Hello! I have a small development team but we are not yet a legal entity. Team members are currently compensated with membership units in the company. When I initially started recruiting new people for the team I drafted an NDA which essentially says "you cannot talk about the project" and "your work is the property of the company" (in legalese, of course). Now we've recruited some more people and one said he would like to also sign a document that guarantees they will receive credit for their work. My understanding is that these clauses are incorporated in a contributor's agreement. I wanted to ask for opinions on the wording. I'd like to attach the draft of the contributor's agreement that I made, but apparently that's not possible, so I will just include the highlights (skipped test marked with ellipsis).

This Contributor Agreement is between My Company and the individual or other entity identified below ("the Contributor"):
...

1. DEFINED TERMS
"Work" means the work of authorship contributed by you to My Company.
"LLC Units" or "Units" means measures of ownership in My Company. 
...
2. LICENSES
Subject to the terms and conditions of this Agreement, 

(a) You hereby irrevocably grant, assign, and transfer to My Company all right,
title, and interest, worldwide, to the copyrights, copyright
applications, and copyright registrations in the Work.

(b) You represent and warrant that you are legally entitled to grant the above
assignment and that by providing the Work you are not violating any law,
breaching any contract, or infringing upon the rights of any person or entity.

(c) You will take any such actions as may be requested by My Company to perfect
the assignment of the Work as stated herein, including the execution and
delivery of any additional instruments of assignment if appropriate and
necessary.

(d) You understand and acknowledge that submission of the Work does not
guarantee that it will be included in any My Company project or product or that
it will otherwise be distributed by My Company or any other entity.

3. ATTRIBUTION

In the event that a My Company project or product including the Work is
published, you will receive attribution. The exact form, format, and placing of
the attribution is subject to My Company's discretion.

4. PAYMENT

You will receive compensation for the Work or Works you have contributed in
either monetary form, Units, or a combination thereof, subject to My Company's
then-current policies. You will be solely responsible for all taxes, duties,
and other governmental assessments that may be due as a result of your receipt
of any compensation related to this Agreement.

5. SEVERABILITY
...
[if a section is unenforceable others are still enforceable]

6. AMENDMENTS
...
[the agreement may be amended and has to be re-signed at that time]

I do plan to have a lawyer review our legal documents once we incorporate, which should be soon. In the meantime, I need development to move forward so I would appreciate any feedback you may have on glaring mistakes or omissions in this draft. In particular, I am interested if section 4, PAYMENT, is appropriate. Also, I am wondering how much of section 2, LICENSES may be redundant given that the NDA states all work contributed by a team member becomes property of My Company. Sorry for the long post and thank you for your time!

You left out a lot of issues that should be addressed.

Some include: explicit clarification of work-for-hire (it either is or is not, and the wording sounds like it is), exclusivity and sublicensing, moral rights, patents, trademarks, other IP rights, venue and rules of law, waivers, assertion of originality of work, assertion of ownership of rights, and assertions of their legal right to sign or authorization to sign.

Items that you probably should understand and consider: indemnification, statutory royalties, taxes, clearances, potential or pending claims against the work, limitations of liability, termination and effects of termination, successors and assignment, beneficiaries, and relationships between the parties.

Also, you better have a very solid assertion of what your "LLC Units" are, and your articles of incorporation and other legal documents pertaining to your company better make sure you aren't giving your company away.



I would not have them sign this document until after your lawyer has gone over it. Having them sign it before legal review is quite likely to cause more harm than good.

Frob, thanks for the reply. Perhaps I need to rewrite the LICENSES section, because I essentially want the company to take ownership of the Work, so it's not just copyright that gets transferred but all rights.

Anyway, can you clarify what you mean by "giving my company away"? Did you mean someone might obtain the majority of LLC units and take control of the company? The operating agreement (which is not yet complete) states any major decisions must be taken by the board of directors, and that any decisions made by members require a supermajority (66%) vote in interest.

Edit: Until the contributor's agreement is complete, is it reasonable for them to work under a verbal agreement that they will receive credit?

Quote: Original post by Kipple
Edit: Until the contributor's agreement is complete, is it reasonable for them to work under a verbal agreement that they will receive credit?

It is reasonable for them to continue, yes.

It is extremely unlikely that your current contributors are going to sue you since you have already got an NDA and other agreements with them. You have already told them that an agreement is forthcoming.

Make sure they know that the final agreement is being worked out with the lawyer, and that they will be required to sign it when that happens.

Tell them the intention of the agreement, which is to assign all rights to the company in exchange for credit and whatever else you said.

Make sure that if they have any qualms about it, they must not give you anything until after their agreement has been executed.

If you have evidence that you have this understanding, such as an email trail, it would be good enough in the (extremely unlikely) case that this becomes an issue.

Thank you very much, this is very reassuring.