Intellectual Property Assignment: Why Your Startup Might Not Own What You Think It Does

Here’s a question that should keep founders up at night: does your company actually own its intellectual property?

Not “do you think it does” or “surely it does because we paid for it.” Does the company — the legal entity — have clear, documented ownership of the code, the designs, the brand assets, and the inventions that make up the core of your business?

For a surprising number of Australian startups, the honest answer is no. And most founders don’t discover the problem until they’re sitting in a due diligence data room with an investor’s lawyer asking for IP assignment deeds that don’t exist.

The Default Position Is Not What You’d Expect

Australian law doesn’t have a single, unified rule for IP ownership. Different types of intellectual property are governed by different statutes, each with their own default ownership rules. And those defaults often don’t favour the company.

Copyright

Under section 35(6) of the Copyright Act 1968 (Cth), if an employee creates a literary, dramatic, musical or artistic work “in the course of employment,” the employer owns the copyright. So far, so good — if we’re talking about employees doing their jobs.

But the key phrase is “in the course of employment.” A developer who writes code for your platform during business hours, as part of their defined role, is creating work in the course of employment. A co-founder who builds the prototype on weekends before the company is even incorporated? Almost certainly not. A contractor you’ve engaged to design your user interface? Definitely not.

Under the Copyright Act, contractors own the copyright in work they create unless there’s a written agreement assigning it to the commissioning party. This is one of the most common IP ownership gaps in startups, and it catches founders off guard every time. You paid for the work. You briefed it. You own it, right? Wrong. Without a written assignment, the contractor does.

Patents

The Patents Act 1990 (Cth) takes a different approach. Under section 15, a patent may be granted to the inventor, or to a person who “would be entitled to have the patent assigned” to them — which typically includes an employer where the invention was made in the course of employment under a contract that contemplates such inventions.

But this is murkier than copyright. There’s no bright-line statutory rule equivalent to section 35(6). Instead, the analysis relies heavily on the terms of the employment contract and, where the contract is silent, on equitable principles about the implied duties of employees. If your employment agreements don’t address IP ownership, you’re relying on implied terms and common law — which is a polite way of saying you’re rolling the dice.

Designs and Trade Marks

Registered designs follow similar principles to patents: the creator is generally the owner unless an employment or contractual relationship dictates otherwise. Trade marks are owned by whoever registers them or establishes common law rights through use — but if a founder registered the trade mark in their personal name rather than the company’s name, the company doesn’t own it. We see this more often than you’d think.

The Four Gaps That Trip Startups Up

1. Pre-Incorporation IP

This is the most common and most dangerous gap. Almost every startup begins with founders building something before the company exists. Code written in a garage, business plans drafted at the kitchen table, designs sketched on napkins — all of this IP belongs to the individuals who created it, not to the company that doesn’t yet exist.

When the company is eventually incorporated, that pre-existing IP doesn’t automatically transfer to it. The founders need to execute a formal IP assignment deed that transfers ownership of all relevant pre-existing IP to the company. Without this deed, the company is operating on IP it doesn’t legally own.

This isn’t a theoretical problem. If a co-founder later departs on bad terms, they can — and some do — argue that the core IP was never assigned to the company and therefore remains theirs. Even if such a claim ultimately fails (perhaps on equitable grounds), defending it is expensive, time-consuming, and distracting. A properly executed assignment deed eliminates the argument entirely.

2. Contractor-Created IP

As noted above, contractors own the IP they create by default. This applies to freelance developers, design agencies, marketing consultants, and anyone else who isn’t an employee.

The fix is straightforward: every contractor engagement should be governed by a written agreement that includes an IP assignment clause, transferring ownership of all IP created in connection with the engagement to the company. The clause should cover both the specific deliverables and any background IP that becomes embedded in those deliverables (or, alternatively, provide a perpetual licence for background IP).

Many startups use contractor agreements they’ve downloaded from the internet, or worse, no written agreement at all. If you’ve engaged a freelance developer to build a critical feature and there’s no written IP assignment, the company may not own that feature. Scale this problem across multiple contractors over several years, and you can end up with a codebase that the company has no clear legal right to use.

