Employment contracts, NDAs and invention assignment

1. The core idea#

In a deeptech startup, the company's value is mostly ideas in people's heads that are slowly being written down: lab notebooks, code, CAD files, process recipes. Employment paperwork is how those ideas become company property. Without it, they legally stay with the person who had them.

Three documents do almost all the work:

1. The employment contract or appointment letter. It sets pay, role, notice and leave, and it is where the other two usually sit.
2. A confidentiality agreement (NDA). It defines what is secret and says the employee may not use or share it, during employment or after.
3. An invention assignment clause. In the US it is often a separate PIIA or CIIAA (Proprietary Information and Inventions Assignment). It transfers to the company everything the person creates in the course of the job, now and in future, and lists anything they owned beforehand that is excluded.

Why it matters before seed:

• Investors check it. Due diligence asks for a signed assignment from every founder, employee and contractor who touched the core technology. One missing signature from an early engineer can delay a closing or force a hurried, expensive "confirmatory assignment".
• Patents depend on it. A patent application needs a clean chain of title from each named inventor to the company (2.01, 2.05).
• Disputes are cheap to prevent and costly to fix. Getting it signed on day one costs nothing. Getting it signed after someone has resigned in anger costs leverage, money, or both.

The common mistake runs the other way too: founders copy a big-company template with a two-year worldwide non-compete. In most of the places a deeptech startup hires, that clause is void or nearly so, and it puts off good candidates. Protect secrets and inventions strongly. Restrict future jobs lightly or not at all.

Who this is for: founders hiring their first employees, interns or postdocs; anyone moving people from a university lab or an existing employer into the company; and anyone preparing for diligence who is not sure every IP assignment is signed.

Pairs with: 4.05 (assigning founder IP, which covers the founders themselves), 4.10 (contractors, a different legal route to ownership), 4.11 (advisors), 1.15 (employer IP clauses when you leave a job) and 2.18 (trade secrets vs patents).

2. What the evidence and the law say#

"Agree to assign" and "hereby assign" are different, and the courts treat them differently. In Stanford v. Roche (US Supreme Court, 2011), a Stanford researcher had signed a university form promising he "agree[d] to assign" his inventions. Later, while visiting a company called Cetus, he signed a form saying he "do[es] hereby assign". The court held that the company's present-tense assignment won and Stanford lost its claim to the patents. The lesson every US startup lawyer now applies: use "hereby assigns", which transfers future inventions automatically when they come into being, not a promise to assign later.

US states limit what an employer can claim. California Labor Code §2870 says an assignment cannot reach an invention the employee made entirely on their own time, without company equipment, facilities or trade secrets, unless it relates to the company's business or results from work done for it. Delaware, Illinois, Kansas, Minnesota, Nevada, New Jersey, New York, North Carolina, Utah and Washington have similar laws, and several require you to tell the employee about the limit in writing. Standard PIIAs include this notice as an exhibit.

Non-competes are a state-law matter again in the US. The FTC's 2024 rule banning most non-competes was set aside by a Texas federal court in Ryan LLC v. FTC (August 2024). On 5 September 2025 the FTC dropped its appeals and accepted that the rule is gone. It says it will instead pursue individual cases against non-competes that harm competition. California (Business and Professions Code §16600), Minnesota (since 2023), North Dakota and Oklahoma ban most employee non-competes outright. Many other states set pay floors or notice rules.

India: post-employment non-competes are void. Section 27 of the Indian Contract Act, 1872 voids any agreement that restrains someone from a lawful trade. Indian courts consistently enforce restrictions during employment but not after it (for example Percept D'Mark v. Zaheer Khan , Supreme Court, 2006). Confidentiality and IP assignment, by contrast, are enforceable. Non-solicitation of clients and staff sits in between, and courts decide it case by case.

UK: non-competes are enforceable only if reasonable, and are due to be limited by law. Courts uphold them only to protect a legitimate interest, for no longer than needed (in practice usually 3 to 12 months). In May 2023 the then government promised a threemonth cap but never brought it in. A November 2025 working paper consulted, until 18 February 2026, on options including caps that differ by company size (for example six

months for companies with fewer than 250 staff) and bans below a salary threshold. In October 2026 the government confirmed it will legislate to limit non-competes. The detail has not been published yet, so check before relying on anything over three months.

NDAs on their own protect less than founders think. Trade-secret law protects information only if you took reasonable steps to keep it secret: access controls, marked documents, a confidentiality policy. An NDA is one of those steps, not a substitute for the rest. In the US, the Defend Trade Secrets Act (2016) also requires employers to include a whistleblower-immunity notice in any agreement covering trade secrets. Without it you lose the right to claim exemplary damages and attorney's fees from that employee.

