What Is a PIIA and Does Every Employee at My Startup Need to Sign One?

Your first engineers are joining next week. Offer letters are signed, onboarding documents are ready, and everyone is focused on product velocity.

Then an investor asks a question during diligence:

“Do all employees and contractors have signed PIIAs?”

A surprising number of startups discover a problem at that moment.

Founders often assume code, product designs, inventions, and internal processes automatically belong to the company because employees created them while working there. Legally, that ownership is not always as straightforward as founders expect. Without proper agreements in place, intellectual property ownership can become unclear, creating problems that often surface during fundraising, acquisitions, or diligence reviews.

That is where a PIIA becomes important.

What a PIIA Actually Is

PIIA stands for Proprietary Information and Inventions Agreement.

Some companies also call it:

• A CIIA
• An IP assignment agreement
• A proprietary rights agreement

The purpose is generally the same.

A PIIA establishes ownership of inventions, work products, and confidential information created during employment. It helps transfer ownership from the individual creating the work to the company itself.

Without that transfer, ownership questions can remain open.

Those questions become expensive later.

A PIIA Helps Assign Employee-Created IP

One of the most important functions of a PIIA is assigning intellectual property rights.

The agreement generally states that:

• Code written during employment belongs to the company
• Designs created for company work belong to the company
• Inventions related to a company’s business belong to the company
• Work product created within the scope of employment belongs to the company

Importantly, these rules can sometimes apply even when employees work remotely or use personal devices.

Founders often assume ownership happens automatically.

The agreement creates the legal framework supporting that ownership.

Prior Invention Disclosure Matters Too

PIIAs do more than assign future work. They also typically ask employees to disclose inventions or projects they already owned before joining the company.

This protects both sides.

Employees preserve ownership of pre-existing projects while companies create a documented record identifying what does and does not belong to the business.

Without this process, disputes may later arise over whether the technology originated before or during employment.

Confidentiality Is Usually Included

Most PIIAs also include confidentiality obligations.

These sections commonly address:

• Trade secrets
• Internal company information
• Product plans
• Customer information
• Proprietary processes

Some startups use separate NDAs alongside PIIAs. Others combine confidentiality and IP assignment protections into one agreement.

Either approach can work if documents are structured correctly.

State Law Can Affect Enforceability

This is one area founders frequently overlook. Certain states limit how broadly companies can claim ownership rights.

States including:

• California
• Washington
• Minnesota

have rules restricting overly broad assignments.

For example, California Labor Code Section 2870 limits ownership claims involving inventions developed entirely on personal time and unrelated to company business.

Founders sometimes download generic templates without realizing local rules may require different languages.

That creates risk.

Contractors Need Protection Too

Many startups remember employee agreements but forget contractors. That can create a major problem.

Contractors are generally not automatically covered by employment-based IP rules.

Every contractor working on:

• Product development
• Software
• Design work
• Proprietary processes

should generally have written IP assignment language in their agreements.

Without it, ownership may remain with the contractor rather than the startup.

Common Founder Mistakes

• Discovering Missing PIIAs During Diligence: Investors frequently review IP ownership chains early in diligence. Missing agreements often surface immediately and create cleanup projects. Tracking down former employees or early hires months later can become difficult and sometimes impossible.
• Using Generic Templates Without State Review: Many startups use a single agreement for all employees, regardless of location. State-specific rules may require different language and limitations. Templates that ignore those differences can create enforceability problems.
• Forgetting About Contractors: Founders often focus heavily on employee onboarding while overlooking freelancers and contractors. Contractors who write code or contribute to core products still create ownership issues. Missing assignment language can create significant risk.
• Waiting Until Later To Organize Documentation: Some startups postpone paperwork because early hiring moves quickly. Unfortunately, fixing ownership gaps after growth or fundraising begins is much harder. Early organization usually prevents larger problems later.

10 Minute Founder Self Check

Before your next hire begins work, ask:

• Have all employees signed PIIAs?
• Have contractors signed IP assignment provisions?
• Have prior inventions been disclosed?
• Does the agreement comply with state law requirements?
• Are agreements stored and organized properly?

If several answers remain unclear, your intellectual property chain may have gaps.

Small Documentation Gaps Can Become Big Diligence Problems

Founders usually think of intellectual property as code, products, and technology.

Investors think about ownership.

Schedule a free discovery call with our team to learn more about startup growth, fundraising preparation, and common structural issues founders encounter when building and scaling companies.

Book here: https://calendly.com/primumlaw/30min

Sources Used

• Proprietary Information and Inventions Agreements — Cooley LLP Startup Guide, https://www.cooleygo.com
• California Labor Code Section 2870 — California Legislative Information, https://leginfo.legislature.ca.gov
• Y Combinator SAFE and Startup Documents — Y Combinator, https://www.ycombinator.com/documents