some small "sunset" clause that software developers could put in their code to ease the transfer, like a quit-claim that goes into effect if the corporation dissolves and no creditors assert any rights for a period of one year.
I like that idea - problem is, I don't think it's enforceable unless it is agreed to (probably ahead of time) by every potential lienholder/creditor of the company, down to common stockholders. You could make it boilerplate. The problem is that creditors don't want to give things that might have value away, and would rather just have it "just in case." Most likely, they'll just assert their rights over all software in general, in case something comes up they didn't know about.
Re:The correct answer is, of course... (Score:5, Informative)
But failing that, try to find the principals of the company, the original owners. They owned the assets of the firm. If they don't want it try to get a "whatever, do what you want with it" from them before you try to sell or publish it.
NO, NO, NO!
Folks, please pay attention to the thread on this. If it was this easy, there would not be a problem. There are three possibilities:
The original owners almost certainly do not own the code anymore when a company closes the doors but does not go through a formal bankruptcy to distribute assets. The code, as well as all other assets, are owned by the creditors (most likely, especially in a venture-funded company, but even this can vary dependent on how original agreements were drafted). Even if there is no longer any board of directors, as long as the corporate entity itself exists the assets will probably be owned by the creditors in this situation. However, there will usually still be at least a chairman of the board, so you could contact that person to see if a deal can be cut with the creditors to open-source it, etc.
If the corporate entity no longer exists, because it was shut down through a bankruptcy, then this issue was taken care of through that process, and the bankruptcy lawyers will know what to do (somebody else already owns the code, most likely).
If the corporate entity no longer exists, and there was no formal dispersal of the assets (i.e., through a bankruptcy), then things are stickier. This would be the time to hire a lawyer to go back and figure out what reality is. Different states have different laws about "abandoned property", and in many states these laws apply equally to corporations and individuals alike. If this is the situation, and you can find out what the time limit is for property to be considered abandoned, your best option might just be to wait quietly until that time limit has passed.
No, I am not a lawyer, and the above is not legal advice. I'm just an ex-CEO who suffered through a business partner killing a company we co-founded, and I had to try to keep the legal pieces together...
Source Code Escrow (Score:3, Informative)
As others have pointed out, without such provisions, the ownership of the source code can become very mucky--generally any creditors have claim to the company's assets. You might be able to buy the rights to the code for pennies on the dollar, but then again, the code might disappear forever if the owner doesn't care or won't sell. The legal thing to do would be to look up the bankruptcy documents and find out exactly what happened to the company's assets & then try to work something out with them. Any other actions will depend on your feelings about the risks, punishments & likelihood of getting caught. The right thing and the legal thing aren't necessarly the same thing.
Re:Prevention? (Score:4, Informative)
They do. Assets are liquidated. Banks get paid, bond holders get paid, preferred stock holders get paid, and then common stock holders get anything thats left. Theres no "last will and testement" because the company doesn't get to choose who gets paid off when they liquidate - The courts decide which creditors have first pick. Everything gets assigned to someone. The code the original poster asked about undoubtably belongs to _someone_, either creditors or someone who bought it and gave the money to the creditors.
Are bankruptcy proceedings so sloppy that they leave any property unassigned?
Generally not. Creditors tend to fight tooth and nail for anything thats of value.
Re:creditors and dead code (Score:3, Informative)
1. Buy it from them. Problem there is that they will not know how to attach a value on it, so they will pick an arbitrarily high one. Remember, if no deal is struck, they get it back once you admit to having it. They also don't want to get fired when they sell it to you for too little. Not reaching a deal won't get them fired, and burning the code is probably best for them.
I used to work for a UK company that was liquidated. Basically the receivers were legally obligated to get as much money for the creditors as they could, so not selling the code when somebody is willing to pay for it is not an option. Everything of value was sold to the highest bidder. In the case of the source code there were two interested parties - a customer (who had acquired a couple of the dead company's developers) with a vested interest in a particular piece of software and a company formed by some of the employees who planned to take the code and build on it. The two parties bidded against each other until one gave in.
Re:Did the company owe you any money? (Score:2, Informative)
I'd say that's a very liberal interpretation.
This isn't the same as repossing a car. Just because the company owes you money, doesn't mean you can walk in and start seizing assets. You can however get a judgement, in which case a sheriff or constable gets to walk and seize assets.
If the company goes through bankruptcy and there are other creditors involved, the judge will make you stand in line with the other creditors. You'll all be feeding from the same dead carcass.
Finally, if the IRS is owed money, they may cut in to the head of the line.
If a bankruptcy judge learns that you have this company's assets in your possession, they may very well demand that you turn the asset over to the conservator or receiver of the company's assets.
IANAL, bah!
-rickRe:Bankruptcy Distribution According to an Attorne (Score:2, Informative)
Re:Are you this guy? (Score:5, Informative)
I like to think that since I managed to get 3 out the door, it was only a partial failure. Vanity++
Re:California law on abandoned property (Score:3, Informative)
Not on copyrights. Copyrights are governed by Title 17 of the US code.
