When founding a company, many founders simply focus on the traditional documents associated with a founding stack, articles of incorporation, bylaws, shareholder purchase agreements, etc. But, it is important to not overlook the role Intellectual Property will play in a business, the different protections afforded by each, and how to set up a company to take advantage of said protections. This article will go over the basics every founder needs to understand about IP before they build their company.

Your Brand Is an Asset

A trademark and a corporate name are not the same thing, but they are often intertwined with each other. When first deciding on the name for a new company there are a couple of steps that every founder should take with federal trademark law in mind.

First and foremost, it is important to run a clearance check with the appropriate secretary of state to make sure that no other business has registered the name. Next, founders should consider performing a trademark clearance search before committing to the name. A trademark is a recognizable word, phrase, symbol, design, or some combination thereof that identifies and distinguishes the source of goods or services from competitors. In sum, they protect brand identity and the name of a corporation may very well be entitled to federal trademark protection.

A trademark application is most commonly filed under two different bases: intent-to-use or in-use. An intent-to-use application is filed before the mark has been used in commerce, assuming that the registrant has a bona fide intent to use the mark. It is important to note that if the application is approved for registration under an intent-to-use basis, the mark cannot be registered until the proper statement of use is filed. An in-use basis application is filed when the mark is already being used in interstate commerce, meaning the goods are being sold or services rendered across state lines.

The trademark system follows the first to use system, so it is imperative to get an application on file with the USPTO to secure nationwide “constructive use” before other competitors have a chance to use a similar mark. Regardless of which basis a founder uses, it is best practice to retain an attorney with experience in trademark registration to guide you through the process.

Patent Protection for Core Technology 

Patents protect the technology that makes your product defensible and valuable. Patentable subject matter under 35 U.S.C. § 101 includes any new and useful process, machine, manufacture, or composition of matter. However, unlike trademarks, as discussed above, the U.S. patent system follows a first to file system. Meaning, whoever files a patent application first may have the superior right.

As a result, something known as a “priority date” plays a significant role with patents. A priority date is the earliest filing date that a patent application can claim, and it is also the cutoff date for prior art. So, a patent application filed in 2025 can potentially claim a priority date in 2021, assuming it is a part of the same patent family. Provisional patent applications help inventors and companies take advantage of an earlier priority date because a provisional patent application is a patent application that is filed with the USPTO but is never examined. Instead, it provides a twelve-month runway for a company to further develop their technology before filing an official utility, otherwise known as a nonprovisional, patent application with the USPTO.

While this mechanic may seem straightforward, there are some potential downsides to rushing a provisional application filing. It is important to have a conversation with a licensed patent attorney about these risks prior to filing as the concept of priority dates in patent law deserves its own in-depth discussion.

Trade Secrets and Copyrights - A Brief Overview 

Trade secrets are any confidential business information that provides a company a competitive edge because it is not generally known. The secret must derive economic value from its secrecy and be protected by reasonable efforts to maintain that confidentiality. Quick examples of items that may qualify for trade secret protection are formulas, customer lists, and financial projections. Protection is immediate and is potentially indefinite so long as secrecy is maintained.

Copyright subsists in any original work of authorship the moment it is fixed in a tangible medium (including books, music, art, and software), and grants creators exclusive rights to publish, reproduce, distribute, and perform the work.

Formation Documents Impacted by Intellectual Property 

Understanding the types of IP protection available is only half the equation. The other half is making sure the company’s foundational documents are structured so that the company actually owns the IP its founders and team create. The following are the key formation-stage documents every founder should have in place.

Founders’ Agreement / Co-Founder Agreement

A co-founder agreement governs the relationship between founding team members and should expressly address IP ownership. This includes confirming that any technology, code, designs, or other IP developed by the founders in connection with the company belongs to the company — not the individual founders. It should also address what happens to IP contributions if a co-founder departs, particularly when combined with vesting schedules.

Proprietary Information and Inventions Assignment Agreement (PIIA)

The PIIA is arguably one of the more important documents at formation that impact IP rights. It ensures that every founder, employee, and advisor assigns ownership of any IP they create in connection with the company to the company itself. Without a signed PIIA, a founder or early employee could later claim personal ownership over technology they developed, a serious problem that surfaces prominently during investor due diligence. Every person with access to the company’s confidential information or technology should sign a PIIA at the outset.

IP Assignment

If a founder developed core technology before the company was formally incorporated, that IP may not automatically transfer to the company upon formation. To fix this issue, it is crucial to have an IP Assignment in place that assigns the ownership rights of the IP from the founder to the company. Typically, these are executed in exchange for additional equity, but it is important to consult an attorney who understands your specific situation. However, failing to address this is one of the most common and consequential IP mistakes made at formation and creates red flags for investors because the company does not own its core IP.

Independent Contractor Agreements

Many early-stage companies rely on contractors for software development, design, or engineering work. A critical and frequently misunderstood point: the work-for-hire doctrine does not automatically apply to independent contractors the way it does to employees. Without a written IP assignment clause in the contractor agreement, the contractor may retain ownership of the work product. Every contractor engagement should include a provision that expressly assigns all of the IP created during the course of the engagement to the company.

Non-Disclosure Agreements (NDAs)

NDAs are the frontline defense for trade secret protection. As discussed above, trade secret protection requires that the owner take reasonable steps to maintain secrecy. Entering into NDAs with employees, advisors, potential partners, and anyone else exposed to confidential information is a core component of satisfying that requirement. Mutual NDAs are appropriate for exploratory business discussions; unilateral NDAs are more appropriate for one-way disclosures such as investor presentations or vendor pitches.

Employment Agreements

Once a company begins hiring, employment agreements (or offer letters paired with a PIIA) should include provisions addressing IP ownership. California employers should be aware that non-compete agreements are generally unenforceable under California law, but IP assignment and confidentiality provisions remain fully enforceable and are essential.

Conclusion

Intellectual property protection does not have to be overwhelming at formation, but any strategy that is implemented needs to be intentional. By understanding the basics of trademarks, patents, trade secrets, and copyrights, and ensuring your founding documents reflect those protections, you can build your company on a solid IP foundation from day one. Feel free to reach out if you have any questions about how these considerations may apply to your situation.