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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?
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Who Owns Source Code When a Company Folds?

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  • Like with BeOS (Score:4, Interesting)

    by zephc ( 225327 ) on Tuesday August 05, 2003 @05:00PM (#6619777)
    Be folded, and I guess sold its IP to Palm, but sold the source code to the yellowTAB guys, which was absolutely the right move. Palm is sitting on their hands (pardon the pun) about using any Be IP, but the yTAB guys are hard at work on the next version of BeOS, now called Zeta. Check it out [yellowtab.com].
  • Did someone... (Score:3, Interesting)

    by BJZQ8 ( 644168 ) on Tuesday August 05, 2003 @05:01PM (#6619789) Homepage Journal
    Did someone purchase the assets of the company? If so obviously they own it...if it was a fire-sale type of thing and nothing really changed hands, I don't see how a non-existant owner could sue you for making it public-domain or even using it yourself.
  • by Virtucon ( 127420 ) on Tuesday August 05, 2003 @05:22PM (#6620063)
    All assets including code belong to either the
    company owner or the "Corporation" under
    the Receivership. If the company was public, then a Bankruptcy proceeding will enumerate those assets, including code and the trustee then has the right to dispose of them how he sees fit in the best interest of the shareholders. If the company was private, who ever owned the company and their heirs owns it unless they sold the rights to someone else.

    I worked for a company that went Chapter 11, they still owed me money and I had the trustee come after me because work I did had tangible (read salable) benefit to clients left out in the cold. So, I cut a deal with the trustee, got my back money and some cash for finishing some work and making modifications to stuff already done.

  • Are you this guy? (Score:5, Interesting)

    by Mournblade ( 72705 ) on Tuesday August 05, 2003 @05:29PM (#6620131) Homepage
    Are you this [slashdot.org] "Technical Development Manager"?

    Interesting (one might say prescient) comment [slashdot.org]about Chilliware from Bruce Perens in that discussion.

    Cheers!
  • Immortal Code (Score:5, Interesting)

    by zlite ( 199781 ) on Tuesday August 05, 2003 @05:33PM (#6620177)
    In Feb Wired magazine had an article, headlined Immortal Code [wired.com], about how some software survives the implosions of its company. "The CEO goes to trial. The programmers hit the street. And yet sometimes a piece of code is so elegant, so evolved, that it outlasts everything else." The main example was the DragonSoft speech recognition code, but it also goes into "software repo men".
  • by MrLint ( 519792 ) on Tuesday August 05, 2003 @05:41PM (#6620257) Journal
    Something kinda similar happened with an after dark module. Berkley systems went *foom*, i guess some of the stuff got bought by Sierra/EA. However there was a lot of questions surrounding a game module called 'lunatic fringe' by Ben Haller [sticksoftware.com]. There used to be some info about it on his page, something along the lines of that there won't be an update as no one knows who owns the copyright anymore.
  • by eric76 ( 679787 ) on Tuesday August 05, 2003 @05:42PM (#6620267)
    Years ago, I was Director of Technical Services (Software Development and Research & Development) for a small, high-tech company. I was also the tenth largest stockholders in the company when it went bankrupt.

    My agreement with the company included my rights to keep a copy of any and all software I developed for the company and to use it as I wished.

    In fact, some of the software came from a large engineering company where I had worked previously. In that case, I had asked for and been granted permission to keep and use a copy of a specific set of programs I had written.

    At one bankruptcy hearing, I gave the secured creditor a good copy of all the software. He asked me where I got it and I told him I made him a copy from my copy.

    The secured creditor went through the roof and started threatening me with lawsuits for "illegal conversion".

    My lawyer said that I while I would probably prevail in court on the matter because of my agreement with the president of the company, it would cost me thousands to do so.

    I'm pretty hard-headed. It didn't matter that the software had no commercial use except for a very narrow segment of companies (there were about three in the United States that did the same thing and they already had their own software), I refused to give it up and wasted a lot of money on lawyer fees to keep it. The bad thing is that my lawyer took it upon himself to start negotiating away my rights to keep the software without telling me.

