A company is formed on a Tuesday. The code was written the previous spring, the mark was designed by a friend, the prototype was built in a founder's apartment on evenings after another job. On the day of formation the company owns none of it, and nothing about the formation changes that.
Ownership of intellectual property does not follow money, effort, or intention. It follows rules that were set long before any particular company existed, and those rules give the invention to the person who conceived it and the copyright to the person who wrote it, regardless of who paid, who had the idea for the business, or who was going to sell the product. A company acquires those rights only by a transfer, and a transfer is a document. Where the document is missing, the company is operating on assets it does not hold, and it will usually not discover this until the question is put by someone in a position to insist on the answer.
This article is about closing that gap at the moment it is cheapest to close, which is at formation, and about the categories of contributor whose work most often falls outside the company's hands: the founders themselves, the contractors who built early versions, and the friend or agency who made the logo. It is written for the founder forming a company around work that already exists, and it sits alongside the firm's article on choosing an entity in New York, which takes up the formation decision, and the firm's article on IP strategy for founders and companies, which places these assets inside a wider portfolio.
It is general information, not legal advice. Ownership of patents, copyrights, trademarks, and trade secrets is governed by federal and state law, and what a particular company owns depends on who did the work, when, under what agreements, and in what employment context. Whether an assignment is effective, what it covers, and whether a prior employer has a claim are fact-specific questions that turn on the actual documents. The rules and provisions described here are stated in general terms as the landscape stands in 2026 and are subject to change. Reading or relying on this article does not create an attorney-client relationship, and ownership of any asset of consequence should be confirmed with counsel reviewing the actual paper.
The defaults: the inventor owns the invention, the author owns the copyright
In United States patent law, rights in an invention begin with the natural persons who conceived it. Inventorship is not a matter of who funded the project, who managed it, or who supplied the equipment; it attaches to conception of the claimed subject matter, and it vests initially in the individual inventors. A company holds patent rights only because those individuals have transferred them, which is why an application filed by a company is ordinarily accompanied by an assignment. Without one, the company is prosecuting an application to which its own founders retain rights, an arrangement that is workable while everyone is friendly and untenable afterward.
Copyright follows a parallel rule with one significant exception. Copyright vests initially in the author, the person who created the work, from the moment it is fixed in a tangible form. The exception is the work made for hire, under which the employer is treated as the author: it applies to works prepared by an employee within the scope of employment, and, outside employment, only to certain enumerated categories of commissioned work and only where the parties have signed a written agreement saying the work is made for hire. That second path is narrower than most founders assume, and a great deal of commissioned creative work does not fall within its categories at all.
Trademarks and trade secrets add their own wrinkles. Trademark rights arise from use in commerce and belong to the party whose goodwill the mark represents, which means a mark used by a founder personally before a company existed may need to be assigned to the company along with the goodwill it symbolizes, since a transfer of a mark without its goodwill is ineffective. Trade secrets are protected only so long as they are actually kept secret, which makes the confidentiality obligations of everyone who touched them a condition of the asset continuing to exist. Each category is transferred by its own mechanism, and a single sentence purporting to convey all intellectual property may or may not do the work in each.
Ownership does not follow money, effort, or intention. It follows rules that give the invention to the inventor and the copyright to the author, and a company acquires them only by transfer.
Why paying for work is not the same as owning it
The most common ownership gap in an early company involves a contractor. A developer is engaged to build the first version, a designer to make the mark, a firm abroad to produce the prototype drawings. Invoices are issued and paid, the work is delivered, and everyone proceeds on the shared understanding that the company owns what it bought. As a matter of copyright law, that understanding is frequently wrong: an independent contractor is not an employee, the work made for hire categories often do not reach the deliverable, and absent a signed written assignment the contractor retains the copyright in what they created and the company holds, at most, an implied license of uncertain scope.
An implied license is not a satisfactory place for a company to stand. Its scope is uncertain, its exclusivity is doubtful, it may not permit the modifications a growing product requires, and it is unlikely to be transferable in a sale. It also leaves the contractor free to reuse the same material for someone else, including a competitor. None of this is usually anyone's intention, which is precisely why it survives unexamined: the parties are not in conflict and the defect is invisible until the company tries to sell, license exclusively, or enjoin a copyist and discovers what it actually holds.
Employees are on firmer ground and are not automatically safe. Work prepared by an employee within the scope of employment is generally a work made for hire, so copyright in it vests in the employer, but patent rights do not transfer by the same operation; an employee-inventor's rights still require an assignment, and while courts have recognized limited implied rights in an employer under certain circumstances, those doctrines are narrow and are a poor substitute for an executed agreement. The practical rule is straightforward: everyone who creates anything for the company, employee or contractor, founder or friend, signs an agreement that assigns the work and obliges them to cooperate in perfecting the transfer.
The founder assignment at formation
The instrument that closes the gap at formation is an assignment from each founder to the company, executed as part of the formation package and exchanged for the equity the founder is receiving. It should identify the pre-existing work being transferred with enough specificity to be meaningful, the code, the designs, the prototypes, the drafts, the mark, the domain names, the accounts, rather than relying only on a general recital, and it should convey the whole of the relevant rights: patent rights in inventions, copyright in works, rights in trade secrets and know-how, and the mark together with its goodwill. Where a founder is keeping something out, the exclusion should be listed rather than left to memory.
