What Is an IP Assignment Clause?
An IP assignment clause is a provision in an employment agreement that transfers ownership of intellectual property created by the employee to the employer. This includes inventions, software code, designs, trade secrets, written content, and any other creative or technical work produced during the course of employment.
Without an IP assignment clause, ownership of employee-created work can become murky. While the "work made for hire" doctrine under U.S. copyright law automatically assigns certain works to the employer, it has limitations and does not cover all types of intellectual property. A clear IP assignment clause fills these gaps and ensures the employer owns everything the employee creates in connection with their job.
Why IP Assignment Clauses Are Critical
The Work Made for Hire Limitation
Under copyright law, a work made for hire belongs to the employer if it was created by an employee within the scope of their employment. However, this doctrine only applies to copyrightable works — it does not cover patents, trade secrets, or other forms of intellectual property.
Additionally, the "scope of employment" can be ambiguous. If an employee writes code at home on their personal laptop over the weekend, is it within the scope of their employment? A clear IP assignment clause eliminates this ambiguity by explicitly assigning all work-related IP to the employer.
Patent Ownership
Patent rights present unique challenges. Unlike copyright, there is no automatic employer ownership of inventions under patent law. The inventor is the initial owner of a patent, even if they developed the invention while employed. Without a written assignment, the employer may only have a limited "shop right" — a non-exclusive, non-transferable license to use the invention.
For companies in technology, manufacturing, pharmaceuticals, or any industry where patents are valuable, an IP assignment clause is essential to ensure the company owns the patents on employee inventions.
Investor and Acquirer Requirements
Investors and acquirers will scrutinize your IP ownership documentation during due diligence. If your employees' employment agreements do not include clear IP assignment provisions, it creates a risk that the company does not actually own its core intellectual property. This can delay or derail fundraising and M&A transactions.
If your company has employees who were hired without IP assignment clauses, consider implementing an Invention Assignment and Confidentiality Agreement (sometimes called a PIIA — Proprietary Information and Inventions Agreement) as a standalone document to close the gap.
Key Components of an IP Assignment Clause
Scope of Assignment
The clause should define what is being assigned. A comprehensive IP assignment covers:
- Inventions — Ideas, discoveries, improvements, processes, and methods
- Copyrightable works — Software, documentation, designs, marketing materials, and written content
- Trade secrets — Proprietary processes, formulas, techniques, and know-how
- Trademarks — Branding elements, logos, and service marks created for the company
The assignment should cover IP created during working hours, using company resources, or relating to the company's current or anticipated business.
Timing
The clause should cover IP created:
- During the employment period
- Using company equipment, facilities, or resources
- Related to the company's business, products, or research
Some clauses also include a "trailer clause" that covers inventions created for a period (typically 6 to 12 months) after the employee leaves, if the invention relates to work the employee performed during employment. Trailer clauses are enforceable in many states but must be reasonable in duration and scope.
Duty to Disclose
The employee should be required to promptly disclose all inventions and creations that may be covered by the assignment clause. This allows the employer to evaluate whether the IP falls within the scope of the assignment.
Cooperation
The clause should require the employee to cooperate with the employer in obtaining and enforcing IP rights, including signing patent applications, copyright registrations, and other documents. A "power of attorney" provision allows the employer to sign these documents on the employee's behalf if the employee is unavailable or uncooperative.
Moral Rights Waiver
For international employees or creative roles, consider including a waiver of moral rights — the right to be identified as the author and to object to modifications of the work. Moral rights are recognized in many countries outside the United States and in certain U.S. contexts.
State-Specific Limitations
Several states have enacted laws that limit the scope of IP assignment clauses. Employers must comply with these restrictions.
California
California Labor Code Section 2870 prohibits employers from requiring employees to assign inventions that the employee developed entirely on their own time, without using company equipment or resources, and that do not relate to the employer's business or anticipated business. The employment agreement must include notice of this exception.
Similar Protections in Other States
States including Delaware, Illinois, Minnesota, North Carolina, Washington, and others have similar statutes protecting employee inventions developed on personal time and unrelated to the employer's business.
If you operate in a state with employee invention protections, your IP assignment clause must include the required statutory notice. Failing to include the notice does not necessarily invalidate the clause, but it creates unnecessary legal risk and may affect enforceability.
Prior Inventions
The Prior Inventions Exclusion
Employees may join your company with pre-existing inventions or IP that they want to continue developing outside of work. A well-drafted IP assignment clause includes a mechanism for the employee to list prior inventions that are excluded from the assignment.
This is typically handled through an exhibit or schedule attached to the employment agreement where the employee lists all prior inventions. If no prior inventions are listed, the agreement states that none exist.
Why This Matters
Without a prior inventions exclusion, disputes can arise about whether an employee's side project existed before they joined the company. The employee may claim that a particular invention predates their employment, while the employer argues it was developed during employment. The prior inventions schedule prevents this dispute by creating a clear record at the time of hire.
Open Source Considerations
For tech companies, the IP assignment clause should address the employee's use of and contributions to open source software. Key questions to address:
- Can employees contribute to open source projects during work hours?
- Does contributing company code to open source projects require approval?
- How are open source license obligations tracked and managed?
- What happens if an employee incorporates open source code into company products?
Drafting Best Practices
- Be comprehensive — Cover all forms of intellectual property, not just patents or copyrights
- Include statutory notices — Comply with state laws that protect employee inventions
- Require prior inventions disclosure — Create a record of pre-existing IP at the time of hire
- Include a cooperation clause — Ensure the employee will assist with IP filings
- Add a power of attorney — Allow the company to sign IP documents if the employee is unavailable
- Address open source — For tech roles, include provisions about open source contributions
- Include trailer clauses carefully — Post-employment invention assignment should be reasonable in scope and duration
IP assignment clauses are foundational for any company that creates intellectual property. A clear, properly drafted clause protects the company's most valuable assets and ensures clean IP ownership for future fundraising, partnerships, and exits.