3. Employee Side Projects and the “Course of Employment” Question

Even with employees, the position isn’t as clean as founders assume. Section 35(6) of the Copyright Act only applies to works created “in the course of employment.” If an employee develops something outside their normal duties — say, an internal tool they built in their own time that the company then adopted — the ownership position is arguable.

Your employment agreements should contain a broad IP assignment clause that covers all IP created by the employee in connection with the company’s business, regardless of when or where it was created. This goes beyond the statutory default and provides contractual certainty. The clause should also include an obligation for the employee to do all things necessary to give effect to the assignment, including executing further documents if required.

4. Moral Rights

Even when copyright is properly assigned, there’s another layer that many startups miss entirely: moral rights. Under Part IX of the Copyright Act 1968, the creator of a work has the right to be attributed as the author, the right not to have authorship falsely attributed, and the right of integrity (not to have the work subjected to derogatory treatment).

Moral rights are personal to the creator and cannot be assigned or waived under Australian law. However, a creator can provide written consent to acts that would otherwise infringe their moral rights. This is why well-drafted IP assignment deeds and employment agreements include a moral rights consent clause — it doesn’t waive the rights (which is legally impossible), but it records the creator’s consent to the company using, modifying, and commercialising the work without attribution and without restriction.

Without this consent, a departed developer could theoretically object to the company modifying “their” code on moral rights grounds. It’s an edge case, but it’s the kind of edge case that surfaces at the worst possible time.

Why Investors Care — A Lot

If you’re raising venture capital, IP ownership will be scrutinised during due diligence. Every serious VC fund and their lawyers will ask for:

• Founder IP assignment deeds — evidence that all pre-incorporation IP has been assigned to the company
• Employee IP clauses — confirmation that employment agreements include comprehensive IP assignment and moral rights consent provisions
• Contractor IP assignments — evidence that all contractor-created IP has been assigned
• IP register — a schedule of the company’s IP assets and the basis on which each is owned

If any of these are missing, you’ll either need to remedy the gap before closing (which means tracking down former contractors and asking them to sign assignment deeds — sometimes years after the engagement ended) or accept that the investor will price the risk into the deal. Some investors will simply walk away.

As Gilbert + Tobin noted in their overview of Australian venture capital practice, a key element of IP due diligence is “confirming that all employees and contractors have validly assigned any relevant IP they have developed to the company.” It’s not optional. It’s table stakes.

How to Fix It

The good news is that the fix is well-established and not particularly complicated. It just requires discipline:

1. Execute founder IP assignment deeds at incorporation. Every founder should sign a deed assigning all pre-existing IP relevant to the business to the company. This should happen on day one. If it didn’t happen on your day one, do it now.

2. Include IP assignment clauses in every employment agreement. The clause should cover all IP created in connection with the company’s business, include a present assignment of future IP, and include moral rights consent.

3. Use proper contractor agreements. Every contractor engagement — no matter how small — should be governed by a written agreement with a clear IP assignment clause. No exceptions for “quick jobs” or “just this once.”

4. Maintain an IP register. Keep a running schedule of the company’s key IP assets, how they were created, and the legal basis for the company’s ownership. This is the document your investors’ lawyers will ask for, and having it ready signals that you take IP seriously.

5. Audit periodically. As your team grows and you engage new contractors, IP gaps can creep in. Review your IP position at least annually, and always before a fundraise.

The Bottom Line

Intellectual property is often the most valuable asset a startup has — and frequently the most poorly documented. The Australian legal framework doesn’t automatically vest IP in your company just because you paid for it, directed its creation, or built your entire business around it. Ownership requires proper documentation: assignment deeds, employment clauses, and contractor agreements that make the position clear and legally enforceable.

If you’re not sure whether your startup’s IP house is in order, it’s worth finding out before someone else asks the question for you. Get in touch — we help founders across Australia close the gaps and build an IP foundation that holds up under scrutiny.