Founders do not set out to fight over intellectual property. They fight over money, control, and pride. IP sits at the intersection of all three. The fastest way to freeze a financing, lose a key customer, or fracture a team is to leave ownership of your core technology ambiguous. I have watched seed rounds stall for months while counsel sorts out who owns a handful of repositories and a few provisional patents. In one deal, the fix cost under ten thousand dollars in legal fees. In another, ambiguity gave a departed founder leverage worth millions.
This is preventable. IP assignment and ownership can be clear from the first commit, the first sketch on a whiteboard, and the first consulting invoice. Getting it right requires a few disciplined choices, solid paperwork, and a culture that treats intellectual property like cap table equity: tracked, verified, and governed.
What “IP ownership” actually covers
Intellectual property in an early-stage company rarely lives in a single bucket. It sprawls across several categories, each with different legal rules and practical traps:
- Copyrights cover code, product copy, design files, documentation, training content, and datasets assembled or cleaned by humans. Absent a written assignment or an employment agreement with a proper present assignment clause, the author owns the copyright, not the company. Patents, both provisional and non-provisional, cover inventions that are novel and non-obvious. Inventors are the initial owners, not the entity, until inventors sign assignments. Filing a provisional without lining up assignments is a common mistake. Trade secrets include algorithms, know-how, tuning parameters, customer lists, and pricing models that derive value from not being generally known. Protection depends on reasonable measures to keep them secret: NDAs, access controls, logs, and consistent practices. Trademarks protect brands: names, logos, taglines. Ownership turns on use in commerce and filings, but also on who created the mark and whether it was assigned. Data rights are increasingly central. Training data, telemetry, and user-generated content each have different ownership and license terms. Many disputes start with vague consent or an assumption that public availability equals free use.
Each class of IP has its own path from creation to company ownership. Founders should map those paths early, especially where contributions precede incorporation or come from advisors, contractors, or students.
The misbeliefs that trip founders
Two myths do more damage than any others. First, “we’re cofounders, so the company owns what we build.” Second, “work for hire covers everything.” The law does not gift ownership to the entity because you meant it that way. Without a signed agreement, creators typically own their work.
“Work for hire” only applies in narrow copyright circumstances and seldom covers software from contractors unless the contract specifies a work-made-for-hire and, more importantly, includes a present assignment of all right, title, and interest. Outside pure employment, the safer route is a clear assignment clause that transfers ownership as the intellectual property comes into existence. Courts treat “hereby assigns” differently than “will assign.” That one verb can decide who owns your code.
The timing that matters: before, during, and after incorporation
The seed of most fights lies in the early days. Before incorporation, founders experiment on nights and weekends, reuse past projects, and invite friends to test prototypes. Once an entity exists, you need a clean chain of title that brings any prior work into the company.
I recommend a simple sequence.
- On or before formation day, execute founder IP assignment and invention contribution agreements with present assignment language, covering all IP created relating to the business before and after incorporation. Provide schedules of prior inventions or materials that a founder intends to exclude. Keep these narrow and, where possible, grant the company a license to use excluded materials that are necessary for the business. Inventory repositories, design files, domain names, social handles, and provisional patent filings within the first two weeks. Move registrant ownership and admin access to company-controlled accounts. For any pre-incorporation contractors or students who touched the product, backfill assignments with consideration. If someone refuses, redesign that portion or quarantine it behind a well-documented interface to mitigate risk.
Investors will ask for this chain of title. M&A counsel will scrutinize it. The deeper you go without clarity, the more leverage you hand to anyone who walks away.
Why NDAs are not enough
Non-disclosure agreements protect confidentiality, not ownership. They are necessary, especially when you share prototypes or pitch for pilots, but they do not transfer rights to anything a recipient creates after seeing your materials. If a contractor signs only an NDA, then builds a module for you, they likely own the copyright to that module. If you want ownership, you need an assignment. If ownership is unnecessary, negotiate a broad license instead and price accordingly.
Present assignment language that works
Subtle drafting matters. Courts in the United States have treated “hereby assigns” as an immediate transfer, while “agrees to assign” creates only a promise to transfer later. That promise can be disrupted by bankruptcy, divorce, or a change of heart. In employment and contractor agreements, you want present assignment paired with a requirement to execute confirmatory assignments and power of attorney to perfect filings if someone is unavailable.
