My friend and I recently started our own service company. Since we have no technical background, we found a development guy to join our team. We ended up filing for an LLC two months afterwards (we started the project in college, so we held off formalizing until we graduated). Now we have a verbal agreement that the company is split 46,46, and 8 (developer) and we have put that in operating agreement, which are finalizing. The issue is, the developer started coding prior to us LLC'ing. Now for liability purposes, we want him to assign his IP to the company, but he has a hesitation. He said the coding framework that he used for our software is a custom framework that he uses for all his development. If were to assign his IP to us, would that mean his custom framework belongs to us or just the end product? If it's the former, then how can we accommodate his concerns?
Development Legal Intellectual Property Partnerships
If I were him I would not assign it either.
One thing he can do is grant a non-transferable license that allows you/your company to use the framework but you can't modify, sell or re-assign that license or the framework to any other entity.
He should probably get compensation for that as well. For two reasons:
Every well written IP attribution will have a section called "List of prior inventions" where the developer can list his own IP that is not going to be transfered to the company. That's enough to address his concerns.
Other than that, I agree with what all the other people said. The developer is really not making a good deal for himself.
If he is identifying a framework that he uses to build all of his projects, then I'd segment out what the diff is between the framework and the customizations as IP. I'd also make sure that the framework could be used continuing on.
Another alternative would be to have him migrate his changes to a general framework like CakePHP as an example. Depends on how important the framework is to the IP.