Kid Squats at AOL, Starts Company

Man, it is good to be young. If your only responsibility is yourself, you can live on-campus Rudy style, but when you start getting into your late 20's, you'll get locked up. I'm glad this guy was able to continue his venture, I hope it works well. I spent 11 years in arguably the best public school system in the country (fairfax county), went to a private for my senior year of high school, and saw firsthand the general waste of time and opportunity that public school students face. I really hope that there can be a change in the way public schools are taught. Silicon Valley can provide half of the solution, but the other half needs to come from the school districts. Teachers need to be creative, and teach creativity.

Fantastic, good for him. Peter Thiel needs to get in touch with this kid; he is the perfect poster child for self education.

My mom once fell asleep on a bean bag of an incubator...drunk.

We should all be so lucky to care that much about something. Good for him.

Now AOL is going to claim ownership of the intellectual property and the business given that it was developed with its computers on its campus using its resources.

Silicon Valley's version of "Pursuit of Happiness".

He developed it on AOL property using AOL resources, so most IPAs would cover that, regardless of his current employer.

Your NDA, IPA, non-compete, non-disparagement, etc rules extend AFTER you leave the firm. This would actually be a fairly clear-cut case from what I have seen as a technologist.

A.) He signed the IPA. B.) The IPA included any work he did on company premises using company resources. C.) He spent 24/7 on company premises while developing the product.

This kid's success is great news for AOL, and great news for this kid, too. He will be getting an $80K/year office job without a college degree, and AOL will be making millions off of the business.

Housing, firm resources. The kid could have never done this startup without AOL. The fact that he knowingly and willingly chose to use those resources, whether or not they were stolen, gives AOL claim over all of them under most IPAs.

I mean, the alternative you are suggesting is for AOL to send this kid to jail for burglary. He broke into the building, he stole computer time, paper, food, etc for an entire month and the business was the result. It's the fruit of what he stole from AOL, so it belongs to AOL anyways. Either way, the kid is going to wind up with an $80-200K/year job running this business for AOL, and AOL will wind up with the business.

You find a good lawyer and have him reach out to AOL's General Counsel and try to settle this.

If they're in a really good mood and you've got a brilliant lawyer, they might give you some upside. If they're not bastards, they'll probably buy you out for your original investment amount. Partly to avoid the legal hassle, partly because your investment probably covered expenses they would normally have had to cover, anyways. Then you listen to your lawyer's advice.

IP was part of the DD you should have done when you invested, so it's your own darn fault you missed that AOL effectively has a call option on the business.

But seriously, as an investor, I've had to walk away from deals because of IP stuff.

I almost bought PortfolioBuilder.com for $5,000 a couple months ago. Then I went to the USPTO for a trademark search. I realized I was paying $5,000 for the domain name and another $500K in legal fees to defend the domain from various trademark claims, after verifying it with my favorite trademark and domain lawyer. Thank god I checked.

Whoever invested in this business just stepped on an intellectual property land mine. They're not going up against a millionaire financial planner like I would have been; they're going up against an F500 company with some of the smartest lawyers around, and they're probably going up against an ironclad IPA.

RE: "Fortune favors the 'brave'", I think "Audentes" is really translated as "Bold" with the word forming the latin root for the English word "Audacious". Second off, I think the reason we have the alternate saying "the meek will inherit the earth" is that the bold are going to go bankrupt suing each other.

Saw this yesterday. Good on him.

who else thought squat meant he took a shit at AOL when they read the title?

They own HuffPo now, they aren't going out of business for a while..

Love it.

Whenever an F500 gives money to a programmer, they always attach two contracts to it:

1.) An intellectual property clause. You give them the intellectual property rights to everything you develop if any of the following conditions are met: A.) You did it on their premises or using their resources B.) You did it while you were supposed to be working for them. (EG: 9-5 on a weekday under their employ) C.) What you did is directly and fundamentally related to your responsibilities at the firm.

The agreement generally applies after you conclude work there, too. I think 1(A) has clearly been met in this case, as well as perhaps 1(C).

2.) A non-disclosure agreement. The internal mechanics of most systems are pretty proprietary for most businesses and they don't want you going around blabbing away their trade secrets when it comes to architecture and design.

he wasn't an employee he was part of the incubator, and those contracts are different, as nobody would go near a F500 incubator with a ten foot pole under those terms.

its probably not worth the PR hit to go after him in criminal court, especially given the reaction it would provoke in the subscriber base of their own Techcrunch property. Realistically AOL will invest and take the good press.

I forgot that huffpost owns AOL now. Given that this is exactly the type of program (and entrepeneur) that Ariana is in favor of, I do believe that no on in AOL would risk pissing her off. They'd create a martyr and end their career in one move.

If Arianna Huffington goes after this kid, I do believe there will be a political firestorm, and this kid will have no end of supporters. AOL's only really good move is to avoid being typcast in a Mr. Porter v Mr. Bailey type standoff. Personally, I'd throw money at this program because it's a good idea, and just because this kid is the type of crazy that inspired me to come into finance in the first place (In pursuit of happyness type committed)

Then again AOL also has criminal trespassing and burglary charges to hold over his head if he doesn't comply. It will be hard to raise more seed capital from jail. AOL is going to make most of the money off of this, and he will probably have a pretty nice job at AOL without having to pay for a $150K college degree. It's a good deal for him.