Good agreements also capture derivative works, moral rights waivers where allowed, and rights in any tangible deliverables such as notes, test suites, and raw datasets. The longer you wait to refine these, the more room you leave for disagreement about what was intended.
Advisors, interns, and the friendly helper problem
A surprising number of IP disputes trace back to a helpful friend who tuned a model, cleaned a dataset, or designed an early logo. The company never paid them, never documented the engagement, and later discovers the helper believes they own the work or are owed equity.
Treat advisors and interns like professionals. Use short-form advisory agreements with clear IP assignment and confidentiality. For interns, especially students, confirm whether their university claims rights to inventions under sponsored research or lab policies. Many schools require a waiver if the work relates to your business. If you use university equipment or take grant money, you might trigger Bayh-Dole or institutional IP rules. The cleanest approach is to keep company work off university resources, and to pay for any university IP you need to use through a license with defined field of use.
Contractor code and open source landmines
Contractors write a lot of the first version of a product. Two predictable issues arise: ownership of code and embedded open source licenses. Do not assume a contractor’s standard terms favor you. Many boutique shops retain ownership and grant a license unless you negotiate otherwise. If you only need a license, that may be fine, but you should confirm that license is perpetual, worldwide, sublicensable, and transferable in connection with a change of control.
Open source choices are equally consequential. Copyleft licenses, such as GPL and AGPL, can require disclosure of source code for derivative works or network interactions. Some investors will not finance a company whose core product cannot be commercialized without facing copyleft obligations. Set an open source policy early. Track dependencies with automated tools. Approve exceptions deliberately. When a contractor delivers code, require a software bill of materials and a representation that they have the rights to all included components.
Patents: inventors, assignments, and the trap of the provisional
Founders frequently rush a provisional patent filing before assignments are signed. The inventors are then the owners. If one leaves and refuses to sign, you have a mess. Make sure employment and contractor agreements include present assignment of future inventions that relate to the company’s business or result from company resources. Back this up with an obligation to cooperate in prosecution and a power of attorney for ministerial acts.
A provisional is not a cheap placeholder if it is thin or disconnected from your ultimate claims. Treat it as a strategic disclosure. Include enabling detail. Align it with your product roadmap. Budget for conversion within twelve months, and make sure your cap table and IP chain of title are clean before you file non-provisionals that will require declarations and assignments.
Trade secrets depend on behavior, not just documents
Trade secrets lose protection when they are not treated as secret. You need a set of practices that a judge would view as reasonable under the circumstances. That includes access control on repositories, restricted Slack channels for sensitive topics, marking confidential documents, limiting copying of datasets, logging access to production systems, and training managers not to disclose sensitive material to candidates during interviews. A casual culture can coexist with rigor, but you cannot defend a trade secret you spray across public channels.
I have seen companies claim an algorithm was secret while the full explanation sat in a public GitHub issue. Another firm lost leverage because their pricing model was widely shared in a sales wiki open to all contractors. A few disciplined settings and group permissions would have preserved most of their protection.
Equity and IP: different ledgers, same discipline
Founders track equity issuance down to the decimal. IP should receive the same care. Each contribution of code, design, data, or invention should have a name attached, a date, and a governing agreement. When someone leaves, you have an offboarding checklist that revokes credentials, collects devices, confirms deletion of local copies, and obtains confirmatory assignments for anything lingering in draft.
Equity vesting schedules do not, by themselves, govern IP. A founder who departs after six months still owns any IP they did not assign, even if they forfeited unvested stock. Investors know this. They ask pointed questions during diligence because a single unassigned dataset or core library can halt a financing.
Joint development and customers who want too much
Enterprise pilots often come with a demand: joint ownership of anything developed during the engagement. Joint ownership sounds fair until you live with it. Under U.S. law, joint owners can exploit the IP without accounting to one another, which creates unpoliced competition and complicates later licensing. The better approach is to grant customers a limited license to product improvements or to carve out specific deliverables that they will own, while the company retains ownership and a broad license to use any feedback, suggestions, or non-confidential improvements across its product.
If a strategic partner insists on joint ownership, define fields of use, carve out core platform technology, and include a duty to account for licensing revenue. Many buyers will accept a practical compromise if you explain why joint ownership reduces your ability to maintain the product for them.