The same document ordinarily carries three further terms that matter later. It assigns future work as well as past, so that inventions and works created during the founder's service belong to the company as they arise rather than requiring a fresh transfer each time. It contains a cooperation covenant, obliging the founder to sign the further documents that perfecting rights requires, including the declarations and assignments a patent filing needs, which is what prevents a departed founder's unavailability from stalling a filing. And it contains confidentiality terms, without which the company's trade secrets are not being kept as secrets by the people most likely to hold them.
Recording matters for some assets. An assignment of patent rights may be recorded with the United States Patent and Trademark Office, and recording protects the assignee against a later purchaser who takes without notice, subject to timing rules; trademark assignments are recorded with the same office. Recording is inexpensive and is often skipped, and its absence tends to be discovered in diligence rather than in a dispute. Where a company will file patent applications, the chain from inventor to company should be complete and recorded before the filings mature, which is a point the firm's article on patent prosecution takes up from the filing side.
A founder assignment should carry three things beyond the transfer itself: future work, a cooperation covenant, and confidentiality. The covenant is what keeps a departed founder from stalling a filing.
What a prior employer may claim
A founder who built something while employed elsewhere brings a question with them. Employment agreements commonly contain invention-assignment clauses that purport to give the employer rights in inventions made during the employment, and depending on their drafting they may reach work done on personal time, work related to the employer's business, or work that used any employer resource. Whether such a clause reaches a particular project is a question of contract interpretation applied to the actual document and the actual facts, and the answer is frequently not obvious from a first reading.
New York has enacted a statutory limit on how far such clauses may reach. In general terms, the law provides that a provision in an employment agreement requiring an employee to assign rights in an invention is unenforceable as against public policy where the invention was developed entirely on the employee's own time, without using the employer's equipment, supplies, facilities, or trade secret information, except where the invention relates to the employer's business or actual or demonstrably anticipated research or development, or results from work performed by the employee for the employer. The exceptions are doing significant work in that sentence, and a founder whose venture is adjacent to a former employer's field should not assume the statute resolves the question.
The practical response is documentary and early. A founder should read the agreements they signed with a prior employer, including the ones signed at hire and forgotten, before the company relies on their contribution. Where the work predates the venture, records that establish when it was created, on whose equipment, and on whose time are worth preserving contemporaneously rather than assembling under pressure years later. Where a real question exists, it is better raised at formation, when a release, a carve-out, or a scoping decision is available, than in diligence, where it becomes a discovered defect and a price adjustment. Whether a particular clause reaches particular work is a question for counsel on the actual documents.
What diligence asks for, and why it is asked early
When a company raises money or is bought, counsel on the other side conducts an ownership inquiry, and it is a specific one. They ask for the founder assignments and read whether they cover the pre-formation work; for every contractor and employee agreement, and whether each contains a present assignment and a cooperation covenant; for the chain of title on every filed application and registration, and whether the assignments were recorded; for the prior-employer agreements of anyone technical; and for evidence that confidential material has actually been treated as confidential. What they are testing is whether the company owns the thing being valued.
Gaps found at this stage are expensive in a way they never were before. Remedies exist, a former contractor can be asked to sign a confirmatory assignment, a departed founder can be located, a release can be negotiated, but the bargaining position has moved: the person being asked now knows the company needs the signature and knows why. What would have cost nothing at formation becomes a negotiation, a payment, or an indemnity and escrow that follows the founders through the transaction. In some cases the asset simply cannot be cleaned in the time available, and the transaction is repriced or restructured around the defect.
The counsel that follows from all of this is unglamorous and reliable. Paper the ownership when the company is formed, while everyone is present, friendly, and receiving equity for signing; use the same form for everyone who contributes; keep a single place where the executed agreements live, so that the company can produce them without a search; and record the assignments that can be recorded. None of it is difficult, none of it is expensive at the outset, and it is the difference between a company that owns what it sells and one that has been assuming so. What a particular company needs depends on its facts and belongs with counsel, but the timing does not vary: the cheapest day to fix this is the first one.
Gaps found in diligence are expensive in a way they never were before, because the person being asked to sign now knows the company needs the signature.
Common questions
- We paid a contractor to build our product. Do we own the code?
- Not automatically. An independent contractor is generally not an employee, and commissioned work often falls outside the narrow categories in which a written work-made-for-hire agreement can vest authorship in the party paying for it. Absent a signed written assignment, the contractor ordinarily retains the copyright and the company holds at most an implied license of uncertain scope, which may not permit the modifications a product requires and may not transfer in a sale. A confirmatory assignment can often be obtained, and it is far easier to obtain before the company needs it.
- I invented this before the company existed. Does the company own it now?
- Not without a transfer. Patent rights vest initially in the individual inventors and copyright vests initially in the author, and forming a company does not move them. The instrument that moves them is an assignment from the founder to the company, ordinarily executed as part of the formation package in exchange for equity, identifying the pre-existing work with specificity and conveying patent, copyright, trade secret, and trademark rights along with the mark's goodwill. Where patent or trademark filings are involved, the assignment should also be recorded with the United States Patent and Trademark Office.
- I built my prototype while working for someone else. Can my former employer claim it?
- It depends on the agreements signed with that employer and on the facts of when and how the work was done. Invention-assignment clauses vary widely in reach, and New York law limits their enforceability as to inventions developed entirely on an employee's own time without the employer's equipment, supplies, facilities, or trade secrets, subject to exceptions for inventions relating to the employer's business or resulting from work performed for the employer. Those exceptions are broad, so the statute rarely answers the question by itself. The actual agreements should be reviewed with counsel before the company builds on the contribution.