Your startup's IP probably isn't yours yet
If you built the product before you incorporated, the company does not own it — you do, until you sign something that moves it.
If you paid a contractor and the agreement says "work for hire" but nothing else, the company may not own what they made, even though you paid for it.
If your employees never signed an invention assignment agreement, there may be no written instrument transferring anything at all.
This is the assignment gap. It is boring, it is entirely preventable, and it is one of the most common things that turns a straightforward financing or acquisition into a scramble.
The default rules run against you
Start with copyright. Section 201(a) of the Copyright Act: "Copyright in a work protected under this title vests initially in the author or authors of the work." The author is the human who made it. Not the person who paid, not the entity that was later formed around it.
Patents work the same way. In Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems (2011), the Supreme Court put it directly: "Since 1790, patent law has operated on the premise that rights in an invention belong to the inventor." Absent an effective grant, an employer does not automatically acquire them.
So ownership by the company is not the default. It is something you have to create, in writing, deliberately.
"Work made for hire" does less than you think
There are exactly two ways a work qualifies as a work made for hire under § 101 of the Copyright Act.
One: "a work prepared by an employee within the scope of his or her employment."
Two: "a work specially ordered or commissioned for use as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, if the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."
Read the second prong again. It is a closed list of nine categories, and even within the list it requires a signed writing.
Software is not on that list. Neither is a logo, standing alone. Neither is a sculpture — which is precisely the issue in Community for Creative Non-Violence v. Reid, where the Supreme Court held that whether the maker is an "employee" under the first prong is decided using "principles of general common law of agency," and that a hired party who is an independent contractor cannot produce a work made for hire except through the second prong's enumerated categories plus a signed agreement.
The practical consequence: a "work for hire" clause in a contractor agreement, by itself, is often not enough. What you also need is a present assignment — express language transferring all right, title, and interest — as a backstop for everything the work-for-hire doctrine does not reach.
And that assignment has to be written. Section 204(a): "A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner's duly authorized agent."
Patents: 35 U.S.C. § 261 provides that applications and patents "shall be assignable in law by an instrument in writing," and that an assignment is void against a subsequent bona fide purchaser unless recorded at the USPTO "within three months from its date or prior to the date of such subsequent purchase or mortgage."
Trademarks: 15 U.S.C. § 1060(a) provides that a registered mark or application "shall be assignable with the good will of the business in which the mark is used," that "assignments shall be by instruments in writing duly executed," and that an assignment is void against a subsequent purchaser for value without notice unless recorded at the USPTO within three months of the assignment or before the subsequent purchase. Note also the restriction on assigning an intent-to-use application before the applicant files an amendment to allege use or a verified statement of use, subject to a successor-of-the-business exception.
Three regimes, three statutes, one common theme: writing, signature, and — for patents and trademarks — a recording clock.
The four places the gap opens
Founders who built before incorporating. The most common gap, and the largest. The prototype, the repo, the deck, the brand, the domain, the early designs — all created by individuals, before the entity existed. Nothing transferred at formation unless someone signed a technology and IP assignment as part of the formation package. Founders often assume the stock they received covered it. It did not, unless the documents said so.
Contractors without assignments. Designers, developers, illustrators, editors, composers, freelance engineers. You paid an invoice; that is a purchase of services, not a transfer of copyright. Section 204(a) needs a signed writing, and the invoice almost never is one.
Employees without PIIAs. A proprietary information and inventions agreement is what makes ownership by the company explicit rather than dependent on scope-of-employment arguments after the fact. Without one, you are litigating the boundaries of an employee's role instead of reading a contract.
New York note: Labor Law § 203-f makes provisions requiring an employee to assign inventions unenforceable, and against the public policy of this state, where the invention was "developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information" — subject to exceptions for inventions that relate at conception or reduction to practice to the employer's business or its actual or demonstrably anticipated research or development, or that result from work performed by the employee for the employer. State-specific note: limits like this vary substantially by state; a form agreement drafted for another jurisdiction may not fit here.
Open-source obligations. Not a gap in ownership so much as a set of conditions attached to code that is already in your product. Obligations depend entirely on which license applies and on how the code is used and distributed. GPL-2.0 § 2(b), for example, requires that a distributed work containing or derived from the licensed program "be licensed as a whole at no charge to all third parties under the terms of this License," and § 3 imposes source-code accompaniment requirements for distributions of executable or object code. Whether and how those obligations apply to a given product is a specific, technical question — not one to answer by intuition.
Why it surfaces in diligence
Because that is when someone reads the documents for the first time with a reason to be skeptical.
An IP schedule gets built. A chain of title gets traced from each significant asset back to a signed instrument. Every founder, employee, and contractor who touched the product gets checked against the executed-agreement file. Repositories get scanned for third-party code and license obligations.
The buyer's or investor's counsel is not looking for a story. They are looking for signatures.
What follows from a gap is a process problem: representations and warranties that cannot be given cleanly, closing conditions requiring cleanup, and requests for confirmatory assignments from people who no longer work with you. Some of those people are easy to reach. Some moved, some left badly, and some now understand exactly how much leverage a missing signature carries. Timelines slip while you find them.
None of that is a prediction about any particular deal. It is a description of the work that the gap creates, and the work is real.
Closing the gap
At formation. A technology and IP assignment from every founder, executed as part of the formation package, covering everything created before the entity existed that relates to the business. Do this with the stock documents, not after.
For every hire. A signed PIIA before the first day of work, drafted for the state where the person works.
For every contractor. A written agreement executed before work begins, with both a work-for-hire clause and a present assignment, plus a moral-rights waiver where applicable and a clear statement of what the contractor may reuse.
For the code. A short written policy: an inventory of dependencies and their licenses, a review step before adding anything new, and a named person responsible.
For registrable rights. Record patent and trademark assignments at the USPTO, and mind the three-month windows in § 261 and § 1060.
Drafting detail worth knowing. Assignment language is conventionally drafted in the present tense — "hereby assigns" rather than "agrees to assign." The reasoning is straightforward: a present grant is itself the transfer, while a promise to assign later is an obligation you may have to enforce before you own anything. Whether that distinction carries legal weight varies by the kind of intellectual property involved and the governing law, so treat the present-tense form as the safer drafting habit rather than as a rule, and have counsel review the operative language in your own agreements.
Federal versus state: Copyright, patent, and trademark are federal. The contracts that assign them, and the employment relationships behind them, are governed by state law and vary by state. This article addresses New York law and does not address the law of any other jurisdiction.
The honest summary
None of this is difficult. It is a handful of documents signed at the right time, in the right order, by everyone who touches the work.
The reason it goes wrong is that the right time is always the moment when the company is smallest, busiest, and least inclined to do paperwork — and the moment it matters is years later, when the paperwork is the only thing anyone wants to see.
Do it now. It is a short list.
Sources:17 U.S.C. § 101 (Cornell LII) · 17 U.S.C. § 201 (Cornell LII) · 17 U.S.C. § 204 (Cornell LII) · 35 U.S.C. § 261 (Cornell LII) · 15 U.S.C. § 1060 (Cornell LII) · Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989) (Cornell LII) · Bd. of Trustees of Leland Stanford Jr. Univ. v. Roche Molecular Systems, Inc. (2011) (Cornell LII) · NY Labor Law § 203-f · GNU General Public License v2.0 (Open Source Initiative)
This article is general information, not legal advice, and does not create an attorney-client relationship. Copyright, patent, and trademark law are federal; the contracts and employment relationships that transfer those rights are governed by state law and vary by state. Thony Law PLLC is admitted in New York only.