Some backstory here. But the TLDR is that my super shitty co-inventor on a patent wants $10 for a limit of 100,000 units sold. This is way too much, as margins are impossible to calculate yet since it’s still in prototyping phase. Psychologically, he just wants something that equals to $1M. He has no concept of equity, I offered him 6% of my company and spent $4000 on legal paperwork because he agreed during a legal conference call with my corporate lawyer who negotiated the deal - he didn’t sign after it was all done. I then offered him 5% royalties indefinitely for the one device, he refused. Now he is demanding $10 per unit for only 100,000 units sold (I expect to sell a few million over 10 years). I need a deal that appeals to him but works for me - this guy has screwed me so hard, but I need him to assign IP.
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So a year ago I quit my job to develop some very promising tech. My cousin, with a science degree, had a brilliant idea that was a world first. The idea was verbal at a family gathering.
I immediately took pen to paper and began designing. I did market research etc and quit my job immediately to go all in on this. Within a month our patent search came back clear and we spent 3 months refining the idea to file a provisional while we would develop prototypes for the following year before filing a utility.
Well, between the patent search in December and filing in April.....he decided to bring on another cousin, who contributed only a connection to an engineering student - my cousin (it being his idea) talked me into bringing the other, useless cousin on board for his network of business connections. I agreed, on the written agreement we would decide equity division when we incorporated.
Well, I incorporated and before signing any documents they decided we were all equal partners and even wanted to give this engineering student 25%......I fought hard to get him down to 5% with a commitment of $15,000 investment and an executive role with executive duties as a chief technical officer (the student was great).
They vetoed me on the 5% and wanted to give the student 25% so I conceded on the terms of getting advice from our corporate lawyer first. Of course, the lawyer agreed with me and even said 5% was generous. So they agreed.
Well, this left a bad taste in their mouth against me that I wasn’t being equal towards the student - who had provided no value to this point anyways aside from some CAD drawings which were paid for by me at an hourly rate. So with this new resentment toward me, they tried to bring two more cousins in - these two cousins didn’t respond to a Single message or meeting we had for 3 months. They are poor, underachieving losers who don’t even have phones. My “partners” wanted to give them an “opportunity” and also divide equity equal amongst them too! Keep in mind one “partner” only ever spent $335 out of $10,000 by this point.
I designed 80% of the device, came up with the entire marketing plan, entire executive summaries, pitch deck, and paid 90% of the bills for trademarking, patenting, websites, incorporating, legal, art for logo, CAD work, everything, even most lunches were on my dime. I have since incorporated a new company for all the other IP, put substantially more into developing more products and have established a distribution network, secured some joint ventures when product is ready, and even found a manufacturer who will give me a 24 month exclusivity on non-patentable parts.
My lawyer says I can remove the useless cousin as a “non-cooperative inventor”, I’ve already got the student to assign all his IP to me, it’s just my one cousin who had the initial idea is the co-inventor and has ruined my life over his ego.
I fought that tooth and nail, caused more resentment towards me. Fast forward to filing the patent and the cousin with the student decided they could run the company better than the cousin who had the idea and myself - they made a PowerPoint presentation for a competitor without our knowledge.
I found out this competitor had lawsuits against him for trademark and copyright infringement, and lost my shit on these two idiots. The student ‘resigned’ (contract had not been signed yet, it was due that week), and the cousin who went with him turned the entire family against me. I have completely lost all relationships with my family over this - but good riddance.
So it was down to me and the cousin who had the idea. Well now that it was down to the two of us, he wanted full control of 80%, while working a 14-16 hour demanding factory management job.
Met with the lawyer, lawyer educated him on how equity works, cousin freaked out “this was my idea” and has been silent since declining the 6% he initially agreed to be a silent partner and I do all the work.
Before he asked for majority, I agreed to 50/50 even though I do all the work, and any future dilution was equally proportional - before all of this, this guy woulda been the best man at my wedding, now he has cost me over $12k in legal fees, my relationship with my family, anxiety, stress, depression, hardship.....but I’m a resilient entrepreneur and I can dust it off.
I hope by now you realize what an idiot this guy is. But I need him to assign his IP and after 9 months of trying, he is ready and wants that $1M prize to feed his ego “this was my $1M idea, look at me I’m a genius.”
So how do I do this agreement? Offer $5 for 200k units based on a formula that the $5 is based on a dynamic % of MSRP.....so let’s say MSRP is $160 his $5 = 3.13%. Applying 3.13% to wholesale at $80 only gives him $2.50 and not the $5. Most of the business will be wholesale.
I need to be cunning about the formula and make it seem very generous, like it’s his idea (which it technically is), but works to my benefit and not his. I would rather see him make $250,000 or less, than $1M.
“Success is like pregnancy, everyone says congratulations but nobody knows how many times you got fucked.” -Dan Peña
Submitted January 09, 2019 at 06:35PM by teddyruxpin27 http://bit.ly/2FmbFFN
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