The key thing is, what was done with the other assets of the company? Somebody got whatever remaining assets existed after everything else was disposed of.
Re:I've seen this "donation" racket (Score:3, Informative)
This is an urban legend. They get cost of goods, or something like that.
Re:The correct answer is, of course... (Score:2, Informative)
It depends - but here is your answer (Score:3, Informative)
Ok. "My company folded". What is THAT supposed to mean? Was there a bankruptcy order made? That makes all the difference in the world.
If so - the source code vested in the Trustee in Bankruptcy. His task was to sell it on behalf of the creditors and remit to the court.
VERY often however, this does not come to pass.
So what happens?
Here is your answer:
When a Trustee in Bankruptcy does not sell an asset, the asset remains vested in the Trustee. By default, under Canadian Bankruptcy law, property that is not disposed of by the Trustee is supposed to be returned to the bankrupt prior to the Trustee being discharged.
In practice, this hardly ever happens in a corporate bankruptcy. Trustees don't do anything they aren't paid to do and if no one is watching about i dotting and t crossing, nothing gets done.
In Canada, the post bankruptcy corporation is neither alive nor dead. It can be revived by the shareholders but this is highly unusual and typically this is never done. A post bankrupt corporation is a lurking mess and the responsibilities for tax filings and potential director's liability issues is hardly ever worth it.
As there is no one left around to pay the corporate fees for the corporation, it is dissolved by order of the Director of the Business Corporation statute in its jurisdiction and it becomes essentially dead. (But if someone were to acquire the shares from the former shareholder and file articles of revival, THEN persuade the Trustee (who is almost always discharged by now) to go back on as Trustee and THEN make the necessary motion to the Registrar to return the property to the bankrupt, you could then
have the corporation AND the rights to the code.
But - not so fast. That is assuming there was a deal in place for the corporation to actually own the code. Sometimes there is not and the bankruptcy itself reverted ownership in the code to someone else because of a defaulted royalty.
In other words - it's a complex answer which is highly dependent on the facts.
Under Canadian law at least - one thing is NOT true - the property does not vest in a creditor be it secured or unsecured. It is highly unusual for a creditor to foreclose and this is almost never done. The property does not belong to the creditor - the right to sell it for FMV and keep the proceeds is what the creditors - both secured and unsecured - had.
(While I won't vouch for this analysis under US Bankruptcy law as 100% correct - it is MOSTLY correct I expect).
So - is this lurking code something you can manage to make your own? Yes. With the fees to a lawyer and the Trustee, it's possible. The problem is, questions of this kind alert people to residual value in an undisposed property. People who are otherwise unaware of value will be alerted by your inquiries and requests.
Which is a nice way of saying that sometimes it's best to shut your mouth and make some quiet and discrete inquiries.
If the worst case scenario is there is some Trustee theoretically who did not dispose of a copyright it should have, and it would at law have reverted to a dead corporation, then it isn't very likely that anybody would have any right to assert that - say - code you claimed was yours was NOT yours.
Get the picture?
YMMV
Re:Check that law there. (Score:5, Informative)
Lets put it this way. I write a doctoral thesis. A copy gets put in the university library, SOP.
Flash forward 10 years. The university calls me to ask if I'd be willing to sell them the copyright, because the research now has value. I look in my files and realize that I have lost my only copy.
Question - Do I have a right to demand that the University hand over their copy of my work because I have lost my original?
Answer - Hell no. They may not have permission to use it beyond the library, but that copy is theirs, fair and square, and they don't have to give it back.
If I meet David Drake while reading a copy of Hammer's Slammers, he can't just grab it out of my hands and keep it because he own the copyright.
Amazon still sells it... (Score:5, Informative)
And this [businesswire.com] containing contact info (may be out of date)
If Amazon still sells this then someone is connected to the money and that means trouble... So forget droping it in the trash [slashdot.org] and I don't know you...
Re:OP: The very first thing you do ... (Score:5, Informative)
I think you need to track down the trustee that was in charge of liquidating the firm's assets. I would guess only they can tell you who, if anyone, owns the IP assets of the company.
Re:creditors and dead code (Score:1, Informative)
This is total BS. Tax writeoffs for donations cannot exceed the lesser of fair market value or the owner's basis in the donated items. The basis is essentialy what was paid for it. So if it costs M$ $1 to manufacture a copy of Windoze, that's what they get to deduct for donating it.
If I build a PC and donate it to a qualified charity, I only get to deduct the cost of the materials. I can't claim a cent for the time I invested in it.
Even if you buy stock and it doubles in value, you only get to deduct what you originally paid for it if you donate it!
Think about it: its a *donation*, not a business venture!
Re:OP: The very first thing you do ... (Score:3, Informative)