How to Create the Next Facebook: Seeing Your Startup Through, From Idea to IPO Read Online Free Page B

when your attorney gives you legal advice, make sure you ask questions such as “What are the chances of getting in trouble?” and “What would be the consequences?” If the potential fallout seems minor or worth the risk, then you should purse that course of action even if an attorney has some doubts about it. Business is about taking calculated risks.
    Now let’s take a look at Zuckerberg’s experience with obtaining legal counsel. Although Zuckerberg’s contract programming work was certainly helpful to him and Facebook, because it enabled him to build his business savvy and learn his craft, one of his contract projects turned into a legal nightmare for the company. In November 2003, twin brothers Cameron and Tyler Winklevoss as well as Divya Narendra met with Zuckerberg to develop a web site called HarvardConnection , which would host a list of upcoming parties and provide discounts for nightclubs. The Winklevosses and Narendra agreed to let Zuckerberg in on the deal. There was no written contract between the four parties, but there were many e-mail and instant messages that indicated that they had arrived at some type of agreement—part of which was, in exchange for equity in the enterprise, Zuckerberg would create the web site for HarvardConnection.
    Zuckerberg was immediately given access to HarvardConnection’s server. However, despite stating initially that the job would be an easy one to complete, he failed to make much appreciable headway on the project. He claimed that he was swamped with schoolwork, but assured the Winklevosses and Narendra that he was working steadily on the site. Meanwhile, without ever having created functional code for HarvardConnection, Zuckerberg registered the domain name thefacebook.com and launched his own social networking site, which later became the phenomenon we all know today as Facebook. Upon hearing of Zuckerberg’s web site, the Winklevosses and Narendra quickly filed a lawsuit, claiming that Zuckerberg stole their idea fora social network (they eventually created a college site called ConnectU). The litigation was finally settled in early 2008 for an estimated $65 million.
    This experience was a classic, expensive mess, and Zuckerberg could have avoided this legal headache by taking a few simple precautions. First of all, after agreeing to work with the Winklevosses and Narendra on their web site, he could have insisted on a written contract and asked an attorney to review it prior to signing it. When becoming a partner in a new venture, it is essential that you sign a document that outlines each partner’s rights and responsibilities. Prior contract work and former jobs are often sources of problems for entrepreneurs who start new ventures, so think hard about your legal exposure—and about what papers you should or should not sign. Here’s some advice:
Nondisclosure Agreement (NDA): Under the terms of an NDA, you cannot disclose material information to third parties—in general, for a fixed period of time, say, a year or two. These contracts can be broad but are usually enforceable. If you have signed an NDA and then start a company that is similar to your employer’s or your client’s, then the NDA could be a problem. Even if there is not an NDA in effect, the employer or client may be able to claim misappropriation of trade secrets. As a general rule, then, be wary about using propriety information when creating your own venture. Doing so could result in a nasty lawsuit.
Noncompete: Under the terms of a noncompete agreement, you cannot compete against your employer or client for a set period of time—often a couple years. The good news is that noncompete agreements are generally not enforceable in California, but this is not the case with many other states. It’s yet another reason to create a company in California. Keep in mind, though, that if you signed a noncompete agreement as part of an acquisition, you may be held accountable if you do not abide by