Employment law itself changed a lot in 2025–26:

• India. The four Labour Codes took effect on 21 November 2025, replacing 29 older laws. Every worker, including fixed-term and contract staff, must now get a written appointment letter. Fixed-term employees qualify for pro-rata gratuity after one year instead of five. Wages must be structured so that basic pay is at least 50% of total pay for statutory calculations. Several central and state rules were still being notified at the time of writing.
• UK. Under the Employment Rights Act 2025, the qualifying period for ordinary unfair dismissal falls from two years to six months for dismissals taking effect on or after 1 January 2027, and the cap on compensation is removed. Paternity and unpaid parental leave became day-one rights on 6 April 2026. Since 1 October 2026 most tribunal claims can be brought within six months instead of three.

3. The method: a standard hiring pack#

Step 1: Build one pack and use it for everyone#

Have a lawyer prepare it once (about $1,500–4,000 in the US, ₹50,000–1.5 lakh in India, £1,500–3,500 in the UK), then reuse it. Every new person signs, before their first day of work:

The prior-inventions schedule matters most for deeptech hires. Ask each person to list anything they invented before joining that relates to your field, and to say "none" if there is nothing. An empty schedule left blank is worse than one that says "none", because later the person can claim they meant to list something.

Step 2: Draft the key clauses carefully#

• Scope of assignment. Cover all inventions, code, data, designs and know-how made during employment that relate to the company's actual or planned business, or use its time, equipment or information. Do not try to claim everything the person ever does; it is unenforceable in California and similar states and looks grasping everywhere.
• Future tense. "Hereby assigns" and, as a fallback, "to the extent not assignable, grants an exclusive, royalty-free licence".
• Power of attorney. Lets the company sign patent papers if the employee is unreachable or refuses.
• Confidentiality term. Trade secrets for as long as they stay secret; other confidential information for 3–5 years after leaving.
• Return of materials. Notebooks, samples, code, devices, and deletion of copies on leaving.
• Restrictive covenants by country. India: no post-employment non-compete; a 12month non-solicitation of staff and clients is common but not guaranteed. US: none in California, short and narrow elsewhere, checked state by state. UK: if any, 3–6 months, and only for senior staff with real access to secrets.
• Exceptions you must allow. Whistleblowing and reporting to regulators, and (UK) disclosures that cannot be gagged under whistleblowing law.

Step 3: Handle the special cases#

• People coming from a university or a research institute. Their old employer's IP policy may already claim what they invented there, and sometimes for a period after they leave (2.01, 2.13). Get a written release or a licence before they bring anything across. Never let them bring lab notebooks, code or samples.
• People coming from a competitor or a big company. Ask them in writing to confirm they are bringing no confidential material and are not bound by a restriction that stops them doing this job (1.15). Keep that confirmation. Clean-room the first weeks if the overlap is close.
• Interns and students. They are not automatically covered. Get the same assignment signed, and check the university's rules on student IP.
• Anyone who started without paperwork. Get a confirmatory assignment now, covering work from their actual start date, with a small payment (in the UK and US, "consideration" of, say, $100 or £100 avoids arguments that the promise was free).

Step 4: Keep the evidence#

Store signed PDFs in one folder per person, with the date signed. Keep a single sheet listing every person who has touched core IP, their documents and dates. That sheet is what you hand to investors in diligence.

Worked example#

Anika founds a battery-materials startup in Bengaluru with an Indian Pvt Ltd and a US Delaware parent. In month 4 she hires:

• Ravi, a materials scientist joining from an IIT lab, as an employee of the Indian subsidiary;
• Mei, a process engineer in California, as an employee of the US parent;
• a summer intern.

What she does:

1. Ravi's appointment letter follows the Labour Codes format. His confidentiality and IP agreement assigns to the Indian company, which then assigns to the parent under the intercompany IP agreement set up during the flip (4.03). There is no non-compete; there is a 12-month non-solicitation. His prior-inventions schedule lists one IIT patent application, which stays excluded. Anika gets a letter from the IIT confirming it claims nothing he creates after his leaving date.
2. Mei signs a California-form PIIA with the §2870 notice, the DTSA notice and no noncompete.
3. The intern signs the same IP agreement as Ravi, plus a letter from the college confirming it has no claim.
4. All three go into the IP sheet.

At seed diligence 10 months later, the investor's lawyer finds a cathode coating idea that appears in both Ravi's IIT patent application and the company's own provisional filing. Because the schedule recorded the IIT application on day one, the parties can separate the two quickly: the company's claims are narrowed to the new process steps, and the round closes on time. Without the schedule, the investor would likely have asked for an IIT licence before closing.

