Overview of a Founder’s IP Assignment

What is a Founder’s IP Assignment?

A Founder’s IP Assignment or Assignment of Intellectual Property Rights sets out the transfer of ownership between the seller and the buyer of a company’s intellectual property.

An Assignment of Intellectual Property Rights grants the buyer ownership and consequently the right to use the intellectual property. For trademarks, patents, copyright, and designs, the assignment needs to be in writing to be effective.

The Assignment of Intellectual Property Rights allows the seller to get paid for the intellectual property rights and the buyer is free to commercialize (or “exploit”) the intellectual property for any purpose. Intellectual property includes patents, trademarks, designs, copyright, goodwill, and rights in know-how and confidential information (also extending to trade secrets).

Why is a Founder’s IP Assignment important?

Intellectual property rights are a valuable intangible asset and an integral part of brand identity. Hence, it is important for a business and its stakeholders to have a clear record of the ownership of intellectual property rights. Intellectual property rights may include patents, trademarks, designs, domain names, and (for a software business) source code and documentation about the software.

What should be included in a Founder’s IP Assignment?

  • Types of intellectual property assigned: There are four types of intellectual property Copyrights, Patents, Trademarks, and Trade Secrets.
  • Intellectual property derived from project-based work:
  • Unregistered intellectual property rights: This means those trademarks and copyrights that are not the subject of a pending application for registration with an appropriate trademark and copyright.
  • Price of assignment: This is the appropriation of costs to the activities that generate the incurrence of the cost.

Why do founders assign intellectual property rights?

The founders need to assign intellectual property rights to the company for the following reasons:

Proper management of the business: After the company has been established the founders should assign the IP to the company because the startup is now the company entity, rather than you and your co-founders as individuals.

Preventing Conflict: Startup founders need to assign their IP to the company because in case a co-founder escapes this will create a threat for your business. If your co-founder escapes and no IP assignments have been assigned, your co-founder will take your valuable IP with them. This would leave your business with no capability to move forward.

Risk on Raising Capital: In the process of raising capital for the business, the investors often come on board as co-owners and shareholders of your company. Investors usually investigate to assure if investing in an early stage is worth it. And if it turns out your company does not own IP rights the value of your business decreases naturally.

Risking a Future Acquisition: Conforming IP rights will also be an essential factor if another company is interested in having your business. If the investigation process discovers that IP was not completely assigned to the company founders, this may damage the acquisition.

In this Assignment of Intellectual Property Rights, we have assumed that:

  • the rights to be assigned fall into six different categories, namely Patents, Registered TradeMarks, Unregistered Marks or Trade Names, Registered Designs, Domain Names, and Software, Source Code and Documentation;
  • the founder makes a number of warranties about the rights to be assigned, for example, he has not previously licensed or assigned any of those rights, and he is not aware of any infringement of those rights; and
  • the founder will (at the company’s cost) take any further action required such that the ownership of the rights to be assigned is effectively transferred to the company.

In describing the rights to be assigned, please be as clear and accurate as possible. The transfer of ownership may not be effective if the description is not accurate or clear enough. If you have any uncertainties, please seek legal advice.
If you wish to assign intellectual property rights in the course of a working relationship, such as from an employee or consultant to the company they work for, clauses to that effect are included in our Employment Contract and Consultancy Agreement. If you have already used those documents, you may not need a separate Assignment of Intellectual Property Rights. If you are unsure, we recommend that you seek legal advice before proceeding

Conclusion

An Intellectual Property Assignment Agreement ensures that IP is assigned properly from one entity to another. If you’re a startup, this ensures that future investors have an accurate representation of what has been transferred. Use this template to document the agreement between yourself and the other party.

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