Does Your Operating Agreement Require Members Actively Involved in the Business to Assign to the Company All Intellectual Property They Create in the Course of Business?

Welcome, dear readers, to the 18th piece in our comprehensive series about operating agreements. As we approach the final lap, your unwavering dedication to gaining knowledge and understanding inspires us, and for this, we extend our profound gratitude. Today, we delve into an often-overlooked yet critically important aspect of operating agreements - intellectual property. As the heart of innovation and competitive advantage, intellectual property is a cornerstone of any company, especially those in the tech and creative sectors. This article will explore the essential provisions regarding intellectual property in an operating agreement, why they are crucial, and how they can protect the business and its members. By the end of this piece, you’ll grasp the importance of addressing intellectual property rights in your operating agreement. Let’s get started.

Importance of Intellectual Property Assignment

Intellectual property (IP) serves as the backbone of any innovative company, fostering progress, and driving competitive edge. In such a context, assigning intellectual property rights from individual members to the company is critical. This process legally transfers the ownership of creations, safeguarding the company’s interests and helping secure its future. When members contribute their IP to the collective portfolio, the company can utilize these assets to their full potential, creating new products, services, or enhancing existing offerings.

Neglecting this provision could create a labyrinth of problems. If IP assignment isn’t clearly outlined, disputes can arise over who truly owns an invention or idea. For instance, a member may leave the company and attempt to claim ownership over an IP they created during their tenure. This could lead to costly legal battles, damage to the company’s reputation, and lost opportunities.

Protecting Inventions by Existing Members

The operating agreement isn’t just a document that lays the ground rules; it’s also a protective shield, particularly when it comes to inventions made by existing members. By clearly stating that any inventions created by a member during their involvement with the company remain the company’s property, an operating agreement safeguards the company’s rights over these valuable assets.

If not properly addressed, the absence of such clarity can lead to complications. An exiting member might argue that they retain rights to an invention they developed while with the company. This could potentially deprive the company of a valuable asset, disrupt operations, and once again, lead to expensive and time-consuming litigation.

Considering International Intellectual Property Laws

For companies with a global footprint, it’s not just domestic laws that matter. International intellectual property laws and agreements can significantly impact a company’s rights to its own inventions and creations. For instance, patent laws can differ significantly across countries, potentially affecting how a company protects its inventions. By considering these international laws when crafting the operating agreement, companies can ensure their IP remains secure across borders, maintaining their competitive edge globally.


We hope this article has been informative and useful for your business. If you have any questions or comments, please contact us at We plan to answer general questions in an upcoming FAQ series. If you need legal advice specific to your situation, please ask to schedule a consultation with an attorney to discuss your company’s goals.

Next time, we’ll dive into a scenario that’s likely to cause headaches for many businesses: what happens when the majority, but not all, of the members want to sell their ownership interests? Stay tuned as we unravel this complex topic and offer guidance on how to address it in your operating agreement.

This article is for informational purposes only and should not be relied upon as tax or legal advice. Please consult professionals for advice tailored to your specific situation. The author and publisher assume no responsibility for any errors or omissions or for any actions taken based on the information presented.