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News

Entrepreneur Alleges Vancouver Incubator Lifted Ideas

Dispute is a cautionary tale for entrepreneurs, says lawyer.

By Bob Mackin 30 Jan 2015 | TheTyee.ca

North Vancouver-based journalist Bob Mackin is a frequent contributor to The Tyee. Find his previous Tyee articles here.

Surrey, B.C. software developer Troy Spracklin dreamed of creating an online marketplace app to challenge giants Craigslist and Ebay. He called it Pixsel. Instead of ceding control to Silicon Valley venture capitalists, he trusted a homegrown technology startup incubator run by founders of Hootsuite to help him make Pixsel reality.

Spracklin, who told The Tyee he initially raised $60,000 of investment from friends and family with co-creator and photographer Brian Howell, claims in a B.C. Supreme Court lawsuit that Vancouver-based Invoke Labs, Invoke Media and Quietly Media undermined his project, stole the code and created a competitor. 

In an emailed statement, Invoke's head of marketing and strategy Duncan Blair said the company denied the allegations. "We categorically refute these claims and will be defending ourselves appropriately," Blair said.*

In the Jan. 29-filed lawsuit that alleges copyright infringement and intellectual property theft, Spracklin, the president of Pixsel Technology Inc., claims that Quietly, a content management system and marketplace app, incubated at Invoke, is based on Pixsel.

He described Pixsel as an image-based, local person-to-person and business-to-consumer classified app concept.

The lawsuit claims that "numerous" Invoke employees worked on both the Pixsel and Quietly projects "and were explicitly instructed to use Pixsel confidential information in the Quietly project." It also claims that Invoke discussed rebranding Pixsel as a new product that could be submitted to the Apple App Store without Pixsel's involvement.

Pixsel seeks an injunction restraining Invoke from using or disclosing Pixsel confidential information or intellectual property, plus general, punitive, aggravated and exemplary damages.

None of the allegations has been proven in court. The Tyee contacted representatives at Invoke for a comment, as well as Quietly CEO Dario Meli, but they did not immediately respond.

In the technology start up world, incubators provide business support to entrepreneurs through services and resources, according to the U.S. based National Business Incubator Association. 

Vancouver lawyer Jon Festinger, a teacher at the Centre for Digital Media in Vancouver, said the dispute is a cautionary tale for innovators and entrepreneurs.

Festinger said developers must ask key questions before seeking help from an incubator.

"The contract is easily the most important thing," Festinger said. "Is it fair? What happens to your intellectual property, what do you have to provide, are you giving up a part of your company, for how long?"

Invoke Labs spun-off from Invoke Media in 2012, but the two companies reunited last September. The Invoke website describes the 2005-founded company as "part digital agency, part startup accelerator." The BC Liberal Party is one of the agency's clients, but Invoke is best known for its star spinoff, Hootsuite, the social media dashboard, analytics and advertising company.

Invoke's website lists David Tedman, Hootsuite CEO Ryan Holmes and Quietly's Meli as founders, but the only person named as a defendant in the Pixsel lawsuit is Meli.

The court filing says that Spracklin met Sept. 10, 2012 with Invoke chief operating officer Keith Ippel to discuss a technology partnership. Spracklin paid $15,000 up front and, under an October 2012 service agreement, Invoke said it would seek $250,000 to $500,000 of investment to underwrite development and marketing of Pixsel. Invoke would receive a 10 per cent equity for its contribution to Pixsel.

Deadlines missed: claim

In November 2012, the lawsuit says, Pixsel and Invoke agreed on project features that would be delivered by mid-January 2013. Invoke also agreed to assign a product manager, designer, community manager and a mobile developer to the project, the claim says.

But the lawsuit says Invoke missed five major deadlines between January 2013 and August 2013. The version of Pixsel delivered Aug. 15, 2013 lacked key features, such as the payment gateway, buyer/seller real-time chat, and an automotive section. It also contained bugs, errors and deficiencies. 

"(Invoke) represented that a corrected product would be delivered in due course," the statement of claim said.

Four days later, Pixsel issued Invoke a termination letter, ordering the immediate cease of work, except for fixing the errors, bugs and deficiencies.

The lawsuit also describes a July 10, 2013 Invoke-arranged meeting for Pixsel to pitch to the Glacier Media Group. 

The lawsuit claims Invoke used Pixsel as a decoy. "Pixsel later learned that (Invoke) had arranged the meeting as a pitch for the Invoke Fund, rather than as a pitch for Pixsel, and that Glacier had made a substantial investment in the Invoke Fund. Invoke informed Pixsel that it would not receive the expected Invoke Fund investment."

While the lawsuit describes one side of a business relationship that went awry, incubators can be an effective route to market for software developers who think they have a marketable product, but don't have all the necessary cash and resources. 

Festinger said it is vital to consider who the people are that are running the incubator, their track record and integrity, and whether one's company can coexist with the other companies being incubated. 

"Always do due diligence and talk to other people and find out what their reputations are," he said.

Said Festinger: "The one thing about tech is it's very iterative, things change. People and technologies pivot and they move from one thing to another thing. Is it the right kind of place, the right kind of environment that values that, that allows for that?"

*Story updated Feb. 2 at 3:10 p.m.  [Tyee]

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