    So I fired the lawyer and kept the software.

    Since neither of us really had a use for the software, he never did file suit against me and I still have a copy of the software.

    All I need to use the software, besides a reason to use it, is a PDP-11 and a VAX.
  • by siskbc ( 598067 ) on Tuesday August 05, 2003 @05:47PM (#6620314) Homepage
    4. Convince them to assign the rights collectively to the old development team, under an open license. This way, both the old developers and the general public will benefit. That's what any respectable company would do.. (of course, ideally, said company would not have produced proprietary code to begin with and this wouldn't have been an issue)

    Right, and then we'll all dance in fairy land and everyone will be happy. I mean seriously, there's no chance in hell that would happen. If the team ever did anything worth a damn with it then the lawyer might have his boss come in and say "Why the hell did you give this away, you are FIRED!"

    I mean, that's just not the way this world works. I'm pretty sure parent is a troll (and a good one! ;>), but it does raise a good point, namely the following...

    The only chance you would have of open-sourcing this would be for the guy to convince the company to donate it to FSF or some other non-profit. The FSF would then value the code at some ridiculous value, giving the owner a massive tax write-off that is much more valuable than it sitting around collecting dust, and more than the guy could have ever paid for it.

    That's the only chance of open-sourcing this stuff.

  • by anthony_dipierro ( 543308 ) on Tuesday August 05, 2003 @05:48PM (#6620324) Journal
    If you just want to release it under some sort of free license, put it out there anonymously. If you want to profit off it, release it commercially and wait for the lawsuit. If it's a commercial success, settle out of court and get the company to hire you to continue work on the product. If it's not a commercial success, there aren't going to be any damages anyway. And remember, you can't be sued for punitive damages until the copyright on the software is registered. I assume the copyright for this software has never been registered. If it has, then there's the way you can find out who owns it.
  • by RealAlaskan ( 576404 ) on Tuesday August 05, 2003 @05:51PM (#6620352) Homepage Journal
    What do I do with this source code?

    If you're feeling lucky, you could simply publish the source code. Assuming that there are no trade secret issues, putting it on your website for public comment might not involve any serious liability.

    Two things (at least) could happen:
    1) The real copyright holder might notice, and answer your questions.
    2) Nobody might really care, in which case you could eventually do something more daring.
    3) SCO might sue you for infringing their copyrights on Unix^H^H^H^Heverything.

    Option (1) could involve a bit of embarrasment for you, but if you weren't distributing the code, or claiming the right to do so, I imagine that you' probably get away with it. Or not. Talk to your lawyer. Get someone in Nigeria to post it.

    Option (2) isn't so good, either. Although you never get in trouble, you really can't distribute or license the code. MAybe you could start a project to reimplement the functionality?

    Under option (3), at least you would get some serious publicity on Slashdot.

  • It's 'work for hire' (Score:2, Interesting)

    by Uzik2 ( 679490 ) on Tuesday August 05, 2003 @05:53PM (#6620382)
    The owner of the company owns it. He hired you, and the others, to produce it. If the owner of the company cannot be determined or there are debtors they can claim an interest in the software. In short, not you. I would imagine if you express interest in releasing it they might be willing to restart the company or at minimum will want a significant portion of the revenues. It might be negotiable though. Ask them, all they can do is destroy your dreams with crass demands for money.
  • by R2.0 ( 532027 ) on Tuesday August 05, 2003 @06:01PM (#6620463)
    "Remember, if no deal is struck, they get it back once you admit to having it."

