Meaning
The documented sequence of transfers of intellectual property traces ownership from the individual creators to the corporate entity. Maintaining an early ip chain of title is necessary to demonstrate that the company owns its proprietary technology. The sequence begins with the very first prototype developed in a founder’s garage and ends with the current commercial product.
It provides the legal foundation for the startup’s valuation and defense against infringement claims.
Chain Continuity
Chain continuity requires that every founder, contractor, and employee who worked on the product has executed a valid transfer. If a single developer is missed, the chain is broken, leaving a portion of the technology outside corporate ownership. For this reason, companies must collect signed agreements from all early contributors.
Due Diligence
Acquirers and venture capital firms scrutinize each assignment to confirm the company possesses full rights. Legal counsel will inspect the dates on the agreements to ensure that the assignments preceded the creation of the technology. This diligence confirms that the startup is the sole owner of the proprietary assets.
Remedial Action
Remedial filings are necessary if an individual failed to sign a transfer agreement before leaving the company. The startup must track down the former contributor to secure a retroactive assignment of the technology. These actions must be completed before the company proceeds with an exit or a funding round.
