Company Structure, Formation & Corporate Basics

Who owns your IP

To successfully launch a new startup, the company needs to own, or have a license to use, the intellectual property that will be used in the business. This aggregation of IP does not happen automatically and requires careful planning with your legal counsel.

Upon the formation of the company, each founder should assign all of his or her rights to the idea and other IP related to the proposed business to the company. However, the founders may not own all of the IP, even if the founders invented it. For example, inventions created while a founder was a student or employee may be owned by the founder’s school or former employer. If any founder is employed by another company or part of another institution while he or she is collaborating on or developing the idea for the business, you should carefully review the terms of any applicable agreements or policies to determine who has ownership rights over any resulting IP. In general, however, the more that a founder has (1) used resources from another institution in developing the idea or (2) developed an idea that relates to other work performed for another institution, the more likely that the institution owns the IP. In that case, it may be necessary to acquire the rights to the IP or obtain a clarifying waiver or consent from the other institution in order for the startup to commercialize the IP.  

Some startups will commercialize technology that was originally developed at a university, hospital or other institution. In those cases, the company will typically need to obtain a license to the IP. In exchange for these licenses, the startup may need to grant the university or other institution equity, make up-front or milestone payments and/or pay royalties. Learn more about licensing IP from a university or hospital. 

Copyright protects original works of authorship, including source code. Rights automatically vest upon creation, but the copyright belongs to the original author. So there needs to be an agreement transferring the copyright to the person who commissioned the code where the code writer is not an employee. For example, if your company hires a person to write some code the company can enter into a consulting agreement pursuant to which the code writer transfers copyrights (and any other intellectual property created as a result of the agreement) to the company.  

You should also consider pursuing patent protection. A patent protects inventions or discoveries, including computer programs. In the United States, the inventor of the patent application is the person who conceived of the invention. To the extent the code writer is an inventor (which depends on how much detail was provided to the coder), the person or company that hired the code writer will want to obtain an assignment of the invention and the agreement of the code writer to cooperate with filing a patent application. This is best done when first commissioning the code writer. Learn more about filing a patent and registering a copyright.