New Business Idea - Who owns it?

I was looking for freelance work and met with a lawyer who had some work for me. The lawyer asked if I could build a product for him. I told the lawyer I can build the product and will charge him a fee for it. I also informed the lawyer that I would be interested in selling the product to other lawyers. We agreed on this. This was a verbal agreement; no paperwork was signed.

Now I have completed the product and the lawyer wants to go in 50/50 with me on selling it to other lawyers. I told him I am not interested in a partnership with him. Now he wants to take legal action and sue me for stealing his idea. Again, no paperwork was signed and no agreement was ever in place about a partnership. There was no NDA, no exclusive rights contract. In fact there is no written agreement for me to build the product for him.

Now I am getting threatening emails that he is going to sue me and that I should hand over any profits from the product as well as take down the product website.

Does he have any valid reason to take me to court with no written agreement? Should I be worried? He has been sending emails stating verbal agreements that are wrong and never agreed upon.

Thanks.

If you wish to go forward with developing or selling this product, you should get a lawyer who is on your side and can engage in the discussions with the lawyer who believes he owns a piece of this venture.

If a lawyer is taking written action towards you, and you aren't going to comply with what they want then you need a lawyer. It's about as simple as that.

If he has time then he can make your life miserable, and cost you/your attorney a lot of time and money.

Laws are obviously dependent on your country and state, but the typical arrangement if you did a fix bid on this project and had nothing signed that YOU would own the 'copyright.' Typically people have programmers sign a work for hire or some acknowledgement that they are being hired to build this on the behalf of someone else and that all the IP/copyright fall to the person paying for the work to be done.

Otherwise, if it's fixed bid - it's more like they are buying a product or a solution to their problem. Not the ownership of the actual product. BUT - whether it is one way or the other it doesn't matter if their are lawyers involved it's going to get ugly and expensive. Even if you are 100% in the right.

Having emails or any evidence that it was agreed upon or acknowledge that you were going to resell or market it would obviously be a big benefit. But, getting in a pissing match with a lawyer is bad news.

Facebook is in a similar situation and they're still debating about it, here and there, now and then. No final conclusion has been reached. Settlements have been done and undone, it's murky waters with no easy way out.

Get another lawyer, maybe you'll have more chance if you offer this other one a seat onboard, and yes it feels real weird, but if lawyers want your software that hard... Since now on, make everybody sign agreements on everything. (also legal proof of the ownership of your code may help, in the future. Register your stuff at the copyright office.)

Last, but not least, you shouldn't ditch prematurely the ugliest of the options: partnering with the lawyer that wants to sue you . Why?

• He may have actually helped you develop the software with his domain insight (the fact you don't make people sign waivers suggests you didn't know enough about law, at the time. So how could you, then, have written a software that valuable to lawyers? Someone will drool about that, in court.)
• He already knows other lawyers and may sell your stuff to them. How many? How well? That may be something you should give him a chance to show off.
• He may introduce you to bigger clients, ones you would have no chance to get in contact with. He may have worked and be working with, and for, law firms you never even heard of, and which don't want to hear from you , unless properly introduced.
• He may consider settling for 20%, 30%, or 40% given enough reasons. Reasons like "software development has these costs, takes this kind of time, we may have to recruit people, and I will have to teach them most of the stuff while you scratch you stomach, and sell my work short, or low, and agree on impossible deadlines out of thin air" and so on...

Your quick description sounds, as the previous comment, as though were "work for hire". Based on his idea. My thought is that it would take less time and money for you to consider the work you did for him as a prototype and not pursue selling it. Rather, spend the next month (which can be a slow business month) thinking about and working on a second generation product that will be better and even more salable. If I were you, the attorney I would hire would be more about use and interface design of the next product, as a potential customer. You can change the product enough that you learn from this experience and can still meet claims for it being your own. I would take the product off of the web and build it toward a future audience, utilizing some of the code you have. You learned a lot, spend your time and ideas toward 2012 and growth rather than looking backward. Some people love a good fight, he sounds like he's ready.

I suggest you go 50/50 with the lawyer. He will be pushing this to his colleagues, etc. You think you could do it as well but trust me it is going to be much harder. It's good to have someone with domain knowledge on your side. It's better to have a smaller piece of a larger pie, than own 100% of very little or nothing.

(This got too long as a comment on ZJR's answer, so I made it a full answer.)

Going in to business with the lawyer is a great solution. He believes in your product, and at 50-50 he will motivated to sell it to other lawyers. 50% commission to a great salesman is high but not unacceptable. (Go ask a farmer what percentage of the supermarket price he gets for his carrots, even though he did "all" the work, took "all" the risk, and "all" the supermarket does is display it on their shelves.)

Your options come down to:

• cut your losses. Earn nothing for your time, but no more costs on your time and money. Lots of peace of mind. And a fair cost for the lesson: get it in writing before you start next time.
• Earn 50% of something.
• Fight your case. Spend a lot of time and money and distracting effort. As it is his word against yours, saying you have a 50% chance of winning in court will do as an estimate. So this option gives you a 50% chance of 100% of the profits.

Having said that, get him to write up the agreement but then get a different lawyer to review it for you, explaining you suspect there may be an unfair clause in there, can they spot it.

Battling a lawyer on his own turf would be hard. Even if you were right, it's hard to prove that point beyond doubt.

Your role in this situation sounds like a programmer for hire, which makes the resolution harder. You also seem likely to not have much exposure on that front, and might need a business partner anyway for marketing. Why not work with the one that knows your product in and out?