Early text messages show that the genesis for the most important aspect of Snapchat—the timer—did not come from Spiegel or Murphy. It came from Stanford English major Reggie Brown, a fellow Kappa Sigma brother, friend, and assumed co-founder of the app. Spiegel recognized that he deserved credit for the disappearing messages idea as late as August 16 of 2011. “I want to make sure you feel like you are given credit for the idea of disappearing messages,” one text reads.
A week later, Brown—who had applied for a patent—emailed a short, snippy email to Spiegel, telling him that the application was making its way through various bureaucracies. The trio then had an argument over the phone. Allegedly, Spiegel was offended that his name was listed last on the patent list, and, after he hung up, he changed the passwords and forced Brown out of the company. Brown would receive no equity. The app is now worth around $800 million. Murphy and Spiegel are millionaires.
This is, legally speaking of course, a pretty insane case. Brown came up with the most important detail of Snapchat, and one would think he'd be entitled, as was Eduardo Saverin with Facebook, to a cut of its future earnings. However, Murphy and Spiegel contend that Brown never really did anything. (Techcrunch says he may have been “going out constantly, partying at all hours and not working on the app, while Murphy coded and Spiegel worked on design… Brown added virtually nothing to the team beyond the initial concept.”)
And, there's this: From the beginning, Brown never had equity. Before Snapchat was Picaboo, it was a company founded by Spiegel and Murphy called Future Freshman, which was designed to help high schoolers apply to college. The app went nowhere, and Brown had the bright idea of a photo-sharing service, so the founders changed the name and focus to Picaboo.
But they never changed the equity breakdown. Future Freshman's 50/50 Murphy/Spiegel split was never altered for the addition of Brown.
In May of 2012, after the New York Times profiled the now widely-successful app, Brown emailed his former buddies. He asked this time for a 40-40-20 equity split:
Brown is now suing for a third of the company, worth around $267 million. His claim is based off “the patent application, which has not been approved, his initial idea for the disappearing photos app, and his early role at Picaboo and the Toyopa Group.” He's lawyered up with Lee Tran & Liang, while Spiegel and Murphy are contending with the firm of Quinn Emanuel, who actually has a lawyer on staff who previously consulted Brown on legal matters. (Brown wanted Emanuel disqualified because of that particular fact. A judge denied his motion.)
This story just got juicy.
[H/T: TechCrunch, Valleywag]