As for PR, AOL doesn't have to care what the public thinks. It's not like they have a huge customer base anymore. Ultimately, this kid stole from AOL, and they're simply reclaiming their property, not unlike the Sergey Aleynikov trial. The PR will be no worse for AOL than it was for GS during the trial, and

I say sue the kid. But play nice and try not to get the police and district attorney's office involved like Goldman Sachs did. Next time you want to develop something for yourself, don't do it using somebody else's property. That's rule #1 for doing a startup.

Actually, IP, I think you're way off on this one. He was part of an incubator, so he traded X% equity for the $20k and office space/mentoring for four months. The incubator just happened to be located on AOL property (I'm pretty sure it isn't even sponsored by AOL). Therefore, AOL never paid him, he was never in AOL's employ, and they have no right to his intellectual property.

They do have a cause for trespassing, but that's gonna be a really tough case to make when they failed to revoke his security credentials and he basically came and went as he pleased with the full knowledge of AOL security (electronically, anyway). I'm pretty sure AOL isn't going to risk the bad press to make a case about couch surfing and the random box of ramen.

Sergey Aleynikov? C'mon man, that's beyond a stretch. Aleynikov was a Goldman employee privy to the proprietary source code of their doomsday machine. This kid was building an app on a laptop and crashing on someone's couch.

Let's keep it real.

I'm not being a dick here, but by your logic AOL has a claim to the intellectual property of anyone who visits their campus and has a free cup of coffee and uses the free WiFi to work on their side project.

Eddie, he was dining in the corporate cafeteria for free, which probably had a huge sign over it that said "Employees only". That right there is your theft. And the value of that month adds up to a felony charge.

He was also using AOL's computer resources, which, as a programmer, I can tell you aren't cheap.

Goldman did it with Aleynikov. The guy's doing twenty years in jail, now. That shouldn't happen to a 19 year old kid whose main crimes were trespassing and stealing food from the cafeteria, but if you use somebody else's computer, somebody else's resources without their permission to develop your business, you lose a lot of your claim to that business. Next time, kid, pay me $10K for my clunker of an old Mustang GT and restore it, rather than just sneak into my garage, restore it, and try to drive off with it. In the second case, I get to pay you $5K for your services and keep my car.

Huff Po is running articles about this kid, I highly doubt Aol is going to do anything about it.

Aleynikov actually stole company software as an employee, this kid worked on a startup independantly, so it's kind of apples to oranges. The tresspassing charges are a seperate issue. I don't know the details of the VC money, but if it's not AOLs, then they basically have no claim to it and can resign themselves to prosecuting the kid for that...really bad PR and likely to draw blowback both on the consumer and political levels. If it is AOL money, the program will likely get bought out by another VC firm and the kid will be scott free.

Not sure what they think they realistically think they can do...

Aleynikov stole his own software that he himself wrote. We're comparing factory farmed east coast apples with organic west coast apples is what's really going on here.

Most colleges have the same rules regarding intellectual property, as well. Whether you know the rule or not, if you use their resources to develop something, they get intellectual property claims to it, too. It's a cardinal rule of IP just about everywhere. Use someone else's stuff without paying them or having a prior arrangement in place, and they get a claim against your IP, whether you realize that will be the case or not. This is simply a classic rule of software development they teach you the first day in a CS degree. If you use somebody else's computer without an explicit agreement in place to do X, Y, or Z, they own a substantial portion of what you produce. The fact that it's particularly flagrant here means AOL probably owns most of it.

Look, if this kid can change the rules for everyone, that's awesome. I'd love to be able to work on my startup idea while under the employ of a major New York bank. But I don't think he will.

Regardless of the legal issues surrounding the case, the story itself is inspiring and a lesson to the rest of us. Do what you care about, smash fear, and be inspired to pursue your dreams with everything you've got. Never settle.

^^^ That said, if someone, without my permission, squats on my couch, takes food out of my refrigerator, and borrows my computer all while doing a startup that winds up making millions for him, he can expect to hear from my lawyers.

Does anyone know any details about the VC funding? Who's money is it?

Thing is....they knew he was there. As opposed to the Russian, this kid was never an employee and AOL would have about as much legal right to an equity stake in his company as a library would had he worked on it from there. They'll have their day in court if they so chose, but they'd do much better to use this PR to their advantage. Given that his business is in no way aligned with any of AOL's existing business, they won't have much claim to taking anything more than source code.

There's the matter of rent, the food he stole from the cafeteria, etc, etc. Had his business not succeeded, they would have had no way of collecting it back from him, so therefore, the only way for him to pay for these services was through AOL taking more equity.

Basically, this kid is beating the system in front of our eyes and given that he's the underdog, I'm inclined to side with him. Also, I genuinely want educational programs to succeed, I think it's important that a company not buy up the rights to a good idea and kill it like so many others oer the last century. Contrast this kid with some jerk that makes his money in the US and then gives the finger on his way out (aka: facebook guy), this kid is actually contributing something to the larger system alla educational innovation.

There's a set of rules you have to follow when you are doing a startup. When you use somebody else's resources, you need to have arrangements with them to use it for the business. You can't violate other peoples' copyrights, trademarks, or patents. You need to be free of intellectual property obligations for the purposes of the startup. This kid broke many of those rules, and now he is going to find himself in legal hot water for it.

Setting up an educational start-up is great. But it's ultimately being done for-profit, and when it gets big enough, AOL can get the lawyers out and make sure they enjoy a much larger share of those profits because the kid used AOL's resources without AOL's express written permission.

Everybody has to play by the rules. Including paying 15% on capital gains tax and making sure that your invested capital is YOUR investment- not somebody else's.