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My cofounder is completely shutting me out

I had created a biomedical product with my cofounders help. He was employed with another company for the first 1.5 years after we had started.

I completed the prototype and handed it over to him.

He goes and incorporates, patents the product all in his name and doesn’t acknowledge my existence. Basically, he shuts me completely out, very craftily keeping me worried all the time since he controls everything.

When I complained, he gave me a stock grant letter which mentions I am a cofounder. Now the company is doing well and after repeated requests to give me my share certificates – I’ve heard nothing. I have no clue how much money the company is making or anything about it.

Can he restructure and dilute me and get away with it? It feels like shareholder oppression and breach of contract. Also, I haven’t signed any IP assignment, so can I use that card?

Can he start another company and buy this one out and dilute my shares? Currently it’s all common shares.

Thanks in advance for any advice.

  • As a Co-Founder you should have certain privileges such as information.

    Has there been any written non-compete agreements? You could use what you have made in the formation of a new company (with the right paperwork / agreements at hand to avoid this) or sell to an existing company while not violating any existing patents. Being a ‘first mover’ is not advantageous all the time.

    The other option is to challenge the validity of the patent but you will need specialist help.

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  • When you say you completed the prototype and handed it over, exactly what happened? If you have evidence that you built it on your own – you may be entitled to something, most of it will depend on how you “handed it over”. I am assuming you didn’t do this literally. So did you sell it to him, did you assign things to him, did you agree to anything? Is anything documented in email? Was there consideration? What were the terms? What were you expecting in return (regardless if you were justified or not)?

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  • Regarding the patent, if you have proof you were a co-inventor and your name isn’t on it, you can complain to the USPTO to either get your name on it or get the patent voided. Let him know that.

    Also as a co-inventor, if you never assigned over any IP rights, you have FULL rights to license the patent to anyone without his agreement (he has the right to do the same). So you could threaten to license that patent to a competitor (after you get the USPTO to put your name as a co-inventor).

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  • If any of this is true, then why are you here instead of talking to a lawyer??? I’m seeing how it might have been easy for your cofounder to shut you out.

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  • Strategically speaking, don’t go nuclear just yet. Play your cards wisely. Declaring war may feel good, momentarily, but it’s a rookie move which makes winning a longer, more difficult process.

    Do, indeed, seek legal counsel. Do plan your moves. Do maintain a cordial tone while you execute that plan. Do take action – the sooner the better. Good luck.

    Michelle Fisher

    @GetSetMC

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