The most valuable asset in most technology startups is intellectual property — code, design, data, and proprietary processes. Yet many founders are surprised to learn that paying someone to build something doesn't automatically mean the company owns what was built. IP assignment agreements close this gap, and doing so before an investor looks at your cap table is essential.
The default rules of IP ownership
In Australia, the general rule for employees is that IP created in the course of their employment belongs to the employer. This is a useful default, but it has limits — work created outside employment scope, or before the employment commenced, may not be covered.
For independent contractors, the rule is reversed. Under the Copyright Act 1968, copyright in commissioned works belongs to the contractor unless the contract says otherwise. If you paid a freelance developer $50,000 to build your product and there is no IP assignment clause in the contract, the developer may own the copyright to that code.
Many founders only discover this during a due diligence process ahead of a funding round. At that point, cleaning up ownership — if the contractor can even be located — is expensive and time-consuming.
What an IP assignment agreement does
An IP assignment agreement transfers ownership of intellectual property from one party (the assignor) to another (the assignee). For a startup, this typically means transferring all IP created by contractors, co-founders, and early employees to the company entity.
The assignment should be broad enough to capture all relevant IP — including inventions, software, designs, written content, and trade secrets — but specific enough to be clearly linked to the work performed. A blanket assignment of all future IP a contractor will ever create is both overreaching and unenforceable.
The assignment should also include a moral rights waiver where applicable, confirming that the creator will not exercise their moral rights (the right to attribution and the right to object to derogatory treatment) in a way that interferes with the company's use of the IP.
Co-founder IP: the overlooked scenario
Many startups are built on code or designs created by a co-founder before the company was formally incorporated. Unless that IP is formally assigned to the company, it may still belong to the individual co-founder personally.
This creates a significant problem. If that co-founder later leaves the company — particularly on bad terms — they may have a claim over IP that the company has built an entire product around. Investors conducting due diligence will identify this risk and price it into their valuation or their term sheet conditions.
Every co-founder should execute an IP assignment agreement at the time of incorporation, assigning all pre-existing relevant IP to the company in exchange for their equity stake. This is standard practice and protects both the company and the co-founder.
When and how to use IP assignment agreements
IP assignment should be executed at the start of every engagement — before work begins, not after. Include the assignment as part of your standard contractor agreement so it becomes a routine part of onboarding any service provider.
For historical work already completed, a retroactive assignment is better than no assignment, but it requires the original creator to sign. Most contractors will cooperate if approached professionally. If they won't, that's a risk the company needs to document and disclose.
Review your IP ownership position before any significant funding round, acquisition process, or partnership discussion. A clean IP register — where the company can clearly demonstrate it owns what it says it owns — is a fundamental component of investor confidence.
IP assignment isn't a formality — it's the foundation of your company's asset base. Document it early and enforce it consistently.