Small Software went into liquidation

Hessie

I set up a small software development company in the early nineties. We were developing a new .net product when the downturn came and the company went into liquidation. A few of the staff took the source code of the existing products and told the customers they acquired it from the liquidator which they could have but didn't. I am left with a load of personal debt that went into the business. They ex staff invested nothing and are making a living out of my investment. Is there anything I can do?

markpb

Get legal advice. It sounds like you could have a case against them for IP theft/breach of contract but only a solicitor will be able to advice you properly and, more importantly, tell you if it's worth persuing.

Hessie

Thanks but I can't afford a solicitor. They got redundancy and job seekers for a year I got nothing.

markpb

Such are the joys of being an entrepreneur in Ireland. If you can't afford a solicitor, I can't imagine anyone else is going to fight your battle for you. You could try writing to your ex staff demanding payment and threatening legal actin if they don't comply but I've no idea how legal that is (I am definitively not a soliciter) and I'm not sure if they'll believe you.

jon1981

Did you have an escrow agreement in place with your customers?

Hessie

No we had no escrow in place, again to do it properly is very expensive.

Graham

Is it too late for you to make a small offer to the liquidator to legitimately acquire the rights/source code?

It sounds like theft of IP, it was an asset which the liquidator should have been able to realise for the benefit of the outstanding creditors.

Manach

Offhand that as the owner of the code the OP still has a bundle of IP rights in them, and these can be enforced against the immediate users of said code. There are also specialists in IT forensics that can determine how likely a code source resembles the origin - ie if it has been copied. However how this would effect anyone (3rd parties) who in good faith latter bought/used the code is where the OP might need specialised legal advice.

Hessie

Yes the liquidation is finalised. I was told I couldn't acquire the software because I was a director of the company. There was other investors involved so I had to be careful that everything was done right. At the creditors meeting there was a liqidator with one of the creditors and he put a figure of around 100k on the software. He said that the staff had been telling the customers that they were creating a new company. The business was advertised in the business post. The ex staff were always operating in the background. It was difficult because other businesses were depending on the software and I didn't want to bring anyone else down.

Graham

Manach wrote: »

Offhand that as the owner of the code the OP still has a bundle of IP rights in them, and these can be enforced against the immediate users of said code. There are also specialists in IT forensics that can determine how likely a code source resembles the origin - ie if it has been copied. However how this would effect anyone (3rd parties) who in good faith latter bought/used the code is where the OP might need specialised legal advice.

It sounds like OP didn't own the code, the OPs Limited company did.

Hessie

I made a complaint to the OFDC. They confirmed that the staff did not acquire the software from the liquidator but said that the matter of the ex employees taking the software and customer base was not a matter for their offfice.

Hessie

that should have been ODCE Office of the Director of Corporate Enforcement

Graham

Dissolved Company Assets: Once a company has been dissolved, the assets of the dissolved company become State property. Where an application relates to Real or Leasehold Property it is dealt with by: The Office of Public Works. Applications in writing to - Deirble Tomas Property Management Services, The Office of Public Works, Head Office, Jonathan Swift Street, Trim, Co. Meath. or by e-mail - [email]redacted[/email] and Neil Ryan - [email]redacted[/email]. Where an application relates to Personal Property this is dealt with by: Property Section, Department of Expenditure & Reform, Government Buildings, Merrion Street, Dublin 2.

If you were also a creditor of the company, I wonder if you may also have a case to seek the return of the company to the register to address the issue of the value of the stolen software.

Hessie

That's interesting I am the biggest creditor of the company.

Graham

Hessie wrote: »

That's interesting I am the biggest creditor of the company.

Worth looking into then but keep in mind I was posing a question rather than suggesting a course of action. You will almost certainly need to take legal advice.

jimmycrackcorm

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jimmycrackcorm

a company I worked for took an ex employee to court when shortly after he was let go, he turned up shortly after in customers trying to sell an uncannily similar system.

The high court case seemed to be a slam dunk because it was obvious that it was a copy. The company lost because some small variations were there and it couldn't be proven that the same code wasn't actually just rewritten.

Kinet1c

A large part of your case seems to rely on former customers. How willing do you think they'll be to let you disrupt their business if it's a key piece of software?

5rtytry56

Kinet1c wrote: »

How willing do you think they'll be to let you disrupt their business if it's a key piece of software?

