IP Assignment
A legal agreement transferring ownership of intellectual property created by founders and employees to the company.
An IP (Intellectual Property) assignment agreement transfers all rights to inventions, code, designs, and other intellectual property from individuals to the company. Every founder, employee, and contractor who contributes to a startup's product should sign an IP assignment agreement, ensuring the company owns what it has built.
IP assignment is one of the first things investors check during due diligence. If the company does not clearly own its core technology, the investment is at risk. Common problems include founders who built the initial product before incorporating (pre-incorporation IP), contractors who were not required to assign their work, and employees whose prior employment agreements may claim rights to inventions.
The standard approach is to include IP assignment clauses in employment agreements and contractor contracts, and to have founders sign a separate IP assignment covering any pre-incorporation work. California and several other states have laws protecting employees' rights to inventions made on their own time and unrelated to the employer's business, so assignments must be carefully scoped to comply with local law.
Example
Two founders built a working prototype over six months before incorporating. During incorporation, both sign an IP assignment that transfers all rights to the code, algorithms, and design work to the new company. Their investor requires this as a condition of funding, along with IP assignments from two contractors who helped build the prototype.
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