Corporate Invention Assignment Agreement Protocols for Hardware Ventures
Hardware ventures must execute localized invention assignment agreements with explicit power of attorney mechanisms before issuing equity or opening design repositories.
Schedule B Prior Inventions
Meaning
Disclosure documents annexed to an employee invention assignment agreement or founder stock purchase agreement list all the patentable designs, software, or other intellectual property that the worker created before commencing their relationship with the company. This schedule is a critical tool for isolating the worker’s pre-existing intellectual property from the company’s operating assets, ensuring that the company cannot claim ownership of technologies developed prior to the employment relationship. It also protects the company from situations where a worker subsequently claims that a critical piece of the company’s product was developed by them prior to joining and is therefore not owned by the company.
The list must be detailed and specific, containing clear descriptions of each pre-existing invention, its current development status, and any associated patent numbers, to establish a clear legal boundary between personal and corporate technology.
Founder Diligence
Venture capital investors and corporate acquirers conduct thorough due diligence on a startup’s historical employee agreements, with a focus on the disclosure schedules of the founders and key technical staff. The legal team reviews these schedules to verify that no core technologies of the startup have been listed as pre-existing inventions, which would indicate that the startup does not own its primary assets. If a founder has listed a critical piece of the startup’s platform as a prior invention, the startup’s valuation may be severely impacted, and the investor may require the founder to formally assign the technology to the startup before closing the investment round.
The disclosure schedule must therefore be drafted with care, ensuring that only genuine, unrelated, and pre-existing personal projects are listed, while all startup-related technology is properly assigned to the corporate entity.
Title Gaps
Gaps in the ownership of a startup’s technology can arise if an employee or founder fails to list their prior inventions on the disclosure schedule and subsequently uses those technologies in the company’s products. In such cases, the company may find itself using intellectual property that it does not own, creating a significant risk of ownership disputes and patent infringement claims. To mitigate this risk, many employee agreements include a provision stating that if any prior invention listed on the schedule is incorporated into a company product, the employee automatically grants the company a non-exclusive, perpetual, royalty-free, worldwide license to use and exploit the technology.
This licensing provision ensures that the company can continue to use the technology even if it does not own it, preserving the company’s operational continuity and protecting its asset base.
Corporate Exits
Disputes over the ownership of technology frequently arise during high-value acquisitions or initial public offerings, as former employees and founders seek to share in the financial rewards of the exit. The presence of a signed invention assignment agreement with a complete and accurate disclosure schedule provides the company with the legal documentation needed to defend against these claims. The schedule serves as an objective, contemporaneous record of what technology the employee owned prior to joining, making it very difficult for them to subsequently claim ownership of technology developed during their tenure.
This legal certainty is essential for securing a successful exit and protecting the company’s competitive advantage.