If you've read our latest ebook on HBO's Silicon Valley, you know the perils that can arise from issues of ownership and work created while otherwise employed. While a creator can easily separate in their mind the work done for each separate entity and see no contradiction or overlap, the law is less forgiving of such indistinction. Hooli's case against Richard and Pied Piper works so well because we've all seen cases in the news where a entrepreneur has created a product or company in their spare time, only to have the ownership of said creations disputed by their current employer. At the very least, we're familiar with David Fincher and Aaron Sorkin's telling of Facebook's sordid origins in The Social Network, embellished as it likely may be. So we shouldn't be surprised to see new cases pop up all the time, even here in the Valley of the Sun.
Tempe-based LifeLock, Inc. has filed a lawsuit against the founder of Lemon, a company it acquired in December 2013, over the ownership of one of his other projects. LifeLock is alleging that Wences Cacares, the founder and former CEO of Lemon, used Lemon computers and resources to develop the source code for one of Cacares' other ventures, Xapo. (For those unfamiliar with the company, Xapo offers offline, encrypted storage for bitcoins, in facilities with physical security measures that would give Danny Ocean pause.)
At the time that LifeLock acquired Lemon, LifeLock also launched its LifeLock Wallet app that used Lemon technology to help customers protect their identity online by securely storing digital copies of credit and debit cards for use. What the lawsuit alleges is that Cacares and his team continued work on a bitcoin wallet component to the app that wasn't going to be a part of the LifeLock Wallet, even after being ordered to stop by Lemon's board. LifeLock is claiming that such work continued even after they purchased Lemon, and as such they are entitled to ownership of the company.
Cacares has responded by filing suit against LifeLock, claiming that LifeLock interfered with and mismanaged his team, leaving him unable to continue work on the LifeLock Wallet. Cacares was able to get a letter from LifeLock acknowledging that he owned the bitcoin vault as well as the involvement of two Lemon employees in advisory roles. But LifeLock claims that the role of these employees was misrepresented; rather than advisers, they were involved with Cacares in day-to-day operations as he and others continued development on Xapo with Lemon resources. Cacares further claims that after tendering his resignation, he was instead terminated by LifeLock for cause, resulting in the loss of $1 million in LifeLock shares.
Clearly this is a messy affair, sure to be strung along in the courts for months. And it's impossible to speculate from the outside on what went on within Lemon and LifeLock, especially when we have dueling lawsuits that give us twice the narrative we usually see from a court filing. But the larger paint remains: take care when working on your own business while still employed elsewhere (even if it's your own company). When you sell your business to a large company like LifeLock, then proceed to step out with your new venture, there is a chance that you'll draw suspicion, especially if it's related to a project from your old company. It's not a stretch to say that this Lemon could have used advice from a sage advisor.