HBO’s Silicon Valley episodes 5 and 6 present new partnerships, challenges and a few surprising twists. Here is our legal advice to the Pied Piper team.
Season 4, Episodes 5-6 Recap (Contains Spoilers)
When Richard and Gavin disagree over the launch of their new company, Gavin makes matters worse by inviting Bryce (his blood transfusion associate) to weigh-in. After Richard confronts Bryce and discovers that Bryce has not been living the healthiest lifestyle, Bryce retaliates by getting a book deal to write a tell-all about Gavin’s dirty laundry.
Pitying Gavin, Richard publicly announces their company to help Gavin’s public profile. Realizing that he would never have made such a selfless act himself, Gavin decides to pull out of the partnership in order to work on himself. As a parting gift, Gavin signs over his patent to Richard but also pulls his funding.
With no VC money in their horizon, the team begins pitching individual companies for funding. After having the door shut in their faces due to Gavin’s untimely exit, they land an agreement with Fiduciated, an insurance company run by one of Erlich’s many enemies. After some awkward negotiations, and an even more awkward affair, Fiduciated signs-on.
At the same time, Monica discovers that Ed Chen has been working to push Laurie out of Raviga and brings it to her attention. Although Laurie was already several steps ahead and planning on starting her own company, this display of loyalty garners Monica an invitation to join Laurie in her new endeavor (Bream|Hall).
Feeling left out, Erlich accidentally befriends the founder of a highly sought-after virtual reality company and recruits him to Bream|Hall in exchange for a job there.
Legal Analysis / Advice*
NDA / Confidentiality
Gavin’s inclusion of Bryce (his transfusion associate) in confidential company meetings should at the very least come with a standard NDA or confidentiality agreement. Despite Gavin’s assurance that Bryce is “very discreet,” we quickly discover that Bryce is anything but.
More problematic is Gavin’s attitude towards enforcing his NDA. When brought up, he summarily dismisses the idea as it would “only prove everything [Bryce] was saying and make it worse.” Not true, Gavin. Not true.
The very point of an NDA is to prevent the information from coming out in the first place. If Gavin acts quickly, he can file for an injunction, preventing Bryce from publishing. Moreover, this action wouldn’t “prove” anything, as the inclusion and strong enforcement of NDAs has become incredibly commonplace in the technology industry.
Partnership Agreements and Disputes
Unsurprisingly, Richard and Gavin immediately begin butting heads over the launch of their company. Without a plan in place of how to resolve such disputes, the disagreement leads to hurt feelings, internal divisions, and—indirectly—Gavin’s exit.
More importantly, Gavin’s ability to simply leave on a whim, taking his funding with him, clearly demonstrates that they never put his financial commitment in writing. A strong partnership agreement should outline exactly what each partner will bring to the company (including capital, assets, and time) and how they will be divided in the event of a partner’s exit. Had Richard insisted on a well-structured partnership agreement, Gavin’s exit would not have left them penniless.
As a particularly strange side-story, Gilfoyle and Dinesh have their phones synced and gain access to each other’s data. Unable to contain themselves, they attack one another, attack Jared, and destroy each other’s phones. Clearly, these are crimes, including battery and vandalism.
Due to a strange quirk in California law, vandalism requires a suspension of the perpetrator’s driver’s license. So beyond a criminal record, probation, fines, anger management classes, and potential jail time (unlikely), they could lose their licenses in an area where public transportation is almost non-existent. Luckily, there’s Lyft.
*As a disclaimer, since the characters and situations aren’t real, neither is my advice.These posts are meant to demonstrate to entrepreneurs that doing their own legal work makes about as much sense as uncertified deep-sea diving; if you don’t know what you’re doing, the pressure will build until you pop.