5 Famous Power Struggles at Startups
Suit against Square CEO Jack Dorsey is the latest start-up power struggle.
Feb. 1, 2014— -- intro:"The publicized origin story of Square Inc. is a fabrication," starts a lawsuit filed by a Washington University engineering professor who is suing the mobile credit card reader company.
Square is the San Francisco startup with Twitter co-founder Jack Dorsey as its chief executive. But engineering professor Robert Morley claims he, Dorsey and co-founder James McKelvey worked together in starting the joint venture.
"It was Professor Robert Morley - and Dr. Morley alone - who invented the Square card reader, and Dr. Morley co-invented the corresponding magnetic strip decoding algorithms of the Square app," his lawsuit filed on Thursday with a St. Louis federal court reads.
Read More: Twitter Co-Founder Offers Credit Card Reader Device for Entrepreneurs and Retailers
The founding story of Square, which launched in Dec. 2009 with 50,000 users, has been the subject of a legal battle since Square sued Morley in Dec. 2010 over a patent dispute. Here are five stories of startups with ousted founders.
quicklist:title: Square category: Robert E. Morley Jr.media: 22322819text: Robert E. Morley Jr.Morley claims in his lawsuit that he and Square co-founder James McKelvey have known each other for over 20 years and were friends while Morley was a mentor to him.
Morley alleges in the suit that McKelvey approached him in 2008 and "raised the possibility" of entering into a joint venture with he and Dorsey. But after developing the prototype, Morley claims in the suit, McKelvey and Dorsey incorporated a new company that became Square Inc. and "wrongfully excluded" Morley from ownership.
Read More: Engineering Prof Sues Square Over Origin Story
Aaron Zamost, a spokesman for Twitter, said in a statement to ABC News, "It's not surprising that Morley would file another desperate, baseless patent lawsuit given how poorly his initial claims have been received by the patent authorities. We will fight it vigorously."
Brad Caldwell, attorney for Morley, said the lawsuit details how his client, who has years of experience in the credit card industry, conceived of the idea of a device that plugs into the headphone jack of a smartphone.
At that time, McKelvey operated a glass-blowing studio and "neither he nor [Dorsey] had any significant experience with or knowledge of the credit card industry," the lawsuit states.
"When the business started to take off, they cut him out," Caldwell said of his client.
quicklist:title: Twittercategory: Noah Glassmedia: 22319577text:
Long before social media site Twitter went public last year, its founders were working on a podcasting start-up called Odeo. Hacker Noah Glass was eventually kicked out of the company in the story told by New York Times writer Nick Bilton in his book, "Hatching Twitter."
Glass received six months of severance and six months of vesting of his Odeo stock, Bilton wrote, while the other co-founders and early investors earned billions of dollars from Twitter's IPO last year.
Twitter did not respond to a request for comment.
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quicklist:title: Facebook category: Eduardo Saverinmedia:22319865text:
Facebook co-founder Eduardo Saverin was CEO Mark Zuckerberg's friend while they were students at Harvard University. He later sued Facebook for his reduced stake in the company, claiming he was unfairly cut out.Facebook confirmed that Saverin agreed to an undisclosed settlement.
Read More: Eduardo Saverin Defends Relinquishing U.S. Citizenship
quicklist:title: YouSendItcategory: Khalid Shaikhmedia:text: Khalid Shaikh was the first president of file-sharing company YouSendIt, which changed its name to Hightail last year. Shaikh wrote the original code and built the first servers by hand, Inc. Magazine reported.
"The story of why—how a talented young entrepreneur turned on the company he worked so hard to help create—is at once bizarre and weirdly typical in the world of Silicon Valley tech start-ups," Inc.'s Burt Helm wrote.
With the growth of the company and the addition of new staff, Shaikh received a $50,000 severance payment and agreed to sell 317,000 shares in the company for $73,000, Inc. reported, "less than a fourth of what they had been worth in the Series A round."
In June 2011 he pleaded guilty to launching a cyber attack against his former company. On April 18, 2012, the probation office recommended three years of probation.
quicklist:title: Applecategory: Steve Jobs media: 22319771text: Tech giant Apple was already a publicly-traded company when founder Steve Jobs was fired at age 30 in 1985 after a power struggle with CEO John Sculley. But after his next computer company NeXT was acquired by Apple in 1996, he became Apple CEO the next year. Apple foundered in Jobs' absence and after his return has become one of the most valuable company in the world. Jobs died in 2011.
