Who Owns Your Startup's Code? Assigning IP from Founders to the Company

It's one of the most uncomfortable surprises in a due diligence process: the startup has spent two years building its product, raises a round, and when the investor reviews the documentation, discovers the company doesn't own its own software. Not because anyone stole it, but because the intellectual property never actually passed to the company. And in intellectual property law, what isn't assigned in writing isn't assigned.

The problem almost always shows up in three situations: the founder who started the project before incorporating the company, the employee who codes the product, and the freelancer or agency developing it under a contract for services. All three are fixable, but you have to fix them in time. Let's go through them one by one.

The starting point that surprises people: IP is born in the person, not the company

Under Spanish law, the author is always the natural person who creates the work (art. 5 of the consolidated text of the Intellectual Property Law, Royal Legislative Decree 1/1996, "TRLPI"). A company doesn't "create" code — people do, and that's where the rights are born. The company only owns what has actually been transferred to it. There's also a part that can never be transferred: an author's moral rights are non-waivable and inalienable (art. 14 TRLPI), so what gets assigned are always the exploitation rights (reproduction, distribution, adaptation, public communication) — never authorship itself.

Scenario 1: the founder who started before incorporating

This is the most common case and the one most often overlooked. The founder builds the MVP, the brand, the design or the first lines of code while still acting as a private individual, months before signing the deed of incorporation. Once the company is finally set up, they assume "the project" belongs to it. It doesn't: the company is a new legal entity that doesn't automatically inherit anything created before it existed. That intellectual property remains the founder's until they expressly assign it to the company.

This is exactly what an intellectual property assignment agreement from the founder to the company resolves, and it's not a formality: without it, the startup's most valuable asset — its technology — sits off the company's balance sheet and in the hands of a private individual, with everything that implies if that founder leaves, falls out, or simply doesn't show up to sign in the middle of a funding round.

Scenario 2: the employee

For employees, the law helps — but it's worth not getting too comfortable. For general works created within an employment relationship, art. 51 TRLPI presumes, absent a written agreement, that the exploitation rights are assigned exclusively to the employer, to the extent necessary for its ordinary business activity. And for software, which is what matters most here, art. 97.4 TRLPI is more forceful: when a salaried employee creates a computer program in the course of their duties or following the company's instructions, the exploitation rights over the source and object code belong exclusively to the employer, unless otherwise agreed.

There are two nuances. First, that attribution covers the exploitation rights, not the moral rights, and only within the scope of the employee's actual duties (anything an employee codes on their own time, outside their role, isn't covered). Second, the legal presumption is a safety net, not a signed deed: in a demanding due diligence process, and especially if you need to demonstrate the chain of title to a foreign investor, it's far better to have an express assignment clause in every employment contract than to rely on a presumption you have to explain.

Scenario 3: the freelancer or agency (the most dangerous one)

Here there's no safety net at all. The regime under arts. 51 and 97.4 applies to employment relationships, not to self-employed contractors. A freelance developer or an outside agency working under a contract for services retains ownership of the exploitation rights unless they assign them in writing — even if you've religiously paid every invoice. Paying for work is not the same as acquiring its intellectual property. This is the scenario that causes the most trouble, because the startup believes it "bought" the development when it actually only paid to have it delivered.

How to assign it properly (and why the wording matters)

The transfer of copyright follows strict rules. It must be done in writing (art. 43 TRLPI) and is interpreted restrictively: the assignment is limited to the exploitation modes expressly set out, and to the time period and territory agreed. A vague assignment along the lines of "I assign all my rights" falls short. A well-drafted contract lists the modes (reproduction, distribution, public communication, adaptation), whether it's exclusive, the territory and the duration, and, in the case of software, covers the source code, the object code and the associated documentation — not just the executable program.

From founder to company: two routes, with different tax bills

Assignment from the founder to the company can be structured in two ways. One is an assignment agreement (for consideration or free of charge), quick and flexible. The other is a non-cash contribution to share capital, where the founder contributes the intellectual property in exchange for shares — which requires valuing the asset and carries its own corporate-law effects. The choice isn't tax-neutral: the transfer can generate a capital gain in the founder's IRPF for the difference against market value, and if the founder controls the company, this is a related-party transaction that must be valued at market price (art. 18 of Ley 27/2014 on Corporate Income Tax). Doing it for one euro "to keep things simple" is exactly what a tax inspection later questions.

Risks we flag in red

The first, and the one that sets everything off, is due diligence in a funding round or an M&A deal: IP ownership is one of the representations and warranties an investor or buyer demands, and a gap there can block the deal, lower the valuation or hold back part of the price. The second is freelancers and agencies with no assignment agreement — the most common leak. The third is assignments drafted so generically that the restrictive interpretation strips them of any real effect. And it's worth remembering that patentable employee inventions have their own regime (Ley 24/2015 on Patents), separate from copyright, so a deep-tech startup needs to look at both layers. It's one of the most common legal mistakes when launching a startup.

Frequently asked questions

How we see it at Satya Legal

In most startups, intellectual property is the asset that underpins the valuation. And yet it's usually the last thing to get sorted, almost always in a rush and under the pressure of a funding round. We prefer the opposite: closing the chain of title from day one, with the founder-to-company assignment signed and employee and freelancer contracts carrying their assignment clause, as part of our startup advisory work, so that when the investor arrives there's no surprise left to explain.