The Ironclad IP Assignment Clause Every Indian Startup Needs
Quick Summary
Under the Indian Copyright Act, 1957, the person who creates code, design, or content owns the copyright — not the company that pays them — unless there is an explicit written assignment. This is the single biggest IP risk for Indian startups, and it's why every founder, employee, and contractor agreement on Founding Legals contains a non-deletable IP Assignment clause.
The Legal Breakdown / Why It Matters
Section 17 of the Indian Copyright Act, 1957:The author of a work is the first owner of the copyright. The "employer becomes owner" rule applies only to works created under a "contract of service" (employment), and even then, only for limited works. For software, design, and product work, courts have consistently held that express written assignment is required.
Section 18 of the Indian Copyright Act, 1957: Copyright can be assigned only in writing, signed by the assignor, identifying the work, the rights assigned, the duration, and the territory.
What This Means in Practice
| Scenario | Who Owns the IP Without Assignment? |
|---|---|
| Founder writes the initial product code before incorporation | The founder personally, not the company |
| Full-time employee writes code | Ambiguous — depends on whether agreement has assignment clause |
| Contractor / freelancer / agency builds a feature | The contractor, period |
| Intern designs your logo | The intern, period |
| Co-founder leaves and forks the codebase | They legally can, if no assignment was signed |
The 5 Elements of a Court-Enforceable IP Assignment Clause
- Present Tense Assignment: Language like "hereby assigns" rather than "agrees to assign". Courts reject future-tense clauses as mere promises.
- Specific Work Description: Identify works broadly: copyrights, patents, trademarks, source code, object code, databases.
- Worldwide, Perpetual, Exclusive: Territory, duration, and exclusivity must be explicit under Section 19 of the Copyright Act.
- Moral Rights Waiver: Waiver of "moral rights" under Section 57 should be included.
- Pre-Incorporation Carve-Out: A Founder IP Assignment Agreement must transfer all pre-incorporation IP from founders to the company immediately after incorporation.
How to Do It on Founding Legals
- Step 1: Every template on Founding Legals (Founder, Employment, Consultant, Internship, Vendor Agreement) contains a non-editable IP Assignment clause.
- Step 2: The system prompts you to execute a Founder IP Assignment Agreement that transfers all pre-incorporation MVP work product to the company.
- Step 3: When onboarding, select the agreement type. The IP Assignment clause is pre-locked; you can review but cannot delete it.
- Step 4: For consultants and contractors, the platform additionally includes a "Work Made for Hire" acknowledgment and a separate Deed of Assignment.
- Step 5: Use the IP Registry tab to log every codebase, trademark, and patent — linked to the relevant agreements, ready for due diligence.
Founders typically build the MVP before incorporating the company. Without a Founder IP Assignment Agreement executed post-incorporation, that MVP legally belongs to the founders as individuals — not the company. If a co-founder later leaves, they can theoretically demand royalties or fork the product. Every Indian VC checks for this document during diligence. Execute it on day 1.
Always have the IP Assignment signed before the first invoice is paid to a contractor or first salary is paid to an employee. The "consideration" (payment) is what makes the assignment enforceable under Section 25 of the Indian Contract Act. Sign after payment, and you weaken your enforceability claim.