Who Owns Source Code When a Company Folds?

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?

Comments

Like with BeOS

[zephc]

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.

Are you this guy?

[Mournblade]

Are you this "Technical Development Manager"?

Interesting (one might say prescient) commentabout Chilliware from Bruce Perens in that discussion.

Cheers!

Immortal Code

[zlite]

In Feb Wired magazine had an article, headlined Immortal Code, 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".

Someone threatened me with legal threats one time

[eric76]

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.

You have to be kidding

[siskbc]

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.

Prevention?

[4of12]

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.]

I've seen this "donation" racket

[siskbc]

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.

Not too hard to determine

[rjamestaylor]

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

[TekPolitik]

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).

Re:creditors and dead code

[plierhead]

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.