What are Proprietary Information and Inventions Agreements (PIIAs)?
Takeaway: The PIIA is the single most important contract your team members will sign; it is the legal instrument that ensures your company, not the individual who created it, owns all the intellectual property developed for the business.
Of all the documents in your legal toolkit, perhaps none is more foundational to the value of your company than the Proprietary Information and Inventions Agreement (PIIA). This agreement, also sometimes called a Confidential Information and Invention Assignment Agreement (CIIAA), is the contract that legally transfers ownership of intellectual property from the individual creator to the corporate entity.
Every single person who provides services to your company—including all founders, full-time employees, part-time employees, and independent contractors—must sign a PIIA as a condition of their engagement, ideally on their first day of work. A failure to do so creates a major cloud over the ownership of your IP and is one of the biggest red flags that investors look for during due diligence.
The Two Core Functions of a PIIA
A well-drafted PIIA serves two critical, distinct purposes:
The Confidentiality Obligation (The "NDA" Part): The first part of the agreement is a detailed confidentiality or non-disclosure clause. It legally obligates the individual to protect the company's confidential information and trade secrets and to not use or disclose that information for any purpose other than their work for the company. This duty of confidentiality continues even after their employment or engagement with the company ends.
The Invention Assignment (The "IP Ownership" Part): This is the heart of the agreement and its most important function. The invention assignment clause states that any and all intellectual property—inventions, ideas, designs, source code, discoveries—that the individual creates within the scope of their work for the company is automatically and immediately assigned to and owned by the company.
It includes a "present assignment": The language is structured as a "present assignment of future inventions," which means the IP is owned by the company from the moment of its creation, without any further action needed.
It includes a duty to cooperate: The individual also agrees to cooperate with the company in the future to sign any additional documents needed to secure patents or other formal IP registrations.
Why a PIIA is Non-Negotiable
It Solves the Default Ownership Problem: Without a PIIA, the default legal rule is that an individual owns the copyright to the code they write, even if you paid them to write it. A PIIA contractually reverses this default.
It Creates a Clean Chain of Title: It provides a clear, unambiguous paper trail proving that the company has a clean title to all of its intellectual property. This is absolutely essential for passing investor due diligence and for any future M&A transaction.
It Protects Your Most Valuable Asset: For a technology startup, your IP is your value. The PIIA is the legal container that ensures all that value is securely held by the corporate entity, not scattered among the individuals who happened to create it.
The PIIA is a foundational pillar of good corporate governance. It is the simple but powerful contract that ensures your company actually owns the very innovations it was created to build.
Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.