For a startup to launch successfully, it’s crucial that it either owns or has the rights to use the intellectual property (IP) crucial to its business. This doesn’t happen by itself; it requires deliberate planning and legal guidance.

Understanding Intellectual Property Ownership in Startups

At the startup’s outset, each founder should formally transfer any IP related to the business idea to the company. However, founders might not own all relevant IP even if they originated it.

For instance, if a founder developed an idea while at a university or while employed elsewhere, that institution or employer might own the IP. This is particularly likely if the founder used the institution’s resources or if the idea was related to their work there. In such cases, it’s important to review any relevant agreements to determine who owns the IP. The startup might need to secure rights through a license or get a waiver from the institution to use the IP commercially.

If the startup’s technology originated from a university or similar institution, typically, a license must be obtained. In return, the startup might need to provide equity, make payments, or pay royalties to the institution.

For copyright matters, such as source code, the rights automatically belong to the original creator unless there’s an agreement that assigns those rights to someone else. For example, if a startup hires someone to write code, a consulting agreement should specify that the IP created, including copyrights, is transferred to the company.

It’s also advisable to consider patent protection for inventions, including software. If a hired coder significantly contributes to an invention, the startup should secure an assignment of the invention and ensure the coder agrees to assist with the patent application process. These arrangements should be made when the work is commissioned, setting a clear legal groundwork for IP ownership.