4. Country notes: India, US, UK#

Practical points for each:

• India. Structure pay so basic pay is at least half of total pay, because that is now the base for PF, gratuity and other contributions. Get employees to sign the IP agreement as a separate document as well as within the appointment letter, so you can show investors one clean page. Expect courts to enforce confidentiality and garden leave (pay during the notice period while keeping the person away from work) far more readily than any restriction after the person has left.
• US. Use a form from a known source: Cooley GO, the Orrick Startup Forms, or your lawyer's standard PIIA. Check each state you hire in: the employee's home state usually governs, wherever the company is incorporated. Since 2017 California has also voided clauses that make California employees litigate elsewhere or under another state's law (Labor Code §925), unless the employee had their own lawyer.
• UK. Probation periods of 3–6 months will matter more from 2027, because six months is the new threshold for unfair dismissal claims. Use the probation period properly: set objectives in writing and review them before month five. Grant share options under a separate option agreement, not inside the employment contract.

Cross-border hires. If the person lives in a country where you have no entity, you either set one up, use an employer of record (EOR) such as Deel, Remote or Multiplier, or engage them as a contractor (4.10). With an EOR, the EOR is the legal employer, so make sure the EOR contract assigns IP through to your company and that the person also signs your own confidentiality and IP agreement directly. Otherwise the chain of title can stop at the EOR, which is exactly the kind of gap diligence is looking for.

5. Scripts, mistakes, related playbooks, sources#

Scripts

When sending the pack to a new hire:

"Attached are your offer letter and our confidentiality and IP agreement. Everyone here signs the same one, founders included. It says work you do for us belongs to the company, and anything you invented before joining stays yours: please list it on the schedule, or write 'none'. There's no non-compete. If anything is unclear, ask, or have your own lawyer look at it."

When someone started without paperwork:

"We're getting ready for our funding round and the investors' lawyers will check that every IP agreement is signed. Yours slipped through when you joined, which is our fault. Here's a confirmatory version that covers your work from your start date, with a small payment so it's properly binding. Nothing about your role or equity changes."

When a candidate asks you to remove the IP clause:

"We can't, because investors won't fund a company that doesn't own its core technology. What we can do is make sure your side projects are protected: list them on the schedule, and we'll add a line confirming the company has no claim to anything unrelated to our business that you do on your own time and equipment."

Common mistakes#

1. "Will assign" instead of "hereby assigns". It leaves a gap that a later, present-tense assignment to someone else can fill.
2. Signing after the start date with no new consideration. In the US and UK, a promise given for nothing can be challenged. Sign before day one, or pay something for a later signature.
3. Copying a big-company non-compete. Unenforceable in India and California, risky elsewhere, and it scares off candidates.
4. Leaving out the state notice or the DTSA notice in US agreements.
5. Forgetting interns, postdocs, visiting researchers and EOR staff.
6. No prior-inventions schedule, or one left blank.
7. Assuming university hires come free of university claims. Check the institution's IP policy every time.
8. Treating an NDA as the only protection. Without access controls and marked documents, a trade-secret claim may fail anyway.
9. Not tracking it. If you cannot produce a signed assignment for every inventor within a day, diligence will slow down.
10. Ignoring 2025–26 changes. India's Labour Codes and the UK's six-month unfair dismissal threshold change old templates; update them.

Related playbooks#

• 1.15 Employer IP clauses and turning a side project into a company
• 2.01 Who owns your invention?
• 2.13 Students and postdocs as founders
• 2.18 Trade secrets vs patents for process technology
• 4.03 Flipping to a Delaware holding company, and reverse-flipping back to India
• 4.05 Assigning founder IP to the company
• 4.10 Contractor and consultant agreements
• 4.11 Advisor agreements (FAST template)
• 5.04 Allocating equity by level

Sources#

• Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, 563 U.S. 776 (2011).
• California Labor Code §2870–2872 and §925; California Business and Professions Code §16600.
• Defend Trade Secrets Act 2016, 18 U.S.C. §1833(b) (whistleblower immunity notice).
• FTC, statement acceding to vacatur of the Non-Compete Clause Rule, 5 September 2025; Ryan LLC v. FTC (N.D. Tex., 20 August 2024). Summaries: Duane Morris, Husch Blackwell.
• Indian Contract Act 1872, s.27; Percept D'Mark (India) v. Zaheer Khan (2006) 4 SCC 227.
• India Labour Codes in force 21 November 2025: KPMG India, Treelife, Lakshmikumaran & Sridharan.
• UK Employment Rights Act 2025 timetable: CMS, Lewis Silkin, Walker Morris.
• UK non-compete reform: GOV.UK working paper (Nov 2025); Lewis Silkin, 9 October 2026.
• UK Patents Act 1977 s.39; India Copyright Act 1957 s.17.
• Templates: Cooley GO forms; Orrick Startup Forms Library.