Data: consent, provenance, and derived rights
Data drives modern products. Ownership and rights turn on provenance and consent. If you scrape public data, check terms of service and anti-circumvention laws. If you accept customer data, your rights likely come through a data processing agreement that restricts use to providing services. If you plan to use customer data to improve models, say so and obtain a license in your MSA, with an option for customers to object. For sensitive categories, anonymization alone may not be enough; regulators look at reidentification risk and purpose limitation.
Training datasets mix rights: copyright in curated selections, trade secrets in labeling strategies, privacy interests in personal data. Keep records of sources, licenses, and the methods used to transform the data. If a contractor assembles a dataset, the assignment should cover the compilation and the labeling, and should confirm compliance with any upstream licenses. A single dataset with murky provenance can Noam Glick biography cloud the value of an entire business line.
Open source you originate: choose licenses with a plan
Some companies benefit from releasing libraries or SDKs under open source licenses. This can accelerate adoption and attract developer talent. License choice is a product decision. A permissive license like MIT maximizes adoption and reduces friction. A copyleft license can protect against proprietary forks but may deter enterprise use. License-plus-commercial models can work, but the dual-licensing mechanics require clean contributor license agreements and a contribution policy that records rights from external contributors. If you invite the world to submit PRs without a CLA, you may be unable to relicense later.
International founders and cross-border complications
Employment inventions laws differ by country. In Germany, for example, employee-inventor compensation rules apply. In the UK, employers typically own inventions created in the course of employment, but documentation still matters. Some jurisdictions require additional consideration for assignments, or impose formalities for moral rights waivers. If your team spans jurisdictions, use localized agreements or add jurisdiction-specific riders. File trademark and patent applications where you plan to operate or manufacture, not just where you are incorporated.
China demands particular care when transferring filings or engaging local manufacturers. Keep a clean separation between manufacturing know-how that must be shared and core algorithms that should not. Use technical controls, not just contracts, to limit what a factory can access.
When a founder leaves
Departures can be amicable, but they are rarely simple. Control the narrative and the paperwork. Provide a separation agreement that includes a reaffirmation of prior IP assignment, a cooperation clause for future filings, confidentiality reminders, and an optional limited consulting period to ease handover. If the founder claims ownership of a module or a dataset, evaluate the claim quickly. Sometimes buying out a narrow claim for a discrete payment and acknowledgment is cheaper than a months-long dispute.
I handled one case where a departing CTO asserted ownership of a tuning corpus they had compiled from public sources and internal annotations. Their employment agreement had strong assignment language, noam glick but the annotations lived in a personal cloud folder. We negotiated a confirmatory assignment, a small cash payment, and a one-page statement clarifying that any future use by the founder must exclude company annotations. That clarity saved the next financing.
Investor diligence and the red flags they chase
Investors are not guessing. They have a short list of items that, if missing, slow or stop a deal:
- Signed assignment agreements from every founder, employee, contractor, and advisor who contributed to the product, with present assignment language. Proof that all domains, social accounts, app store listings, and registrant records sit in company-controlled accounts, not personal emails. Documentation of open source dependencies and a policy governing use, including approval records for copyleft components. Evidence of trade secret protection practices: access controls, NDAs, and training records. Patent and trademark filings with executed assignments from inventors and designers, and docketing records that match your claims.
Treat diligence like a dress rehearsal for acquisition. Assemble these materials in a data room. Keep them current. The best time to clean a chain of title is now, not when a term sheet lands.
The founder who brings prior IP
Sometimes a founder arrives with a pre-existing project. If that code or patent sits at the core of your product, the company needs to own it or hold a license broad enough to support growth. Ownership is cleanest, but if the founder wants to retain rights for unrelated fields, define the field of use, include a covenant not to compete within your field, and establish a right of first refusal if the founder wants to license to others. Price matters: tie consideration to equity and vesting, so that if the founder departs early, the company still has what it needs.
Be realistic about third-party claims. If the prior IP came from a past employer, confirm that any non-compete or invention assignment does not reach it. One founder I worked with had built a library on nights and weekends while employed by a large vendor. Their old contract claimed all inventions created during employment that related to the company’s business. We negotiated a release with the prior employer, which cost time and money but beat litigating after launch.
