The Dangers of Moonlighting

I was recently “let go” from my job of three years for violating my employee agreement for allegedy working on a side business and not properly disclosing this to my employer. In addition, I’m now fighting my employer’s claim that because I did some writing on my blog during work hours, my startup’s IP is their property.

The idea for “PromoterForce”:, a web-based referral marketing system for small professional service firms, was created on my own time, with my own equipment. I did, however, make the mistake of not properly assessing the impact of posting about PromoterForce to my company blog during the workday.

While my lawyers are confident in my position (PromoterForce does not encroach on my ex-employer’s core or future business plans, or use any of their IP), the litgation is a major headache and a threat to my startup. I think other entrepreneurs would benefit from knowing about what happened to me, so they can avoid the experience themselves. Here is my account of the events as they unfolded, Blow-by-Blow.

*Idea Formation:*
I woke up early one morning with a burst of inspiration about a new business idea. Because it was 3:00 AM, I grabbed a pen, wrote down a few notes and went back to bed. The next morning my wife left for a day trip with her parents, and I headed to the beach with my dog, a notepad and a pen. Over a three hour period at the beach I captured the main elements of the idea, upon returning home I registered the domain name: “”:

Over the next few weeks I spent a lot of time reviewing the current offerings in the space, and came to the realization that there was indeed a major gap between what was currently available and the product I envisioned creating. PromoterForce’s referral system is a web based application for creating and managing referral campaigns for service businesses, with communication tools for satisfied customers to make referrals to their friends, family, and colleagues via eMail, face-to-face, and SMS. Promoters are rewarded with money to donate to nonprofits.

*Business Plan Competition:*
I wanted to test the validity of the idea so I entered the UC Berkeley Business Plan Competition. I was able to connect with a very talented MBA candidate and we worked together further researching and validating the concept and developing the executive summary and investor pitch.

*Startup Blog:*
I used WordPress software and a lowcost hosting package to create a simple site and a “blog”: for the company.

I worked with the owner of a very high quality web development shop to create a strategic partnership. They would provide web development services in exchange for equity in the new business.

*Idea Consumes:*
With all this momentum forming around the idea I found myself increasingly distracted and disinterested in playing the politics game at work. I also found myself consumed by the idea. I began dedicating a few hours in the morning before work, and again in the evening after work, to developing my idea and product plan.

About five months on, during which time I had spent no more than 1 to 2 hours per week working on PromoterForbce while at my day job, I was called into a meeting by my manager. Within minutes I was told my employment had been terminated. Without any formal warning, my job of three years was gone. I was shocked but upon leaving the office felt a rising sense of joy. It honestly felt as if I had been released from jail.

*Legal Fight:*
Just days after I was fired I receive word from my former employer’s HR manager that the company would be pursuing ownership of the intellectual property related to my new venture under the conditions of my employment contract.

*Finding Help:*
I quickly got in touch with the only lawyers I know and am currently working with them to resolve the matter. Luckily for me, my lawyer is part of a very well-respected Silicon Valley firm and they work with many startups.

*Turning on the PR machine:*
I’ve been blogging about the IP contest, and contacting third-party blogs to generate some buzz. While I have not yet named the company and am seeking to resolve the matter as quickly and quietly as possible, [my lawyers tell me] it is important to leverage all available resources in my defense.

*Lessons Learned:*
*1) Understand the implications of using any resource your employer owns.* Using something as trivial as bandwidth on their network may constitute a violation of your employee agreement. Don’t.

*2) Diligently document the creation of your idea.* Record as many details as possilbe, and then send all your original documents, by email _and_ certified snailmail, to a close friend for safekeeping.

*3) Limit communication to personal devices and email accounts.* Only talk face to face about your idea with colleagues you know well and trust. Don’t discuss it with them over company phones or email. And remember that while many colleagues will want to help you, as soon as word about your project gets out, it will find its way to your managers.

*4) Don’t underestimate the potential vindictiveness of your employer.* While managers and executives may strive to appear supportive and understanding, their primary responsibility is to protect and defend their company. Once your relationship with the company is severed, all good will is out the window. Prepare for this ahead of time.

*5) Don’t be bullied.* Companies don’t want long legal fights, and good CEOs are experts at talking tough. They will set arbitrary deadlines in your negotiations and warn you against engaging in a legal fight, but don’t loose your cool. Most importantly, don’t let them scare you. This is happening because you have developed something they want.