Introduction
Startups move fast, but in the middle of all the progress, there’s a question many founders forget to ask:
“Do we actually own what we’re building?”
You’d be surprised how often the answer is NO.
I’ve seen companies reach advanced fundraising stages only to discover that their developers, freelancers, or even clients still hold rights to parts of their product.
By then, fixing the problem is expensive, stressful, and sometimes impossible.
Here’s how to make sure your startup’s IP is truly yours, and stays that way.
The Most Common Startup IP Traps
1. Service Providers Keeping Their “Background IP”
Freelancers and agencies often arrive with existing tools, code libraries, modules, templates, or design assets.
These are known as background IP, and many service providers fiercely protect them.
The problem?
If background IP is included in your product without clear licensing terms, you may:
- Not fully own your final product
- Be restricted from modifying, scaling, or commercializing it
- Need to pay additional licensing fees later
- Face claims of IP infringement
How to prevent it:
Your agreements should clearly state:
- What is defined as background IP
- What is being licensed to you
- Whether the license is perpetual, royalty-free and irrevocable
- That all new developments (“foreground IP”) belong to you
This is not optional - this is essential.
2. Unclear Licensing Terms With Clients or Partners
Startups often give clients early access to technology.
If your contract isn’t precise, you may accidentally grant them:
- Broader rights than intended
- Unlimited usage
- Sublicensing rights
- Ownership claims
You want clients to use your product, not own it.
How to prevent it:
Define the license scope:
- What they can use
- How they can use it
- For how long
- Whether they can modify or share it
Clarity now saves headaches later.
3. Developers or Ex-Employees Claiming Ownership
This scenario appears more often than founders expect:
A developer leaves and says, “That part of the code? I wrote it before joining so I own it.”
Or worse: “I never transferred my rights to the company.”
Investors will detect this immediately during due diligence.
How to prevent it:
You need bulletproof agreements that include:
- IP assignment
- Work-for-hire language
- Confidentiality obligations
- Clear statements that all developments belong to the company
No agreement? No ownership. Simple as that.
4. Investors Will Check IP — Thoroughly
During due diligence, investors expect to see:
- Signed IP assignment agreements
- Contractor agreements
- Employment agreements with IP clauses
- Proof that the company owns 100% of the tech
- Clean chain of title
If there’s any doubt, they slow down, renegotiate, or walk away.
A startup may recover from a bad logo. It rarely recovers from an unclear IP ownership trail.
How to Keep Your Startup’s IP Safe and Clean
- Sign IP assignment agreements with everyone: employees, freelancers, contractors, and even co-founders
- Separate background IP from foreground IP and define what belongs to the provider, what belongs to you, and what is licensed
- Use clear licensing terms with clients — rights to use, not ownership
- Maintain an IP inventory and track what technology is used and who created it
- Protect trade secrets and confidential information with NDAs and confidentiality clauses
Conclusion: Your Startup’s Value Is Built on Its IP
Your code, brand, technology, processes, and product are your most valuable assets, but they only protect you if you legally own them.
A bit of clarity in your agreements now can save you from costly problems later, and make your company far more attractive to investors, clients, and partners.
If you’re facing an IP issue or want to make sure your agreements fully protect your product, feel free to reach out.
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