    Not necessarily. As long as he doesn't publish the code somehow, his may well be the only existing copy. It's actually a bargaining point. They either deal with him fairly, or they get zilch. All he must do is "lose" the disks. Remember, his copy is legal under fair use (backup copies made while employed) and the only thing the owners can do is compel him to destroy it. They can't compel him to give the code back - he doesn't have a relationship with them anymore.
  • by CharlieG ( 34950 ) on Tuesday August 05, 2003 @06:07PM (#6620521) Homepage
    Years ago, I was asked to maintain a piece of software where the author distributed the code, but maintained copyright

    The author then died, with no heirs, but he had assigned the software (In code comments) to his employer. I called the employer, and asked. I was told, "Do what you want with it - it's yours". Unfortunately, I've never gotten a letter, so I have never really continued. If they want my changes, they can have them. Much better products have come along in the 7 or 8 years
  • Prevention? (Score:5, Interesting)

    by 4of12 ( 97621 ) on Tuesday August 05, 2003 @06:08PM (#6620534) Homepage Journal

    Sounds grim but true.

    So I have to wonder,

    Why don't corporations have easy legal means for property disposal after "death", just as Last Wills and Testaments offer individuals a convenient means for avoiding probabe and all those complications?
    Is it just that no one thinks their corporation will ever die? Are bankruptcy proceedings so sloppy that they leave any property unassigned?

    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.

    IANAL, but, now and then, they're indispensible.

    [It's too bad the code author didn't have some claim on the company's assets, such as a paycheck that didn't come. I could see where he could submit a claim as a creditor and negotiate to settle for said source code.]

  • by sailor2003 ( 695443 ) on Tuesday August 05, 2003 @06:22PM (#6620677)
    If you take the code without securing some rights to it, and succeed in making money out of it somehow, you can be absolutely and positively sure that somebody else and their lawyer (or lawyers) will come out of the woodwork claiming that they own it, or you infringed their copyright or patent. The more money, or money making potential, others see in the code, the flimsier the ownership claims will be. Secure the rights to the code now before you invest any time or cash in it. It will be too late to do so after your success is written up in Slashdot and "Fortune".
  • by zipgunII ( 533764 ) on Tuesday August 05, 2003 @06:45PM (#6620904)
    I was in a similar situation. when my company went BK, I was owed about $6,500 back pay. As a result I am a creditor in the "company" and I have a lien on any "property" that the company owned. Basically, the source code for the app that I developed got forgotten about. Anyway, since I have this lien on the "property" I can "confiscate" it and use it as my own until the someone who owns the code pays off my lien. Anyway, I still have my source code, although I've been unsuccessful in making any money on it. I hope this helps!
  • by siskbc ( 598067 ) on Tuesday August 05, 2003 @06:56PM (#6621026) Homepage
    The way it really works is more along the lines of: How much did it cost the company or individual doing the donation? In the above example maybe they could write off the amount that was donated- development costs if it was never publicly released and they *paid* development costs.

    Not really - it has an intrinsic value that is independent of their actual cost. I've seen a lot of this lately, all involving nonprofits as recipients. MS donates copies of windows to schools, and typically deducts retail price. Another biggie is companies donating patents to universities. Typically the patents are things that didn't work out for them, and got shelved. They donate the stuff to the university in exchange for a "favorable" valuation of the donation, which is typically more than they could have ever sold the patent for.

    So, from examples I have actually seen, there is frequently a disconnect between what a donation should be valued at and what's been happening. Supposedly the IRS is going to look more closely at this, but good luck there. This has been a nice loophole for a few years now, as everyone but the government wins. The nonprofit gets something that might be of some value for free, the company gets a big writeoff. The nonprofit doesn't pay taxes, so that's not a consideraton. Nice racket, eh? Some big companies have been doing this too - can't remember exactly, but Big Oil comes to mind, as does Dow Corning.

  • Re.: Lawyers (Score:2, Interesting)

    by rkww ( 675767 ) on Tuesday August 05, 2003 @07:01PM (#6621076)
    A programmer (and most certainly not a lawyer) writes: The answer, almost certainly, is (spooky music) the bank.

    It seems to me that your best bet might be to put a notice in the appropriate publication(s) announcing your intention to appropriate the code and ask whether anybody has a stronger claim to it than you. Then cross your fingers and hope that nobody takes the bait. That's essentially what the bank would do if it found a deposit box full of stuff and it couldn't determine the owner.

