Co-founder Exits Without An Ip Assignment Deed: What Happens To Your Ip?

By Author: AirCounsel
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What Happens to Your IP if a Co-Founder Exits an Australian Proprietary Limited Company Without an IP Assignment Deed? Imagine building a groundbreaking tech startup or creative agency in Australia, only for your co-founder to walk away with the rights to your code, designs, or branding. This is a common and high-stakes risk for many proprietary limited (Pty Ltd) companies. Under Australian law, the default rule of ownership is simple: the human creator of the work owns the intellectual property (IP), not the company they founded. If a co-founder leaves without executing a formal ip assignment deed , your business is left in a legal minefield. In fact, research indicates that over 60% of Australian startups face IP ownership disputes within 5 years of founding , often stemming directly from co-founder exits lacking written assignments. To secure your company's future value, secure funding, or eventually sell the business, you must formally transfer these intangible assets. Here is everything you need to know about navigating co-founder exits and securing your company's IP. Table of Contents The Default Legal Position in Australia ...
... Key Risks of a Co-Founder Exiting Without a Deed IP Licensing vs. IP Assignment Essential Elements of an Australian IP Assignment Deed Step-by-Step Guide: Executing an IP Assignment Deed Common Mistakes and Real-World Lessons Secure Your IP with AirCounsel Frequently Asked Questions Recommended Quick Summary Takeaway Explanation Creator Ownership Absent a written deed, the co-founder who created the IP retains legal ownership under Australian copyright law. The Risk Exiting co-founders can block future investment, product launches, or acquisitions unless a clean transfer is executed. The Solution A formally executed, written ip assignment deed transferring all intellectual property rights to the Pty Ltd entity. Registration Needed Registered assets like trademarks, patents, and designs must also be updated with IP Australia. Timing Always execute assignments during company setup, or immediately during a structured co-founder exit. The Default Legal Position in Australia Under the Copyright Act 1968 (Cth), the default owner of copyright is the author or creator of the work. Even if they are a director or shareholder of a Pty Ltd company, unless they are an employee acting in the course of employment, they retain physical ownership. Co-founders are rarely classified as standard employees during the early stages of a startup, meaning they own the code, graphics, copy, and product blueprints they created. To legally transfer ownership from an individual to a company, Section 196 of the Copyright Act specifies that the assignment must be in writing and signed by or on behalf of the assignor (the person transferring the rights). Without a signed ip assignment deed, the company is merely using the IP with the co-founder’s temporary permission, which can be revoked at any time. Key Risks of a Co-Founder Exiting Without a Deed In