IP assignment clauses for startups: what your investors will check on Day 1

The IP audit is the slowest part of due diligence

When you raise a Series A, investors run an IP audit. They check that every person who has touched the company's product — founders, employees, contractors, advisors — has assigned the IP they created to the company in writing. Missing any one assignment can delay the closing by weeks or trigger a re-rep on the deal. Founders who get this right on Day 1 save themselves a month of pain.

Founders first

Every founder needs to sign an IP assignment agreement at incorporation, transferring all pre-existing IP related to the business to the company. Without this, the IP arguably belongs to the founder personally — which means the company doesn't own its own product. This is the single most common cleanup issue in startup due diligence.

Employees — present assignment, not future promise

The IP assignment in employee offer letters should say the employee "hereby assigns" (present-tense, immediately effective) rather than "agrees to assign" (future-tense, requires another step). The U.S. Supreme Court ruled in Filmtec v. Allied-Signal that "agrees to assign" doesn't automatically transfer ownership — you need a separate assignment document. "Hereby assigns" does.

Contractors — the biggest gap

U.S. copyright law has a "work made for hire" doctrine for employees, but contractors are presumed to own their own work unless there's a written assignment. Every contractor — designer, developer, marketing freelancer — needs a contract with a present-tense IP assignment clause. The number-one cleanup issue at Series A is contractor agreements with no IP assignment.

Open source and third-party IP

Your IP assignment also needs to address open source: the assignment should require disclosure of any open source components used and warrant that the use is compliant. For your contract review process, ContractScan AI automatically flags open-source warranty clauses and assignment gaps in contractor agreements.

Prior inventions schedule

Every IP assignment should have a "Prior Inventions" schedule where the signer lists IP they own personally and want to exclude from the assignment. Without this, the company can later claim a side project. Founders should list anything substantial, even just "personal blog at X.com".

Moral rights and waivers

In civil-law jurisdictions (France, Germany, India to a degree), authors retain certain "moral rights" that can't be assigned. The contract should include a waiver of those rights to the extent permitted by law. In common-law jurisdictions, this clause is often unnecessary but harmless.

The pre-funding cleanup

If you've already issued contracts without proper IP assignments, you can usually clean it up by signing a "confirmation of IP assignment" for each affected person. The earlier you do this, the easier it is — once a deal is on the table, getting a former contractor to sign a retroactive assignment is hard and sometimes expensive. Run a register of every person who has ever written code, designed a screen, or written marketing copy for you, and check the assignment status.