Securing Intellectual Property Rights For A Startup

Note: This entry discusses IP assignment agreements from the perspective of the company or founders.  A later entry will take a look at IP assignment agreements from the employee’s perspective. 

Many companies these days generate a significant amount of intellectual property (IP) as part of their business operations.  This is especially true for technology start-ups and companies operating in the media space.  For these companies, much of their value derives from the IP they hold.  Due to its importance to their operations, it is critical that companies take steps to secure their intellectual property rights.

IP assignment agreements are important because a company’s IP originates with its people.  Founders, officers and executives of the company, creative directors, engineers, contractors and interns can all create IP as part of their roles with the company.  For this reason, everyone that works for the company ideally should be required to transfer to the company the rights to any IP (patents, trademarks, copyrights, trade secrets) created or developed as part of his or her employment.  This is where an intellectual property assignment agreement (sometimes called an invention assignment agreement) comes into play.

IP assignment agreements are more than just an assignment clause and vary in detail and scope, depending on the context in which they are used.  However, they typically involve the following sections: an acknowledgement that the employee’s output is a “work made for hire”, the IP assignment clause, and (often) a safety-net license clause.  The remainder of this post will primarily discuss an IP assignment agreement between an employee and the company.

As discussed in my previous blog post the “work made for hire” doctrine applies to copyrights and is an exception to the rule that the author or creator of the work is the original owner of its copyrights.  In the employee-employer context, the employer is considered the “author” of the copyrightable work created by the employee as part of his or her duties.  While not required in the employee context, including a “work made for hire” clause can avoid misunderstandings regarding ownership of copyrightable works in the future.  A “work made for hire” clause must be included in any contractor or consulting agreements for the doctrine to apply in that context.

Because the “work made for hire” clause can only apply to copyrights, an intellectual property assignment clause is needed to transfer the remaining IP from the employee to the employer.  The most important aspect of the IP assignment clause is that it must be written in the present tense (such as “I hereby assign…”).  Assignment clauses written in the future tense or using the word ‘shall’ create uncertainty about whether the transfer of IP rights to the company has taken place.

Although not strictly necessary, it is always a good idea to include a license clause in the IP assignment agreement in the event that it is determined in the future that ownership of a portion of the IP created by the employee does not transfer to the employer under the assignment clause discussed above.  If the licensing clause is effective, ownership of the IP stays with the employee but certain rights to use the IP are granted to the employer.  These clauses can take a variety of forms but should at the minimum grant the employer a fully paid up, royalty free, irrevocable, perpetual worldwide license to use IP with rights to sublicense it to others.

IP assignment agreements can be standalone agreements or incorporated into a larger agreement such as an employee or contractor agreement.  Incorporating the IP assignment agreement into the employment/contractor agreement makes a lot of sense because it cuts down on paperwork and makes clear that the terms are part of the conditions for working with/at the company. Further, including the IP assignment agreement in the employer or contractor agreement ensures that it is executed at the beginning of the relationship between the parties.

Whether as standalone agreements or part of other documents, companies should make it standard practice to execute IP assignment agreements when onboarding employees, contractors, or others to the company.