The operative, OP.

John_Mc

Wouldn't think this is anything to do with the customers, that's the new company's problem.

OP, I would definitely seek legal advice on this! I'm sure you'll be able to find a solicitor who can offer a no-fee consultancy on the basis of getting paid should there be a case.

Kinet1c

John_Mc wrote: »

Wouldn't think this is anything to do with the customers, that's the new company's problem.

It is, if as I said, it's a key part of the company's business. What if their business depends on it and without it (further) jobs are lost?

John_Mc

Kinet1c wrote: »

It is, if as I said, it's a key part of the company's business. What if their business depends on it and without it (further) jobs are lost?

So you're suggesting that the OP possibly ignore/forget the fact that they're IP/Software has been stolen, because a company using that stolen software is highly dependent on it to run their business?

Graham

It sounds like it wasn't the OPs software, it belonged to the OP's company. Legally speaking I think it now belongs to the state.

OP, by pursuing this what outcome are you hoping to achieve? Don't mistake that question for a suggestion that you shouldn't pursue it, I just think it's important you ask it for yourself.

Kinet1c

Graham wrote: »

OP, by pursuing this what outcome are you hoping to achieve? Don't mistake that question for a suggestion that you shouldn't pursue it, I just think it's important you ask it for yourself.

John_Mc wrote: »

So you're suggesting that the OP possibly ignore/forget the fact that they're IP/Software has been stolen, because a company using that stolen software is highly dependent on it to run their business?

The above is relevant. How is he going to prove it? What if the code has been completely re-factored?

Some times a win is not a win.

The Corinthian

John_Mc wrote: »

So you're suggesting that the OP possibly ignore/forget the fact that they're IP/Software has been stolen, because a company using that stolen software is highly dependent on it to run their business?

Sometimes this is what ultimately makes sense to do.

While I sympathize with the OP, his situation is not unlike the more common scenario of a bad debt that would cost more to pursue than the value of the debt. Unless there is some 'deterrent' value for future debts, it makes little logical sense to pursue it - it becomes throwing good money after bad. And for what? Pride? Ego? No. Better to draw a line under it and treat the matter as a hard lesson to be remembered for the future.

In the case of the OP, the software in question may not even legally belong to him. It may be up to the State to pursue what is their IP now - so he might report it to them and if they're unwilling to do so, there's not much he can do about it.

The lesson learned for the OP is that when the rats are leaving the sinking ship, be sure they don't walk out with their PC's, and your IP. Lock it down before they're up on their feet, selling your (by then refactored) work, and you no longer even own it anyway.

John_Mc

There is software that can scan source code and give an estimate on how similar one code base is to another. Another thing to pursue would be the source code history. If they did a huge initial checkin then that's what I'd be comparing against.

This is all about IP, and whatever about the outcome for the OP, if they've done what the OP is suggesting they deserve to be caught for it.

If there was a huge initial checkin, and a number of different applications which can compare code give a high score for code similarity, then any reasonable judge would accept that what the OP is suggesting actually happened.

The Corinthian

John_Mc wrote: »

If there was a huge initial checkin, and a number of different applications which can compare code give a high score for code similarity, then any reasonable judge would accept that what the OP is suggesting actually happened.

It's difficult enough to get a solicitor or barrister to be able to get their head around technology, let alone a judge - so I wouldn't hold your breath on that score.

John_Mc

The Corinthian wrote: »

It's difficult enough to get a solicitor or barrister to be able to get their head around technology, let alone a judge - so I wouldn't hold your breath on that score.

A source code repository is no harder to describe than anything else so I'm not quite sure why you're making a huge sweeping statement like that.

There are solicitors and barristers who specialise in IP you know.

The Corinthian

John_Mc wrote: »

A source code repository is no harder to describe than anything else so I'm not quite sure why you're making a huge sweeping statement like that.

Because I've dealt with a lot of them over the years. I'm quite litigious.

There are solicitors and barristers who specialise in IP you know.

I know, I never said there were not. I warned that ones that are competent are few and far between (many in IP law can't get their heads around technology to begin with), let alone judges - which was in response to your comment about a "reasonable judge".

