A founder writes code on a personal laptop. A co-founder designs the logo over a weekend. A third hire builds the brand voice in the first three months. Without explicit written assignments, each one personally owns what they created. The company licenses it from them by default — not owns it. This becomes a problem at the first round, at the first acquisition offer, and at the first co-founder exit.
This piece covers the seven IP clauses every Indian founder agreement should include, and why the default position under Indian law makes each one necessary.
The default under Indian law
Section 17 of the Copyright Act, 1957 says: the author of a work is the first owner. There is a carve-out for works made under a contract of service or apprenticeship, but the carve-out is read narrowly. For founders who are shareholders rather than employees, the carve-out generally does not apply. The founder personally owns the copyright.
Section 28 of the Trade Marks Act, 1999 gives rights to the registered proprietor. If a brand was first used by a founder personally and only later transferred to the company informally, the company’s right is not the founder’s right.
Section 6 of the Patents Act, 1970 says the right to apply for a patent vests in the true and first inventor or their assignee. Without a written assignment, the inventor (founder) holds the right.
By default, founders own what founders build. The company owns what founders have signed away.
Clause 1: Assignment of pre-incorporation IP
The single most important clause. The founder assigns to the company all intellectual property — code, designs, brand names, business plans, technical concepts — created before incorporation but related to the company’s business. The assignment is irrevocable, royalty-free, perpetual, and worldwide.
Without this clause, the MVP code is the founder’s personal property and the company is a long-term licensee. Diligence flags this immediately.
Clause 2: Assignment of post-incorporation IP
The founder assigns all IP created in the course of, or in connection with, the company’s business after incorporation. This covers founders who are not on the payroll (which is most early-stage founders). The clause should specify that it includes IP created on personal time if related to the company’s field of activity.
Clause 3: Moral rights waiver
Section 57 of the Copyright Act, 1957 protects the author’s moral rights — the right to be identified as the author and the right to integrity (to object to derogatory treatment). These rights are not freely transferable. The founder agreement should include the founder’s consent to the company exercising the moral rights to the extent permissible and an undertaking not to assert moral rights against routine company use.
Clause 4: Confidentiality with specific exceptions
The founder undertakes to keep all company confidential information confidential during and after their association. The clause should define confidential information by category (source code, customer lists, pricing models, technical know-how, business plans), specify duration (typically 2-5 years post-exit), and list the standard exceptions (public domain, independently developed, lawfully obtained from third party, required by law).
Clause 5: Non-solicitation (not non-compete)
Section 27 of the Indian Contract Act, 1872 voids agreements in restraint of trade. Post-employment non-compete clauses are largely unenforceable in India. Non-solicitation clauses — preventing the founder from soliciting customers, employees or vendors of the company for a defined period after exit — survive Section 27 and are enforceable.
Structure post-exit IP protection as confidentiality + non-solicitation, not non-compete. The first holds up; the second usually does not. Specific drafting matters here.
Clause 6: Inventions disclosure
The founder undertakes to disclose to the company any inventions, improvements, designs or works conceived during their association if related to the company’s field of activity. The disclosure obligation enables the company to evaluate whether to claim assignment, file a patent, or release the invention.
Clause 7: Return of materials on exit
On exit, the founder returns or destroys all company materials, confidential information, source code, customer data, and any other physical or electronic materials. The clause should include a written acknowledgement of return and a residual undertaking that the founder retains no copies.
This clause matters because it creates the evidentiary record at termination. When litigation comes — and in co-founder disputes it often does — the signed return acknowledgement is the single most useful piece of paper.
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WhatsApp our team →The cost of doing it later
The most common remediation we run during diligence is a deed of confirmation — a one-page document signed by the founder confirming the prior IP assignment in favour of the company. This works when the founder is still cooperative. It does not work when the founder is exiting on bad terms.
A bad-faith co-founder who has not signed an IP assignment can hold up an acquisition or block a fundraise by claiming personal ownership of significant IP. The fix at that point is litigation, settlement or a buy-out — all expensive, all slow.
The takeaway
Seven clauses, one founder agreement, signed at incorporation. Pre-incorporation assignment, post-incorporation assignment, moral rights waiver, confidentiality, non-solicitation, inventions disclosure, return-on-exit. Together they convert the default loose end into a registered company asset. IPForte’s contracts service drafts the seven-clause founder agreement as a standard product for early-stage Indian startups. The cost of doing it on day one is small. The cost of doing it on diligence day is not.
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