If a US-based individual has worked for a Canadian co as a "partner" for years (but never signed an agreement), who retains rights for work completed?

Scenario: • Two individuals agree to start two startups together. • One individual resides in Canada. • The other individual resides in the United States. • The Canadian individual requests a partnership agreement from day 1, however the US based individual creates reasons to not have one yet. • The Canadian-based individual incorporates a company in Canada as the umbrella company for both startups, with no agreement with the US-based individual yet. So the Canadian corporation's shares are 100% assigned to the Canadian individual in the "meantime" until an agreement is reached. • Discussions lead to conclusions that the US-based individual will get 30% shares, when an agreement is signed. • The US-based individual was given an email for the Canadian based corporation, and began to work/associate work with both startups under the Canadian corporation. • After 3 years of pro-bono "partner" work as investment into the Canadian-based corporation, the US-based individual never signed an agreement yet. Questions: • Given that work was completed by the US-based individual ("partner") and he was operating with no agreement under the Canadian corporation's environments, emails, discussions - does the Canadian corporation retain rights to the work completed? • If the US-based individual ("partner") decides to take one of the startup's intellectual property, work (which was completed by both the Canadian-based individual and US-based individual) etc, and setup a US-based corporation with it, can he get sued? Or is he safe since he never signed an agreement with the Canadian-based corporation? • Do legal entities in the United States take lawsuits in performance / win payout shares (if the case is big enough)?


Before litigating on one another, why don't you instruct your respective legal counsel not to sue, but rather to MEDIATE and come up with a FAIR solution for both parties based on: hard dollars invested, sweat equity and ideas. And before you even spend your after-tax dollars as an entrepreneur to do that, ask yourself: how much money did this business generate so far? If the answer is 0$ you may want to reconsider implicating your lawyers. Maybe you are chasing a FBI (false beautiful idea), but nonetheless you may think you have invested so much time, effort, money and emotions in the project so you don't want to let go. That's ok, but pick a fight that has a REAL prize to win, not some maybe-vague-possible revenue stream, otherwise the only winners will be your lawyers....Litigation: you know when it starts, but never when it will end...

Answered 9 years ago

I use LegalShield for all my legal needs. Having firms in Canada and the U.S. Could help you in this case. Feel free to contact me for details.

Answered 9 years ago

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