How to review an IP ownership clause

An IP ownership clause decides who owns what a contractor, consultant or employee creates. Get it wrong and the client can pay for work it does not own. This guide covers the US rules behind these clauses, a checklist of points to check and how to review one in Word with LexDraft.

Last checked: 18 October 2026. The law changes; check the current position before relying on this page.

The rules behind the clause

• Work made for hire is narrow. Under 17 U.S.C. section 101, a work is made for hire if an employee creates it within the scope of employment. A commissioned work qualifies only if it falls into one of nine listed categories (such as a contribution to a collective work, part of an audiovisual work, a translation or a compilation) and the parties expressly agree in a written instrument signed by them. Much commissioned software and content falls outside those categories.
• So add an assignment. A transfer of copyright must be in writing and signed by the owner (17 U.S.C. section 204(a)). Good clauses use work-for-hire language and a back-up assignment.
• Patents. Patents and applications are assignable by an instrument in writing (35 U.S.C. section 261). An assignment not recorded at the USPTO within three months of its date, or before a later purchase, can be void against a later buyer for value without notice.
• Present vs future assignment. Courts have treated "hereby assigns" as an assignment of future inventions that takes effect when they are created, and "agrees to assign" as only a promise to assign later. Prefer present wording.
• Employee invention statutes. California Labor Code section 2870 makes an employee invention assignment unenforceable for inventions developed entirely on the employee's own time without the employer's equipment, supplies, facilities or trade secret information, unless they relate to the employer's business or result from work done for the employer. Section 2872 requires written notice of this limit. Several other states, including Delaware, Illinois, Minnesota and North Carolina, have similar statutes.
• AI-generated material. The US Copyright Office's position is that copyright protects only material with sufficient human authorship. If deliverables may include AI output, deal with that expressly.

Clause checklist

• Definition of deliverables. What is assigned: deliverables, work product, inventions, or everything created in connection with the services?
• Background IP. Each party keeps what it owned before. The client needs a license to any background IP built into the deliverables, with a clear scope, term and right to sublicense.
• Tools and know-how. Contractors usually keep general tools, templates and know-how. Check that the carve-out does not swallow the deliverables.
• Third-party and open source components. Disclosure duties, approved licenses and a warranty that the deliverables do not include code under licenses the client has not approved.
• Further assurances. A duty to sign documents needed to record or perfect the assignment, and a power of attorney if the creator will not sign.
• Moral rights. A waiver, to the extent the law allows, especially if the work may be used outside the US.
• Payment condition. Some contractors make the assignment conditional on payment. Decide whether that is acceptable and what license applies until payment.
• Employees of the contractor. The contractor should promise that its own staff and subcontractors have assigned their rights to it.

A IP ownership clause review workflow in Word

LexDraft is a Word add-in from Microsoft AppSource. It opens as a side panel in Word 365 (Windows and Mac), Word 2021 and Word on the web, so the agreement never leaves the tool you already draft in.

1. Open the agreement in Word and open LexDraft in the side panel.
2. Pick the governing law. Select the state named in the governing law clause so LexDraft looks for state-specific red flags.
3. Run the review. Run the review on the whole agreement. For NDAs, SaaS MSAs, DPAs and services agreements, run the matching playbook on the whole agreement; for other contracts LexDraft runs a general AI review against the governing law you chose. LexDraft has no separate clause-only playbook. The Services playbook reviews IP ownership as part of a services agreement.
4. Triage by severity. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
5. Run the quick checks. The defined-term and cross-reference checks are rule-based and run without AI.
6. Accept or reject each redline. Accepted changes land as native Word tracked changes.
7. Verify and sign off. You check every output before it goes to the client or the other side.

What LexDraft does not do

LexDraft does not give legal advice or decide who owns a particular work. Nothing changes in your document until you accept a redline.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. Spotted something out of date? Email support@lexdraft.ai and we will fix it.