Business Law · Founder & Startup Counsel
You signed the agreement. The question is what you actually agreed to. Assignment clauses in these agreements are governed by 13 Pa.C.S. § 2210 of the Pennsylvania Commercial Code. Independent contractor agreements between Pennsylvania founders and former employers routinely contain IP assignment clauses, work-for-hire provisions, and non-disclosure terms that extend well beyond the engagement itself. Whether your startup’s methodology, toolset, or platform belongs to you depends on the scope of what you signed — not on what you intended when you signed it. Under Pennsylvania contract law, courts enforce the written terms.
Most founders assume the product-versus-process distinction protects them. It sometimes does. Whether it applies to your specific agreement requires reading what the agreement actually says about ownership, scope, and the definition of work product. Investors ask about clean IP at the first meeting. The time to find out the answer is before that meeting, not during it.
The agreement you signed controls the outcome. Not your intent. Not the distinction you drew between product and process. The written scope language is what Pennsylvania courts enforce.
If you are a Pennsylvania founder under an IC agreement with a former employer and you are approaching investors or accelerator programs, get the agreement reviewed before IP questions surface in due diligence. Call 412-351-4422 or schedule a consultation.
In Pennsylvania, an IC agreement transfers ownership of covered work product through an assignment clause governed by 13 Pa.C.S. § 2210. The scope of that clause — not the contractor’s intent — determines what the company owns. A broadly drafted clause can reach startup assets created independently if the subject matter overlaps with the engagement.
Most independent contractor agreements contain an IP assignment clause that transfers ownership of any work product created during the engagement to the contracting party. The scope of that clause determines everything. A narrowly drafted clause assigns only deliverables created specifically for the engagement. A broadly drafted clause may assign anything created using the contracting party’s confidential information, systems, or resources — including work developed independently.
Work-for-hire provisions operate differently. Under federal copyright law, a work created by an independent contractor is not automatically a work for hire unless the parties have a written agreement designating it as such and the work falls into one of nine enumerated categories. Many IC agreements include both an assignment clause and a work-for-hire designation, creating overlapping ownership claims that can extend to materials the contractor never intended to share.
The practical consequence for founders is that an IC agreement signed years before a startup was formed can still reach into the startup’s core assets if the scope language is broad enough and the engagement involved related subject matter. The question is not whether you were thinking about your startup when you signed the agreement. The question is whether what you built falls within the written definition of covered work product.
The product-versus-process distinction is a real analytical framework, but it is not a legal safe harbor. It describes a factual difference that courts and investors evaluate. Whether it applies to your situation depends on how your IC agreement defines covered work, what confidential information you accessed during the engagement, and whether your startup’s methodology overlaps with the subject matter of your consulting work.
A founder advising a healthcare technology company on a specific product and simultaneously building a platform that improves hospital operational processes is making a distinction that may or may not hold under the agreement’s scope language. If the IC agreement defines covered work broadly — for example, any invention, development, or improvement relating to the company’s business or the services performed — the process platform may fall within that definition even if it operates at a different level than the product.
The distinction protects you when it is supported by the agreement’s language, the scope of the engagement, and the independence of your development process. It does not protect you simply because you believe the two categories are different. Documenting the independence of your development — separate tools, separate time, separate subject matter — strengthens the argument, but the written agreement remains the primary evidence.
Many IC agreements between Pennsylvania founders and multi-state employers contain choice-of-law clauses designating New Jersey, Delaware, or New York law as governing. Pennsylvania courts generally enforce choice-of-law provisions in commercial contracts if the chosen state has a reasonable relationship to the parties or the transaction. An IC agreement with a New Jersey-headquartered company governed by New Jersey law will typically be enforced under New Jersey contract principles in a Pennsylvania proceeding.
New Jersey’s approach to IP assignment clauses in employment and contractor agreements differs from Pennsylvania’s in specific ways. New Jersey has a statutory provision limiting the enforceability of assignment clauses for inventions developed entirely on the contractor’s own time without using the employer’s resources — similar to California’s statute but with different carveouts. Whether that provision applies to your agreement depends on how the engagement was structured and what resources were used.
The practical implication is that a Pennsylvania founder operating under a New Jersey-governed IC agreement cannot assume Pennsylvania law limits the agreement’s reach. The choice-of-law clause controls, and the analysis requires applying the law of the chosen state to the specific facts of the engagement.
Assignment clauses and work-for-hire provisions are not the same thing, and many IC agreements contain both. An assignment clause is a present-tense transfer of ownership: the contractor assigns to the company all right, title, and interest in covered work product. A work-for-hire designation is a legal characterization that treats the work as if it were created by the company in the first place, which has different implications for copyright duration and termination rights.
The scope of an assignment clause is controlled by its definition of covered work. Definitions vary significantly. Some agreements cover only deliverables produced under a specific statement of work. Others cover anything related to the company’s business, developed during the term of the agreement, or created using confidential information. Founders who worked on broad engagements with loosely defined scope face the greatest exposure, because the definition of covered work may reach materials developed entirely outside the engagement.
Carveout provisions can limit this exposure. Some IC agreements include a schedule of prior inventions that the contractor retains ownership of. If you signed an agreement with a prior inventions carveout and listed your startup concept or methodology before signing, that listing is evidence of ownership. If you did not, the absence of a listed carveout can be used against you. Reviewing what the agreement says — and what you did or did not list — is the starting point for any IP analysis.
Investor due diligence for early-stage companies almost always includes an IP ownership review. The standard questions are: who owns the core IP, is there any agreement that could create a competing claim, and has the company taken steps to confirm clean title. A founder who cannot answer these questions clearly, or who discloses a pending IC agreement with a former employer and no legal analysis of its scope, creates a diligence risk that can delay or kill a round.