John_Mc

Revision control, also known as version control and source control (and an aspect of software configuration management), is the management of changes to documents, computer programs, large web sites, and other collections of information. Changes are usually identified by a number or letter code, termed the "revision number", "revision level", or simply "revision". For example, an initial set of files is "revision 1". When the first change is made, the resulting set is "revision 2", and so on. Each revision is associated with a timestamp and the person making the change. Revisions can be compared, restored, and with some types of files, merged.

That's from Wikipedia.

Judge, we'd like to see version 1 in their source control system so that we can evaluate what it included, and to have an independent third party compare it to the source control we had.

Also, a judge won't refuse a request unless he fully understands what is being asked of him.

The Corinthian

"Judge, source control was only implemented with version 2. We have numerous expert witnesses who will testify that this is not unusual in the industry."

Jim2007

Hessie wrote: »

A few of the staff took the source code of the existing products and told the customers they acquired it from the liquidator which they could have but didn't.

If that was the case, then it would have been at the liquidator's discretion what if any course of action he wanted to take. Most likely he either decided to abandon the asset or that the legal costs of an action would have out weighted any benefits he might of obtained from the action.

Either way unless you asked the question at the creditors meeting and challenged the decision of the liquidator to the point that he reversed his decision or was instructed to do by the creditors, then the issue is mute.

Hessie wrote: »

I am left with a load of personal debt that went into the business.

Unless you submitted these claims to the liquidator within the time period set out and had them verified by the liquidator then you have no claim on the company.

Hessie wrote: »

Yes the liquidation is finalised. I was told I couldn't acquire the software because I was a director of the company. There was other investors involved so I had to be careful that everything was done right. At the creditors meeting there was a liqidator with one of the creditors and he put a figure of around 100k on the software. He said that the staff had been telling the customers that they were creating a new company. The business was advertised in the business post. The ex staff were always operating in the background. It was difficult because other businesses were depending on the software and I didn't want to bring anyone else down.

It is hard to understand the outcome of this meeting, but it would appear that liquidator was instructed to dispose of the business and any action concerning the behavior of the former employees was left to his discretion, would that be it? Was the business in fact sold or what happened to it?

Either way once the liquidation is finalized then it is all over. The liquidator simply writes off or abandons any remaining assets (they do not transfer to the state), pays himself, the revenue and distributes what is left to the creditors, submits the final returns etc.. and that is where it ends.

Hessie wrote: »

That's interesting I am the biggest creditor of the company.

Well assuming it is now finalized then you were the biggest creditor and even if you were you do not have a right of action against the former employees that would have rested with the company and it's liquidator.

Graham

Jim2007 wrote: »

The liquidator simply writes off or abandons any remaining assets (they do not transfer to the state).

Am i interpreting this incorrectly:

A company can be dissolved either through liquidation or through the strike-off process. Please also find links to information on Examinership and Receivership.

Dissolved Company Assets: Once a company has been dissolved, the assets of the dissolved company become State property. Where an application relates to Real or Leasehold Property it is dealt with by: The Office of Public Works. Applications in writing to - ****. Where an application relates to Personal Property this is dealt with by: Property Section, Department of Expenditure & Reform, Government Buildings, Merrion Street, Dublin 2.
https://www.cro.ie/Termination-Restoration/Company

Jim2007

Graham wrote: »

Dissolved Company Assets: Once a company has been dissolved, the assets of the dissolved company become State property.

This is academic stuff and is really only there to cover situations where a company is a fully functional business and gets struck of for some minor infraction. Once it is corrected everything is back to normal, the state is deemed the owner between the date the company was struck off and when it was restored. The state does not not do anything it is just covering a legal loop hole.

The second case is where a company is deliberately brought into a state where it can be struck off. Here again all assets are disposed of by the directors, so all that might remain is the company seal and books of account - again the state could not care less what happens to them because they are worthless.

And then there is a liquidation, where the liquidator will raise all cash possible by sell off what ever he can at the least expense, then pay everyone off and that is that. In this case a liquidator could end up spending a lot of the cash he raised trying to get control over the software, fail and then end up with less cash for the creditors and that is never acceptable to the creditors.

By the same token the state would have no interest in the left overs - it knowns well that what remains is either worthless or would require a lot of up front cash to but it right. It is interesting to note that while legislation provides for such assets becoming state property, it does not provide for a receiver of such property, with good reason I expect - it would be junk