Litigation is the costliest option
When IP ownership goes to court, everyone loses time and leverage. Even a preliminary injunction motion can consume six figures in fees and cripple a product roadmap. Most disputes settle around the facts you neglected to document. Agreements drafted on day one cost little and prevent expensive ambiguity. If you must litigate, prepare for an intrusive process: forensic analysis of devices, depositions, and subpoenas to contractors and customers. The better your internal records, the faster a dispute resolves.
Building a culture that protects IP without slowing the team
Speed and rigor can coexist. The culture you set in the first ten hires will persist.
- Make IP onboarding part of day one. New hires sign agreements before receiving access. Contractors execute MSAs and SOWs with assignment and confidentiality before they touch a repository. Use company accounts for everything. Repos, design tools, cloud consoles, domains, social media, app stores. No personal email registrants, no personal billing for shared resources. Automate logs and approvals. Use access groups, code ownership files, and ticketing for exceptions to the open source policy. Review logs monthly, not when a problem surfaces. Train managers twice a year. Thirty minutes on IP basics, trade secret hygiene, and open source policy prevents most accidental leaks. Close the loop on exit. Revoke access, collect devices, obtain confirmatory assignments, and run a quick audit of recent commits and exports.
These practices cost far less than a single day of litigation or a delayed financing. They also signal to buyers and investors that you run a disciplined operation.
Practical documents that hold up
You do not need a binder full of bespoke forms. You need a small set of documents drafted carefully and used consistently:
- Founder stock purchase agreements with IP assignment riders and schedules of prior inventions. Employment and contractor agreements with present assignment, moral rights waivers where applicable, cooperation obligations, confidentiality, and invention disclosure processes. Invention assignment acknowledgments tied to specific patent filings. Advisory agreements with clear scopes, compensation, confidentiality, and assignment. Open source policy and contributor guidelines, including a CLA if you accept external contributions.
Keep templates versioned. Record which version each person signed. When you update language to reflect a new jurisdiction or learning, track the change and, if needed, have existing contributors sign the updated form.
When to bring counsel in and what to ask
You can draft a lot of this with reputable templates, but there are moments worth paying for advice: cross-border teams, university affiliations, complex data licensing, joint development with strategic partners, and any time a founder brings prior IP. A good lawyer will ask uncomfortable questions about provenance and process. That discomfort is a small price to avoid a future dispute.
Give counsel a clear inventory. Provide repository lists, contractor rosters, provisional filings, and any unusual license terms. Ask for plain-language explanations of trade-offs. For example, choosing between joint ownership and exclusive field-of-use licenses for a partner is a business judgment. You want legal input that tees up that decision, not abstract theory.
Edge cases worth anticipating
Two less common but costly scenarios deserve a mention. First, an employee who refuses to sign IP agreements after starting because you delayed onboarding. If you have already given access and they have contributed code, you may need to pay consideration for a retroactive assignment. Second, a departure that includes whistleblower claims. Exercise care not to overreach with confidentiality demands. Most jurisdictions protect the right to report violations to regulators, and some protect the right to hold copies of documents related to a claim. Your agreements should accommodate those rights while still securing IP.
Another edge case appears in generative tools. If your team uses third-party models to generate code or content, review the provider’s terms on output ownership and indemnity. Some providers grant ownership of outputs, others provide a license only. For safety, require your team to document when generated content is used and to run it through the same review you apply to open source: provenance, license, and suitability for commercialization.
A simple roadmap for founders who want to sleep at night
You can secure your IP without turning your startup into a law office. Think of this as a one-day sprint you refresh quarterly.
- Inventory everything that could be IP: code, designs, domains, datasets, filings, marks, and accounts. Move ownership and access to the company. Execute or update agreements with present assignment for founders, employees, contractors, advisors, and interns. Fill gaps for anyone who touched the product. Set a basic policy stack: open source, data use, confidentiality, and trade secrets. Implement access controls and logging in your existing tools. Clean up filings: assign inventors’ rights for patents, file or confirm trademark ownership, and docket deadlines. Bake IP into onboarding and offboarding. Make it routine, not a special event.
You will still face tough questions from investors, partners, and customers. But you will answer them with confidence and documentation rather than hope. The goal is not perfection. It is clarity. Clarity reduces disputes, shortens diligence, and lets your team spend its time building value rather than arguing over who owns it.