Formation and founders
IP Assignment for Startups: Founders, Employees and Contractors (CIIAA / PIIA)
The short answer
A startup owns code and inventions created by its people only if they sign written agreements that assign them. Founders sign a technology assignment for anything created before incorporation and a confidential information and invention assignment agreement (CIIAA, also called a PIIA) for work afterwards; every employee signs a CIIAA at hire; every contractor's agreement includes a present assignment ("hereby assigns"). Missing assignments are among the most common findings in seed and Series A diligence and are much harder to fix after someone leaves.
Key numbers
| Item | Rule or practice | Note |
|---|---|---|
| Default owner of contractor work | The contractor | Unless a written assignment or a valid work-made-for-hire category applies |
| Default owner of employee copyright within scope of employment | The employer (work made for hire) | Inventions and patents still need an assignment clause |
| Wording that transfers future IP now | "hereby assigns" | "agrees to assign" is only a promise |
| California carve-out | Labor Code Section 2870 | Inventions made on own time, without company resources, unrelated to the business |
| Notice required in some states | California, Washington, Illinois, Delaware, Minnesota, North Carolina, Kansas, Utah and others | Attach statute text as an exhibit |
| Investor expectation | 100% of founders, employees and contractors signed | Standard rep in seed and Series A purchase agreements |
Why assignments matter so much
Investors are buying a share of a company whose value is mostly intangible: code, models, designs, data, brand. If a founder, early engineer or freelancer still owns part of that IP, the company's core asset has a hole in it. In diligence, the investor's lawyer will ask for a signed assignment from every person who contributed. A gap does not always kill a deal, but it creates leverage for the person who has to sign, and leverage is expensive when that person left on bad terms.
The four documents
1. Founder technology assignment
Founders often write code, create designs or file domain names before the company exists. That work belongs to them personally. At incorporation, each founder assigns all pre-incorporation technology related to the business to the company, usually as part of the consideration for founder stock. The schedule describes the technology broadly (for example "all source code, designs, domain names, trademarks and know-how relating to [the product]"). Assign, do not license: a license with a reversion right will not satisfy investors.
2. CIIAA (or PIIA) for founders and employees
The confidential information and invention assignment agreement covers the period from signing onward. Core clauses:
- Confidentiality of company information during and after employment.
- Present assignment of inventions conceived or developed during the relationship that relate to the business, result from the work, or use company resources: "hereby assigns".
- Prior inventions exhibit, where the person lists anything they created before joining that they want to keep. If they use a prior invention in company work, the company receives a license.
- State law notices, such as California Labor Code Section 2870, which excludes inventions developed entirely on the employee's own time without company equipment or trade secrets, unless they relate to the business or result from company work.
- Moral rights waiver, further assurances and a power of attorney to sign filings if the person is unavailable.
- Return of materials and, where enforceable, non-solicitation. Note that California and a growing number of states restrict or ban employee non-competes; the FTC's 2024 nationwide ban was set aside by a federal court and the FTC later abandoned its appeal, so state law still governs.
3. Contractor or consultant agreement
For copyright, a contractor's work is a "work made for hire" only in limited statutory categories and with a signed writing; ordinary software usually does not qualify. The contractor agreement therefore needs a present assignment of all deliverables and related IP, a waiver of moral rights, confidentiality and further assurances. Two common mistakes: making the assignment conditional on payment (investors then need proof that every invoice was paid) and forgetting subcontractors the contractor hired.
4. Advisor agreement
Advisors share ideas and introductions and sometimes help with product. The advisor agreement should include confidentiality and an assignment of anything they create for the company. See advisor agreements.
Worked example: a typical diligence finding
Acme, Inc. raises a $3M seed round. The investor's counsel reviews IP and finds:
- Founders Ana and Ben signed CIIAAs at incorporation, but the technology assignment covering 14 months of prior work was never signed. Fix: a confirmatory technology assignment signed now, effective as of incorporation, plus a board ratification.
- An offshore freelancer built the first mobile app under a two-line email agreement. Fix: a short IP assignment agreement, often in exchange for a modest payment. If the freelancer cannot be reached, the investor may require a special indemnity or an escrow.
- Engineer #3's offer letter says she "agrees to assign" inventions. Fix: a new CIIAA with "hereby assigns" language and, for past work, a confirmatory assignment supported by new consideration (cash or a small option grant), because continued at-will employment may not be enough consideration in every state.
Cost of fixing these at seed: a few hours of legal time and some goodwill. Cost if discovered during an acquisition, after the freelancer has learned the company's value: much higher.
International contractors and employees
Many startups hire developers in Mexico, Latin America or Europe. Points to check:
- Governing law and local formalities. Some countries treat IP created by a worker differently. In Mexico, for example, the Federal Copyright Law (article 103) gives the employer the economic rights in software created by employees in the course of their duties unless agreed otherwise, but other works follow different default rules, moral rights cannot be transferred, and for independent contractors a written assignment (or a commissioned-work agreement) that specifies the economic rights transferred is essential.
- Assignment of future works. Some civil law jurisdictions limit assignments of future works or require them to be specific. Use a present assignment plus an obligation to sign confirmatory assignments for each delivery.
- Misclassification. A long-term, full-time "contractor" may be treated as an employee under local law, with consequences for benefits, termination and sometimes IP ownership. See hiring your first employees and contractors.
- Signatures. Electronic signatures are accepted widely, but keep an audit trail.
Prior employers and universities
A founder who was employed while working on the idea may be bound by a prior employer's invention assignment agreement. If the idea relates to the old employer's business or used its equipment, the employer may have a claim. Universities frequently own inventions made by faculty and students with university resources. Disclose these facts early, and if needed obtain a release or license before raising.
Red flags investors look for
- Missing agreements for any founder, early employee or contractor.
- "Agrees to assign" or "will assign" instead of "hereby assigns".
- Licenses from founders to the company instead of assignments.
- Assignments conditioned on payment, with no proof of payment.
- Open-source code incorporated under licenses that could require the company to publish its own source code.
- A prior inventions exhibit that lists something central to the product.
Frequently asked questions
What is the difference between a CIIAA and a PIIA?
None in substance. CIIAA (confidential information and invention assignment agreement) and PIIA (proprietary information and inventions agreement) are two names for the same type of agreement. Some firms use one name, some the other.
Do founders need to sign a CIIAA?
Yes. Founders sign the same form as employees, plus a separate technology assignment for anything created before incorporation.
Does a contractor own the code they write for my startup?
By default, yes, unless there is a written agreement that assigns it to the company. Make sure every contractor agreement contains a present assignment of IP.
What does California Labor Code Section 2870 do?
It prevents employers from requiring assignment of inventions an employee develops entirely on their own time, without company equipment, supplies, facilities or trade secrets, unless the invention relates to the employer's business or results from work for the employer. The CIIAA must give employees written notice of it.
Can we fix missing IP assignments later?
Usually, through confirmatory assignments, sometimes with new consideration. It is easier while the person is still friendly and the company is still small.
Should advisors sign an IP assignment?
Yes. The advisor agreement should include confidentiality and an assignment of anything the advisor creates for the company.