Accelerator programs including Pittsburgh’s AlphaLab conduct preliminary IP reviews as part of their application and selection process. A clean IP answer at that stage means you have reviewed the relevant agreements, understand what they cover, and can represent that your startup’s core assets are not subject to a competing claim. That representation needs to be supportable, not aspirational.
The standard for clean IP in a diligence context is not that no risk exists. It is that the risk has been identified, analyzed, and either resolved or disclosed. A founder who has had their IC agreement reviewed by counsel and can explain the scope analysis is in a materially better position than a founder who has not. The review itself is the deliverable that investors and accelerators are looking for.
The right time to get an IC agreement reviewed is before you approach investors, before you apply to an accelerator program, and before your startup’s IP becomes a point of negotiation. The analysis is straightforward when the engagement is recent and the documents are organized. It becomes more complicated when the engagement has ended, memories have faded, and the company has already built on top of potentially encumbered assets.
For founders with an active IC engagement, the review serves a different purpose: it tells you what you can and cannot build during the term of the agreement, what disclosures you may be required to make, and what precautions strengthen your ownership position going forward. Documenting independent development, maintaining separate systems, and avoiding use of the contracting party’s confidential information for startup work are all practices that are easier to establish prospectively than to reconstruct after the fact.
A one-hour consultation with the relevant documents in hand is typically sufficient to identify the key risk factors, assess the scope of covered work, and determine whether the product-versus-process distinction holds under the specific agreement language. That analysis is what investors and accelerators are looking for when they ask about clean IP.
Contract review and IP ownership analysis in the context of an IC agreement is business law, not IP law. A business attorney reviews the agreement language, assesses the scope of covered work, evaluates the choice-of-law provisions, and advises on exposure and risk. That analysis does not require patent, trademark, or copyright registration expertise. It requires contract interpretation and an understanding of how Pennsylvania and sister-state courts enforce IP assignment provisions.
Where IP counsel becomes necessary is when the analysis identifies a gap that requires registration, prosecution, or enforcement action. If the review concludes that your startup’s methodology should be protected by trade secret measures, a non-disclosure framework, or a copyright registration, those steps are best handled by counsel who specializes in IP registration and enforcement. The business attorney’s role is to identify whether those steps are needed and to make the referral before the gap becomes a problem.
For most founders at the pre-seed and seed stage, the immediate need is the contract review and IP ownership analysis, not the registration. The review is what produces the clean IP answer that investors and accelerators require. Registration and enforcement become relevant as the startup scales and the IP assets become more valuable.
Pennsylvania contract enforcement is governed by general common law principles applied by the Pennsylvania Court of Common Pleas. Choice-of-law provisions in IC agreements are evaluated under the Restatement (Second) of Conflict of Laws. New Jersey’s contractor IP assignment statute is codified at N.J.S.A. 34:1B-265. Federal work-for-hire doctrine is governed by 17 U.S.C. § 101.
Frequently Asked Questions About IC Agreements and IP Protection in Pennsylvania
It depends on the scope language in the agreement. If the IP assignment clause covers work product created during the engagement that relates to the company’s business or uses confidential information, your startup’s assets may fall within that definition if the subject matter overlaps. The answer requires reading the specific language, not applying a general rule.
Sometimes. The distinction describes a factual difference that courts and investors evaluate, but it is not a legal safe harbor. Whether it applies to your agreement depends on how the agreement defines covered work, what confidential information you accessed, and whether your platform’s subject matter overlaps with the engagement. The written agreement is the primary evidence, not the distinction itself.
Pennsylvania courts generally enforce choice-of-law provisions in commercial contracts, so a New Jersey-governed agreement will typically be analyzed under New Jersey law in a Pennsylvania proceeding. New Jersey has its own statute limiting IP assignment clauses for work developed independently, but the application depends on how the engagement was structured. You cannot assume Pennsylvania law limits the agreement’s reach.
A work-for-hire designation is a legal characterization that treats work created by a contractor as if it were created by the contracting party. Under federal copyright law, contractor work is only a work for hire if it falls into one of nine enumerated categories and there is a written agreement. Whether your methodology falls within a work-for-hire designation depends on the agreement’s language and the nature of the work. A methodology expressed as a written system or tool may be copyrightable, which makes the work-for-hire question relevant.
Before you approach any investor, apply to any accelerator program, or make any representation about clean IP. Investors ask about IP ownership at the first meeting. Accelerator programs conduct IP reviews as part of the application process. Having the agreement reviewed before those conversations produces the analysis you need to answer the question accurately. A one-hour consultation with the relevant documents is typically sufficient to identify the key risk factors.
A claim requires the former employer to identify the specific IP at issue and establish that it falls within the agreement’s scope. If the claim has merit, options include negotiating a license, challenging the scope of the assignment clause, or restructuring the startup’s IP assets. If the claim does not have merit, responding with a clear legal analysis is the starting point. Either way, the response begins with the agreement language and the facts of the engagement.
This page addresses IC agreement review for Pennsylvania founders. For non-compete agreement issues, see our pages on non-compete agreements in Pennsylvania and how to challenge a non-compete in Pennsylvania. For business contract review and drafting, see our page on contract drafting and review. For the full business law practice overview, see our Business Law practice area.
Business Law · Pittsburgh
Founders approaching investors need clean IP answers before the first meeting. Stephen H. Lebovitz reviews independent contractor agreements for Pennsylvania founders and advises on exposure before it becomes a diligence problem. Call 412-351-4422 or schedule a consultation.
An independent contractor agreement with a former employer can extend IP ownership claims into your startup if the scope language is broad enough. Whether your methodology, platform, or toolset is protected depends on what the agreement says — not what either party intended. Pennsylvania courts enforce the written terms.
