Introduction

At Zecca Ross Law, we’re often asked: “If a contractor developed a patentable invention for my company, should I have them assign it to my startup or license it back?” This is a critical decision that affects ownership, control, legal risks, and your startup’s financial outlook.

1. Ownership and Control

Assignment means a full transfer of ownership. When a contractor assigns a patent to your startup, your company becomes the legal owner. You gain the right to use, sell, license, or enforce the patent independently—no contractor involvement required.

Licensing grants permission to use the patent, but the contractor retains ownership. Even with an exclusive license, there may be restrictions on usage scope and duration, and future modifications often require additional negotiation.

Takeaway: If your startup’s growth depends heavily on the patent, assignment ensures long-term control and legal clarity.

2. Financial Structure

Assignment usually involves a one-time payment or equity exchange. After that, the contractor has no further claims or financial ties. This can mean a higher upfront cost but keeps your financials clean.

Licensing spreads costs over time via royalties or milestone payments. This can help early-stage startups conserve cash but may reduce profitability and add administrative overhead over time.

Takeaway: Assignment results in cleaner accounting; licensing delays payments but carries ongoing financial commitments.

3. Legal Rights and Risk

Assignment places enforcement power squarely in your startup’s hands. As owner, you can initiate lawsuits, defend challenges, and control legal strategy fully.

Licensing often leaves enforcement and maintenance responsibilities with the contractor unless explicitly negotiated, which may limit your ability to protect your product or exclude competitors.

Takeaway: Assignment grants full legal control; licensing can create shared or unclear enforcement responsibilities.

4. Flexibility and Strategic Use

Assignment offers maximum flexibility. You can pivot, cross-license, sell, or relicense your patent as your business evolves—without needing approval from the contractor.

Licensing restricts your use to agreed terms. Any expansion or change usually requires renegotiation.

Takeaway: Assignment supports long-term strategic planning; licensing suits short-term or narrowly defined use cases.

Final Thoughts from Zecca Ross Law

There’s no one-size-fits-all answer. If you’re bootstrapping, licensing might buy you time. But if your startup’s valuation, product roadmap, or investor pitch relies heavily on the IP, assignment is the cleanest and safest path.

Pro tip: If a contractor is developing something even potentially patentable for your startup, make sure your contractor agreement includes IP assignment language upfront. It’s far easier to clarify expectations early than to renegotiate after value is on the table.

At Zecca Ross Law, we specialize in guiding startups through critical IP decisions—whether structuring assignment agreements, negotiating licenses, or supporting investment diligence.

Need help assigning or licensing a patent developed by your contractor?
Schedule a consultation with our startup legal team today.