पाठशाला Pathshala · नियम Niyam, Law and compliance · Lesson 02 · Start

IP assignment: making sure the company owns what you built

Code written before incorporation, a logo from a freelancer, an algorithm from an engineer who left. Each belongs to the person who made it until a signed document says otherwise. Investors check.

Pathshala, The Founder Library · 11 October 2026 · 8 min read

Six months before the company existed, two founders wrote the first version of the product on their own laptops. A friend designed the logo for a dinner. An engineer who left in month nine wrote the module that customers pay for. Ask who owns each of these and most founders say “the company”. The law says otherwise until a signed document agrees with them, and the first person to check is the lawyer running due diligence on the seed round.

This lesson does three things. It explains what Indian law gives a company by default and where the default stops. It sets out the few words an assignment must contain to work, because the Copyright Act fills in blanks in ways no founder would choose. And it gives the folder of documents an investor’s lawyer will ask for, so that the question is answered before it is asked.

What the law gives you for free, and where it stops

Section 17 of the Copyright Act 1957 says the author is the first owner of copyright, then lists exceptions. The one that matters is clause (c): a work made in the course of the author’s employment under a contract of service belongs to the employer, in the absence of any agreement to the contrary. That covers the code, documents and designs an employee produces as part of the job. It is the only automatic transfer a startup gets.

Three things sit outside it. A contractor is not under a contract of service, so a freelance designer, an agency or a part-time developer on a retainer is the first owner of whatever they deliver. A founder who has not signed an employment or service agreement with the company is not its employee for this purpose, and anything built before incorporation was built when there was no company to be employed by. And an invention is governed by the Patents Act, which has no employer default at all. Section 6 of the Patents Act 1970 lets only the true and first inventor, or the assignee of that person, apply for a patent. An employer becomes the assignee by a written document or not at all.

So the honest position on the day a company incorporates is that it owns nothing it did not make, and it has made nothing. Everything it will later call its own has to be moved to it by signatures.

The founders’ problem: work done before there was a company

The prototype, the deck, the domain, the name, the research notes: all of it belongs to the individuals who made it. Section 18(1) of the Act lets the owner of copyright in an existing work assign it wholly or partially, and lets a prospective owner assign a future work, with the assignment taking effect only when the work comes into existence. The instrument is a deed of assignment from each founder to the company, signed in the first weeks, with the consideration being the shares each founder was allotted at incorporation. A nominal cash sum is fine too. What matters is that the consideration is stated, because section 19(3) requires it.

Founders who skip this because “it is our company anyway” discover the gap in two ways. The gentle way is a diligence request list with the line “copies of all intellectual property assignment agreements from founders” and a week spent chasing signatures from a co-founder who has since left on bad terms. The hard way is that same co-founder’s lawyer pointing out that the module their client wrote in the garage was never assigned, and that the company has been licensing it on sufferance.

The four words that break an assignment

Section 19 of the Copyright Act is short and unforgiving. An assignment is valid only if it is in writing signed by the assignor. It must identify the work and specify the rights assigned, the duration and the territorial extent. Then come the defaults, and they are the trap. If the duration is not stated, section 19(5) deems it five years from the date of assignment. If the territory is not stated, section 19(6) deems it India. And under section 19(4), if the assignee does not exercise the assigned rights within one year, the assignment of those rights lapses, unless the deed says otherwise.

A blank in an assignment is not neutral. The Act fills it in, and it fills it in against the company.

So every assignment the company signs says four things in terms: all rights, for the full term of copyright and any renewal, worldwide, and the assignment shall not lapse by reason of non-exercise. Add that it covers all media and modes of exploitation whether or not known at the date of the deed, because section 18 otherwise excludes media that did not exist when the deed was signed. Add a further-assurance clause obliging the assignor to sign whatever else is needed, including patent papers. Five lines, and the document does its job for the life of the company.

Employees, contractors and agencies: three different documents

An employee signs an employment agreement that assigns, as a present assignment, all works and inventions made in the course of employment or using the company’s resources, data or confidential information. It carries a confidentiality clause that survives the job. It carries a schedule of prior inventions the employee claims as their own, even if the schedule says “none”, because the schedule is what defeats a later claim that the clever module came from before. It deals with moral rights: section 57 of the Act gives an author the right to claim authorship and to restrain distortion of the work, and those rights survive assignment. Take an undertaking not to assert them against the company or its customers. Law firms in the United States call the whole package a Confidential Information and Invention Assignment Agreement, and an Indian version does the same work under Indian statute.

A contractor signs a services agreement whose IP clause does more, because the law does less. It assigns the deliverables to the company as they come into existence, states the consideration, licenses to the company any pre-existing material the contractor builds in, and lists open-source components with their licences. It is signed before work begins. An agency that delivers a brand and a website owns both until paid and until the assignment is signed, and an unpaid agency with an unsigned assignment has a strong hand.

An inventor, whether employee or contractor, also signs the assignment that section 68 of the Patents Act requires: in writing, embodying all the terms, duly executed. The employment clause gets you the promise; the executed assignment gets you the patent application in the company’s name.

What you cannot do, however hard you draft

Section 27 of the Indian Contract Act 1872 says that every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind is to that extent void. The one exception is a seller of a business’s goodwill agreeing not to compete within local limits. A clause stopping an employee from joining a competitor after leaving is therefore unenforceable in India, and templates copied from Delaware are full of them. What survives is a confidentiality obligation, which protects what the person knows rather than where they work, and a reasonable non-solicitation of named customers and colleagues during the notice period and for a defined time after. Draft those properly and drop the non-compete, which in diligence reads as a company that does not know its own law.

Registrations, and what Startup India pays for

Copyright arises on creation and registration is optional; the assignment chain is the proof. A trademark is different: file it in the company’s name in the classes you trade in, before the name is on a billboard. A patent, if there is an invention, is filed first as a provisional application to fix the date. For a DPIIT-recognised startup the Startups Intellectual Property Protection scheme supplies a panel of facilitators whose fees are paid by the Central Government, fast-tracks examination, and gives an 80 per cent rebate on patent filing fees; the Trade Marks Rules give a 50 per cent rebate on trademark fees. The one condition is that the applicant is the company. A patent filed in a founder’s name is a patent the company does not own.

This is what diligence actually looks like. The request list arrives a week after the term sheet. It asks for a schedule of all registered and unregistered IP, copies of all assignment agreements from founders, employees and contractors, the standard form of each, a list of open-source components and their licences, and any correspondence alleging infringement. The lawyer then does one thing: for each material piece of the product, trace who made it and find the signed document that moves it to the company. A gap becomes a condition precedent to closing, and the person who must sign to cure it now knows they are holding up a round.

The register in the last group of the checklist is what shortens this from three weeks to one afternoon. A spreadsheet with one row per creator and one column per agreement, with dates and a link to the signed file, is the whole system. Nobody asks for more. Everybody asks for at least that.

A quarterly ritual, in twenty minutes

On the first working day of each quarter, open the register. For every person who started in the quarter, employee or contractor, confirm a signed agreement is on file and the prior-inventions schedule is filled. For every person who left, confirm the exit letter reaffirmed confidentiality and that their accounts were closed. For anything the company now sells that it did not sell last quarter, name who built it and point to the document. Then look at the trademark and patent calendar for the next ninety days. Twenty minutes, four times a year, and the first due diligence of the company’s life finds nothing to say.

Nothing here is legal or tax advice; confirm the current rule with a chartered accountant or lawyer before acting.