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Why Are Intellectual Property Assignment Agreements Important to Tech Startups?

Intellectual Property

If you are contemplating creating a technology startup, an important part of the formation of the company should include an intellectual property (IP) assignment agreement.

What Is an Intellectual Property Assignment Agreement?

Intellectual property is legally defined as a work or invention that is the result of creativity to which one has rights and for which one may apply for a trademark, patent, copyright, or other appropriate protection to keep others from using it without permission.

Works or inventions are typically books or designs but can include ideas or a work product, which includes software programs.

An assignment agreement is a contract that transfers the rights to the intellectual property from the creator to another entity, such as a company. Individuals being hired into research and development or other technical areas sign the agreements to assign to the company, in advance, any ideas, work products, or inventions related to the company business.

Simply put, the company owns the intellectual property, not the employee(s).

If you do not currently have an attorney assisting you with your assignment agreement, consult a business attorney in Houston before proceeding with your agreement.

Types of Assignment Agreements

technology assignment agreement assigns your startup any intellectual property before you form the company. The developer(s) may retain individual intellectual property rights under certain circumstances, or they may sell the rights to you for equity or cash.

An invention assignment agreement assigns a new company ownership of any relevant intellectual property created by employees after the company is formed. The agreement typically includes the founder(s) and employees as signatories to a confidentiality agreement and an invention assignment agreement.

The Need for an Ip Assignment Agreement

Assignment agreements for startups are a necessity. An intellectual property assignment agreement is a key legal document that investors look for when deciding whether to fund you.

Startup founders should have complete ownership, in writing, of all intellectual property assets during the formation of the company. Not only is the legal ownership a requirement for most investors, but it can also keep patent trolls and companies that want to copy your products at bay.

Key Points for an Assignment Agreement

A couple of key points should be included in the agreement for the best legal protection.

  • The employee must promptly disclose to the company any inventions, ideas, discoveries, and work product related to the company’s business that were made during the period of employment.
  • The company is the owner of the inventions, ideas, discoveries, and work product.

If you are hiring an employee to invent or develop a work product, the rights to those inventions and work products are yours if they were created at your request and expense.

This last is an important point when hiring a software developer. The developer is strictly hired to create a work product, namely a software program or application. If the developer completes the project and then leaves your company, the intellectual property rights are yours.

However, it wouldn’t hurt to have that developer sign an intellectual property assignment agreement, just to prevent problems in the future.

Provisions to Include in an Intellectual Property Assignment Agreement

There is no standard form for assignment agreements so each must be carefully worded and signed by the employee or developer for it to be binding. If the agreement is part of the employee handbook or other employee guidelines, you need to work with an attorney to make certain it will still be legally binding if the signature is on a separate employment agreement document.

In general, most assignment agreements have at least three provisions in common.

Assignment Provision

The assignment provision requires employees to assign their inventions to the employer, so the employer has total ownership of the intellectual property. This provision could be narrowed to employee inventions only or broadened to include nearly anything the employee creates.

Example Provision

“I agree that all inventions that are (a) developed using equipment, supplies, facilities, or trade secrets of the company; or (b) result from work performed by me for the company; or (c) related to the Company’s current or anticipated research and development will be the Company’s sole and exclusive property and are hereby assigned by me to the Company.”

Disclosure Provision

A disclosure provision requires employees to inform the employer of the existence of intellectual property that was developed according to the assignment provision.

Example Provision

“While I am employed by the Company, I will promptly inform the Company of the full details of all inventions, discoveries, improvements, and innovations, whether or not patentable, copyrightable, or otherwise protectable, that I conceive, complete, or reduce to practice (whether jointly or with others) and which: (a) relate to the Company’s present or prospective business, or actual or demonstrably anticipated research and development or (b) result from any work I do using any equipment, facilities, materials, trade secrets, or personnel of the Company or (c) result from or are suggested by any work that I may do for the Company.”

Power of Attorney

This particular clause is fairly standard. The power of attorney provision guarantees the employer can register and administer the ownership rights without the employee, regardless of whether the employee is willing and able to assist.

Example Provision

“If the Company is unable to secure my signature on any document necessary to obtain or maintain any patent, copyright, trademark, or other proprietary rights, whether due to my mental or physical capacity or any other cause, I hereby irrevocably designate and appoint the Company and its duly authorized offers and agents as my agents and attorneys-in-fact to execute and file such documents and do all other lawfully permitted acts to further the prosecution, issuance, and enforcement of patents, copyrights, and other proprietary rights with the same force and effect as if executed by me.”

To protect your most important assets and to signal to investors that your startup has valuable intellectual property to use as the foundation of a successful business, you should require an intellectual property assignment agreement signed by everyone involved with the company you are forming, founders, employees, and developers alike.

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