    One question one might ask is whether your employers allowed you to take copies of (their) source code off site, and if so, why.

  • by korielgraculus ( 591914 ) on Tuesday August 05, 2003 @07:59PM (#6621560)
    A quick google search turned up Icesoft [icesoft.no] who are selling a product called iceSculptor. Is it possible these guys bought the rights when the company folded?
  • Treat it as a bonus! (Score:3, Interesting)

    by Neurotensor ( 569035 ) on Tuesday August 05, 2003 @07:59PM (#6621564)
    If your company goes belly-up, and the PHB lets you go home with a company server, it's yours to keep. Regardless of how stupid the PHB feels afterwards. A gift is a gift.

    So if the PHB lets you go home with all the code, maybe you could argue (*cough* make up *cough*) that it was a parting gift for years of service?

    If you didn't start selling licenses to the code they probably wouldn't notice or care anyway, same as if you didn't turn around and sell the company server for $100k. Maybe release it as GPL? If no money is being made, the developers will probably agree with you that it was a good thing to do, while the management won't notice for years to come.

    NOTE: I am most probably an idiot. Take my advice at less than face value. Do not listen to me for I Am Not A Lawyer. (iANAL being the complement of ANAL)
  • by rjamestaylor ( 117847 ) <rjamestaylor@gmail.com> on Tuesday August 05, 2003 @08:11PM (#6621657) Journal
    When a company closes who owns the office furniture, the wall art, the company name, the trademarks, logos...?

    Can I start a company called WebVan today? Maybe. How about using WorldCom's logo for my new venture?

    Bigger question: will anyone who can claim rights to those things pursue me if I use them for myself? Probably not -- unless I am successful. If I am successful that will get the attention of people who might have told me "who cares." If there is a legal heir, they will fight for the throne.

    I've seen the legal agreements for software ownership at software companies -- there is always a clear deliniation of ownership rights for contingencies such as sale, merger, public offering or dissolution, etc., of the company.

    In one recent agreement we had a partner who was responsible for writing and maintaining the bulk of the application system. We had contract language to the effect that if the company could not support the application or if the company folded we would obtain rights to the software. That's just an example.

    Point is, there most likely is a legal owner and if you do something unauthorized, you'll be vulnerable to legal repercussions.

    BTW: Don't mix that source code in any forum that could be seen by GNU or Open Source developers, or you'll taint the community.

  • Re:Lawyers (Score:4, Interesting)

    by TekPolitik ( 147802 ) on Tuesday August 05, 2003 @08:31PM (#6621808) Journal

    Do you know who was the corporate counsel for the company? If so, have your lawyer contact them.

    This is not correct. First, the liquidator is the one that would have done anything that need to be done. That's your first port of call.

    If the liquidator didn't sell it, then what happened to the property depends on what country (and state, in some cases) the company was incorporated in. Typically the undistributed property of a delisted company vests in the securities regulator or government for the company's incorporation jurisdiction.

    Even if the liquidator didn't sell the IP, they should be able to tell you who gets it by default. There shouldn't be a need for a lawyer, and let's face it, who wants to give money to a land shark if it's something you can do yourself.

    Thus there is almost certainly an owner somewhere - you need to contact them and see if you can buy the rights, which you will probably be able to do if they're held by a regulator who has no other use for them (especially if you have the only copy of the code that could be used to make use of them).

  • by PleaseDontBeTaken ( 604130 ) on Tuesday August 05, 2003 @10:00PM (#6622368) Homepage
    Not a lawyer. Now then...

    When there is no clear market price for what you are donating, then original cost, or if ascertainable, replacement cost, would be strong guide in determining the value of the goods provided. Depreciated original cost (whatever the book value would have been) might also be a good starting estimate.

    Donating is sometimes a great idea. The problem is that since the company went out of business, it's almost certain they lost money, thus they have no taxes to offset. If was a C corp, then unless that business revives itself without a change of control within the statutory period for reclaiming tax losses, the "losses" will never offset any taxes inside the corp.

