By default, the person who creates IP owns it, not the company that paid for it. Founders own what they built before incorporating. Contractors own what they deliver unless they sign an assignment. Employees’ inventions stay theirs unless assigned. A startup fixes this with a few documents: an IP assignment from each founder at formation, a confidential information and invention assignment agreement (CIIAA) from every founder and employee, and an assignment clause in every contractor and advisor agreement.
Key takeaways
- Ownership only transfers in a signed writing. A handshake or an invoice isn’t enough.
- Founders assign their pre-formation code, designs, domain and brand when the company issues their stock, and sign a CIIAA for what comes after.
- A missing signature can usually be fixed with a confirmatory assignment. Do it before investors ask.
- Investors check that every person who built the product signed an assignment.
Who owns IP by default?
| Who created it | Copyright (code, designs, content) | Inventions (patentable ideas) |
| Founder, before incorporating | The founder | The founder |
| Employee, as part of the job | The company, automatically | The employee, unless assigned |
| Contractor or advisor | The contractor | The contractor |
Transfers of copyrights and patents must be in writing and signed. That’s why every person who contributes to the product needs a signed assignment, including founders.
There are narrow exceptions. An employee hired specifically to invent, or an officer of the company, may owe the company inventions made in that role even without a signed agreement. And an employer can have a limited, nonexclusive right, called a shop right, to use an invention an employee made on company time or with company resources. These doctrines are fact-specific and often litigated, so none of them is a substitute for a signed CIIAA.
Why does it matter?
Your IP is usually the company’s most valuable asset. If the company doesn’t own it, the company can’t sell, license or enforce it, and investors and buyers won’t close until it does.
How do founders assign what they built before incorporating?
Each founder signs an IP assignment at formation, usually as part of the stock purchase agreement, transferring the code, designs, prototypes, domain, brand and any patent or trademark applications to the company. Then actually move the assets: transfer the domain registrar account, code repositories and app store accounts into the company’s name, and record assignments of patents and trademark applications with the US Patent and Trademark Office. See Restricted Stock Purchase Agreement.
Founders also sign a CIIAA, just like employees. That’s standard across the startup industry, and it covers everything a founder creates for the company after formation.
What does the CIIAA cover?
Every founder and employee signs a CIIAA before starting. It keeps company information confidential and assigns to the company inventions related to its business or made in the course of their work. It also:
- Carves out side projects: inventions made entirely on the person’s own time, without company equipment or confidential information, and unrelated to the company’s business stay theirs. California and several other states require this carve-out.
- Lists prior inventions: anything the person created before joining and keeps. If they build one into the company’s product, the company gets a license to use it.
See The CIIA Agreement.
What about contractors and advisors?
They need the same assignment and confidentiality terms, either in their contractor or advisor agreement or by signing a CIIAA. Since a contractor owns their work by default, the assignment is the most important part of that agreement. See Startup Contractor Agreement.
How do I move IP from an LLC or another company?
The old entity signs an IP assignment to the new company, listing everything on a schedule, and you record assignments of registered rights. Don’t dissolve the old entity until the transfer is done and recorded, and ask your accountant how it will be treated for tax purposes.
What if someone never signed?
Get a confirmatory assignment now. It confirms that everything the person contributed belongs to the company, effective from when they created it. Former employees, contractors or friends who helped may want something in return. A modest payment or a small equity grant is usually enough. Do it before a financing, when you have time and leverage, not during diligence.
Does my current employer own my side project?
It might. Check the invention assignment clause in your employment agreement, your state’s law (several states protect inventions made on your own time, equipment and outside your employer’s business), and whether you used any employer time, equipment or confidential information. See Starting a Startup While Employed.
Who owns AI-generated code?
This is a new area of law, and it’s likely to shift as courts and the US Copyright Office take up more cases. For now, material generated entirely by AI, without meaningful human authorship, isn’t protected by copyright, so no one owns it. The parts that people write, select or substantially modify are protected. Keep a record of who built what, and make sure your assignments cover whatever rights exist.
What if we co-develop IP with a partner?
Avoid co-owning it if you can. Under US patent law, each co-owner of a patent can make, use, sell and license the invention without the other owners’ consent and without sharing the proceeds, so a co-owner can license your core technology to your competitor. To sue an infringer, all the owners generally have to join the lawsuit, so one reluctant co-owner can block enforcement. Co-owned copyrights raise similar problems, although copyright co-owners do have to share licensing profits with each other.
This comes up in joint development deals, pilots where a customer’s engineers help shape the product, and sponsored research with universities. Settle ownership in the agreement before the work starts. The usual answer is that one party owns the result and the other gets a license limited by field, territory or exclusivity. Universities generally keep ownership of what their researchers invent and offer the company an option to license it, so negotiate that option and its terms up front.
What do investors check?
Investors’ lawyers build a chain of title: a signed assignment from every founder, employee, contractor and advisor who contributed to the product, plus recorded assignments for any patents and trademarks. Missing links become a condition of closing.
Patents need one more step. Each time the company files a patent application, have every named inventor sign a short assignment of that specific application, even if they already signed a CIIAA, and record it with the USPTO promptly. An assignment that isn’t recorded within three months of signing, or before a later sale, can lose out to someone who later buys the same rights without knowing about yours. A standalone assignment also means you record a one-page document rather than putting the whole CIIAA on the public record.
Related: The CIIA Agreement · Startup Contractor Agreement · Restricted Stock Purchase Agreement · CIIA Agreement
