Assigning Pre Incorporation Software Rights In Early Stage Ventures
Software created before incorporation belongs exclusively to individual authors under statutory law until formal written instruments transfer title to the entity.
joint work doctrine
Meaning
Legal rules governing shared authorship assign equal ownership of a creative work to all contributors who worked together on it without a written agreement. Under the joint work doctrine, both contributors own the entire product and can exploit it independently without the other person’s permission. This creates a severe issue for startups because an early contributor can license the code to a direct competitor.
It prevents the corporate entity from claiming exclusive ownership over the software that runs its business.
Authorship Threshold
The application of this legal standard requires that each contributor made a copyrightable contribution with the intent to merge them into a single work. When the joint work doctrine applies, no single contributor can exclude the other from using the technology. This situation divides the ownership of the startup’s core assets.
Financial Exposure
Financially, the primary risk is that one author can commercialize the shared assets and only owes the other author a share of the profits. This framework means the startup loses exclusive control over its own intellectual property, making it uninvestable. Venture capital firms will avoid companies with joint ownership issues.
Precautionary Step
Companies must employ clear intellectual property assignment agreements with all contributors before any work begins to avoid this joint ownership trap. This contract overrides the defaults by transferring all individual contributions to the corporation. Taking this step protects the startup’s proprietary advantages.