Key points
- For a start-up, intangible assets (code, database, trade mark, algorithm) are only protected if the rights are properly established and documented.
- A common mistake is that the founders personally own assets used by the company; a formal assignment of rights before the fundraising round is necessary.
- For software created by an employee in the course of their duties, the law vests the economic rights in the employer; for other works, an express and precise assignment is essential.
- External service providers keep their rights unless there is an explicit contractual assignment; a contract without such a clause leaves the company with no title to the product delivered.
- A trade mark is protected by registration with the INPI for France or the EUIPO for the European Union, preceded by a prior-rights search.
- A database may qualify for the sui generis right if building it involved a substantial investment; trade secret law protects information that cannot be protected by a formal right.
For a technology, creative or services start-up, intangible assets are often the most valuable part of the company. Source code, database, trade mark, algorithm, editorial content, proprietary methodology: these assets are only protected if the rights are properly established and documented. Insufficient protection creates vulnerabilities that investors, buyers or competitors can exploit.
IP assignment from founders to the company
A frequent problem in start-ups at the due diligence stage is this: the source code, technology or content was developed by the founders before or during the period when the company was set up, but these rights were never formally transferred to the company. The founders personally own assets that the company uses without owning them.
This situation creates a direct risk: if a founder leaves on bad terms, the company may find itself without sufficient title to its own technology. It also blocks certain financing or sale transactions, where investors require the company to own its key assets unambiguously.
The solution is simple but must be formalised: an assignment of intellectual property rights from the founders to the company, drafted and signed before any fundraising round. This document must be dated and must mention each right assigned separately, with its scope, purpose, place and duration (Article L. 131-3 of the French Intellectual Property Code (Code de la propriété intellectuelle) (in French)). It also states the consideration: the assignment may be granted for consideration or free of charge (Article L. 122-7 of the same code (in French)).
Employee and contractor agreements
Employees create works in the course of their duties. For software, French law vests in the employer the economic rights to software created by employees in the course of their duties or following the employer's instructions (Article L. 113-9 of the Intellectual Property Code (in French)). For other types of creation (content, design, non-software databases), the employment contract does not in itself entail any assignment: the rights remain with the employee unless expressly assigned, and the assignment must cover specific works, since a blanket assignment of future works is void (Article L. 131-1 of the same code (in French)). Inventions are subject to a separate regime, specific to patent law.
For external service providers (freelance developers, agencies, consultants), the rights always remain with the provider unless there is an explicit contractual assignment. A development contract that does not provide for an assignment of rights leaves the company with no title to what was produced on its behalf.
Trade marks
A trade mark protects the trade name, the logo and any distinctive sign of the company and its products. Protection arises from registration with the French National Institute of Industrial Property (INPI) for France, or with the European Union Intellectual Property Office (EUIPO) for protection across the European Union. Without registration, protection is limited and difficult to enforce.
A prior-rights search before filing the trade mark is essential to avoid creating a trade mark that you will not be able to defend or, worse, that you will not be able to use because it is too close to an earlier registered trade mark.
Databases
If the company builds and maintains a database (customer list, product catalogue, technical repository), it may benefit from protection under the sui generis right of the database producer, provided that obtaining, verifying or presenting the contents shows a substantial financial, material or human investment (Article L. 341-1 of the Intellectual Property Code (in French)). This right makes it possible to prohibit the extraction or re-use of a qualitatively or quantitatively substantial part of the contents (Article L. 342-1 of the same code (in French)).
Trade secrets
For information that cannot be protected by a formal right (non-patentable algorithm, business method, customer list), trade secret law offers additional protection, provided that reasonable protective measures have been taken (Article L. 151-1 of the French Commercial Code (Code de commerce) (in French)). This protection fits naturally with the confidentiality agreements signed with partners and service providers.
To find out more about our overall support for start-ups, see our dedicated start-up lawyer page.
To be assisted: trade mark and intellectual property lawyer in Paris (in French).
