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Intellectual Property Assignment Agreement: Why Your Startup Needs One

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Intellectual property is a form of creative invention or expression that can be protected under state or federal law. The form of legal protection is generally a trade secret, trademark, copyright, or patent. Each of these types of intellectual property requires unique procedures for capturing and protecting one’s rights.

The inventor or creator of intellectual property has the sole right to capture rights in the intellectual property. The exception is when the creator works for a business and creates the intellectual property in the scope of her employment. In such event, the employer may legally secure the intellectual property rights. With this in mind, it is not uncommon for individuals or business to transfer intellectual property. This scenario arises frequently within startups. The founders work individually or as a group to create intellectual property. They later form a business entity to commercialize the intellectual property. The entrepreneurs then seek to transfer the intellectual property assets to the business entity for purposes of production, distribution, or licensing.

In this article, we explain the intellectual property assignment agreement and its major provisions.

What is an Intellectual Property Assignment Agreement?

An intellectual property assignment agreement (also known as an “IP Transfer Agreement” or “Rights Agreement”) is a form of contract to transfer (assign) intellectual property rights. It is between the owner of intellectual property rights (assignor) and the intended recipient (assignee). The agreement will generally take one of several forms:

  • Assignment of intellectual property by founders to the existing or newly-formed company.
  • Assignment of intellectual property rights by a third party selling the rights to the company in exchange for some form of consideration.
  • Assignment of intellectual property rights by employees or independent contractors engaged in work for the company that could result in the ideation, discovery, or creation of intellectual property.

There is no standard form of intellectual property agreement. Sometimes the policies are in an employment agreement or in a company handbook. It is recommended to have a completely separate agreement. This makes the intellectual property agreement less subject to dispute, which give confidence to company investors. The typical provisions in an intellectual property assignment agreement are as follows:

  • Words of Agreement – This simply identifies the parties and the purpose of the agreement.
  • Assignment Provision – This assignment provision expressly states that ownership of the identified intellectual property is being transferred from the assignor to the assignee. Like most contracts, there must be an exchange of value (consideration) between the assignor and assignee. As such, the assignment agreement will state some form consideration coming from the assignee. This could be money, employment, property, etc. If this is an agreement between the founders and the company, it may be the exchange of company stock for the property. If the founder has already received a stock grant, it might include “$1 and other valuable consideration” as the value exchanged. This provision may also indicate the timing of the assignment.
  • Definition of Intellectual Property – This provision should define what constitutes intellectual property. In some businesses, this may focus upon trade secrets. In other businesses, it will focus primary on patentable inventions. This definition should include “prior inventions” or previously created intellectual property that naturally led to the creation of the current property.
  • Intellectual Property Rights – This provision is often included within the definition of intellectual property. It spells out the rights of the owner or assignee of the intellectual property. More importantly, however, it will spell out the limits of other parties with regard to the rights. For example, it may state the assignee has sole right to produce, use, sell, transfer, lend, leverage, license, perform, display, advertise, photograph, or otherwise undertake transactions involving the property.
  • Work Product – Employees (and owners) of the company may research or develop more intellectual property. The agreement should include a clause assigning to the company, in advance, any ideas, work product, or inventions developed in the scope of the employee’s job. This will make certain that all future creations of intellectual property belong to the company and not the individual employees. Also, the agreement should require employees to promptly disclose or keep the company apprised of any potential intellectual property (discoveries, ideas, inventions, etc.). This is known as a “disclosure provision” and may be included as a separate provision.

Support for Capture & Enforcement – As discussed, except in employment scenarios, the inventor or creator has the sole right to capture or secure intellectual property rights in her invention or creation. As such, when the property is transferred, the assignee may need the assistance or support of the assignor in capturing or enforcing previously established intellectual property rights. This provision obligates the assignor to willingly participate if her support is required. This is known as an “All Things Necessary Clause”. Often this provision will include a grant of “Power of Attorney”. This provision allows the assignor to capture or otherwise manage the intellectual property rights without the assistance of the assignor. This provision is very common for employee work product agreements.

Representations and Warranties – Representations are assertions of fact by each party to the agreement. For example, the assignor may represent that she is the owner of the intellectual property being transferred. Warranties assure the representations will be or remain true at or until some future time. Other common representations and warranties might include:

Authority to assign the property;

  • The property has not been encumbered or licensed previously;
  • Anyone having a claim or rights in the property has or does consent to the transfer; and
  • The property does not infringe on the intellectual property rights of others.

LawTrades Knows Intellectual Property

Intellectual property law and procedure is complicated. In many cases, intellectual property is a company’s most valuable asset. Don’t risk a misstep in securing or protecting your intellectual property rights. The legal professionals at LawTrades are here to help you along the way.


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