    It would be very interesting to hear someone who knows says who "owns" the code if the corporation was formally wound-up without some of the intangible assets having been sold. Theoretically the liquidators should have gotten some value for it. It may have even been sold to the law firm or other insider for $0.01.

    I would suggest taking the "I'm poor but would like to work on this / see the code live" approach. That will lead well into either the "why doesn't the current holder give it away to something like the FSF and take the deduction" or the "what's the lowest price I can pay for it" discussion or the licensing/royalty discussion, which also sounds like a good idea.
  • by Anonymous Coward on Tuesday August 05, 2003 @10:52PM (#6622650)
    Contribute o the open source project, maybe the people that spends their years working there get their name in the history book of open source.
  • by plierhead ( 570797 ) on Tuesday August 05, 2003 @11:53PM (#6622994) Journal
    A better version of your option "4" would be to:
    • 1. Release the code under a BSD license via an anonymous web site - hotmail address for admin contact, use an internet cafe without security cameras when doing the deed, absolutely no trace back to you.
    • 2. Hide the web site from search engines. Make sure there's no links from anywhere.
    • 3. Contact a notary and have them go to the web site and record the fact that it exists. You'll need this later.
    • Copy the code and a little while later, take down the web site.

    Now the code is effectively open sourced, and you have an audit trail to prove it, but only you can access it. Since its BSD you can freely create derivative works and sell them without restriction.

    The worst that can happen is that if by any chance the actual owners of the code (as per the many other responses to this post, these will likely be some creditors if the company actually did go bankrupt) were to find out what you are doing, your defence will be that the code was open sourced and you thought you had every right to use it. The notary will back you up here.

    Of course you would immediately lose the code - but you will be safe from any legal nastiness. So make sure you've taken plenty of money out of the business by then. And better still, create a trademark or brandname that will have some value to the real owners, then you can sell it to them.

  • by cheezit ( 133765 ) on Wednesday August 06, 2003 @12:09AM (#6623075) Homepage
    IANAL, but as I understand it a company can exist as a legal entity (party to contracts, etc) long after it ceases to exist as a functioning business.

    Whoever owns the pile of papers that represents the entity that is your former company could easily have a problem with what you are doing.

    Check EDGAR and other SEC sources (if a public company) for current contacts. I would assume a lawyer would be required to tell you when you have tried "hard enough" to contact any interested parties.
  • by Little Brother ( 122447 ) <kg4wwn@qsl.net> on Wednesday August 06, 2003 @01:01AM (#6623342) Journal
    I notice several posters talking about how to aquire assets from the company in a property-seisure and/or salvage leagal mindset. The problem is that you don't OWN copyrights. You have the right to copy the material granted by law and, to my knowledge, you cannot be forcced to give this up. (Although you can agree to, which is technicly what happens in works for hire.) I don't think even creditors have a right to copy copywritten materials unless they and the company agree to sell the copyritten material to the creditors for part of the debt.

    I am not a lawyer, am I completly off base here?

  • by 73939133 ( 676561 ) on Wednesday August 06, 2003 @01:03AM (#6623349)
    The source code is owned by the same people who owned the computers, laptops, and any other assets of the company. Most likely, that is not you. If those people decided not to do anything with the source code, that was their right: they can waste their money any way they like. Or maybe it's not wasted: if they own another company with a competing product, the last thing they will want is for this thing to get out. So, no, you don't own the code and there is nothing you can do with it or about it unless you can establish who does and get their permission.

    There is a bill floating around Congress that would require copyright holders to pay a tiny ($1) fee every few years to maintain copyright protection for their works precisely to get creative works out of this sort of limbo. But even then, you might still be contractually bound not to disclose the software.

    If this matters to you, you could try to make it part of your employment contract next time that under a well-defined set of circumstances (bankruptcy, five years elapsed without a product), your copyright reverts to you or the software may get published. In fact, customers might like such clauses as well (source escrow). But most companies won't go for it.

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