> ## Content Index > Fetch the complete content index at: https://entrepreneurplus.co.uk/llms.txt > Use this file to discover other available public pages before exploring further. # Non-Compete and IP Assignment Clauses: What UK Startup Contracts Need - URL: https://entrepreneurplus.co.uk/non-compete-and-ip-assignment-clauses-what-uk-startup-contracts-need/ - Published: 2026-09-28T15:07:06.000Z - Updated: 2026-09-28T16:10:45.000Z - Description: UK startups often obsess over non-compete clauses while overlooking IP ownership. Here’s what actually needs protecting in your contracts. - Author: Editorial Desk - Tags: Startup Toolkit UK startups spend most of their contract-drafting energy on **non-compete clauses** and remarkably little on IP assignment, usually the wrong way round. A non-compete clause isn't automatically enforceable simply because it appears in an employment contract, while gaps in an IP assignment agreement UK contracts should include can leave a founder personally owning code, designs or a product a VC is about to fund. This piece covers when a **non-compete clause enforceable** in the UK actually holds up, why a non-solicitation clause can offer more targeted protection, where the government's reform process stands, and what your IP assignment agreement UK terms need to cover. --- ## What Is a Non-Compete Clause Under UK Law? A non-compete clause UK employment contracts include is a term that stops someone working for a competitor, or starting a rival business, for a set period after they leave. **UK non-compete clauses are governed** by the common law doctrine of restraint of trade rather than a general statute a contrast with IP law, where the rules sit in an Act of Parliament rather than a judge's view of reasonableness. Until a non-compete clause UK courts haven't reviewed is tested, nobody knows whether it holds. --- ## When Are Non-Compete Clauses Enforceable in the UK? A non-compete clause enforceable in the UK must protect a legitimate business interest and go no further than reasonably necessary, taking account of scope, duration and geographical reach. The employer carries the burden of proof, not the employee. The leading case is **Tillman v Egon Zehnder Ltd**, decided by the Supreme Court on 3 July 2019, which allowed the wording "**or interested**" in Ms Tillman's covenant to be severed rather than invalidating the entire clause the "**blue pencil**" test. Tillman shows that an unreasonable part of a restrictive covenant can sometimes be severed rather than voiding the whole thing, provided the legal requirements for severance are met. A drafting defect doesn't automatically invalidate an entire covenant, but relying on severance still means litigation is expensive for a startup with no legal budget to spare. --- ## Beyond Non-Competes: Non-Solicitation and Non-Dealing Clauses A non-solicitation clause stops a former employee approaching your clients or staff after they leave, and it's generally treated as narrower than a full non-compete clause, though enforceability still turns on whether it protects a legitimate interest and goes no wider than necessary. A non-dealing clause goes further, blocking any dealing with those clients even if they make the first approach and the government's working paper has flagged the risk of employers shifting toward wider non-dealing clauses if non-competes are restricted. | Clause type | What it restricts | Enforceability | | ----------------------- | ------------------------------------------------------ | ---------------------------------------------------------------- | | Non-compete | Working for, or starting, a competing business | Hardest to enforce; heavily scrutinised on scope and duration | | Non-solicitation clause | Approaching former clients or staff | Narrower restriction; same reasonableness test applies | | Non-dealing | Any dealing with former clients, even client-initiated | Broader than non-solicitation; still needs a legitimate interest | For an early-stage startup, a **non-solicitation clause** paired with confidentiality terms can offer more targeted protection than a broad non-compete, particularly where the company's interests concern customer relationships or confidential information. --- ## The Government's Working Paper on Non-Compete Reform The government's November 2025 working paper on **reforming non-compete clauses** sought views on options for change explicitly framed as a working paper, not a formal consultation. As of September 2026, no final decision or legislation implementing its options has been published. Responses closed on 18 February 2026, and the CMA published its own response on 25 February 2026. ### Options the Working Paper Explored Issued 26 November 2025, the paper explored a statutory limit on duration, limits differentiated by company size, an outright ban, a ban below a salary threshold, and a combination of a salary-threshold ban with a duration limit above it. One detail matters for founders: it proposed letting businesses with 250 or fewer employees use a longer **non-compete clause** (up to six months) than larger firms (capped at three), framed as a question about protecting smaller companies' ability to retain talent. ### What the Data Shows Today The working paper cites around 5 million employees in Great Britain with a contract containing a non-compete, typically lasting around six months a separate LSE estimate, also cited by government, found **roughly 26%** of UK workers appeared to be covered by one. --- ## Why IP Assignment Deserves as Much Attention as Non-Competes Copyright in qualifying works created by an employee in the course of employment generally belongs to the employer as first owner, subject to any agreement otherwise, but patents, contractor work and pre-incorporation IP follow different rules. ### Copyright and Employees Section 11(2) of the Copyright, Designs and Patents Act 1988 gives employers first ownership of qualifying literary, dramatic, musical or artistic works made by an employee. ### Patents and Employees Under section 39(1) of the Patents Act 1977, an invention only belongs to the employer if it falls within the employee's normal or specifically assigned duties, or a special obligation to further the employer's interests otherwise the employee owns it, even if built on company time. ### Contractors and Pre-Incorporation IP Contractors generally don't transfer copyright merely by being paid to create work; a written, signed copyright assignment is normally required, and other IP rights carry their own formalities. IP a founder creates before incorporation won't automatically become company property once the company exists; those rights should be expressly transferred or documented in the company's favour. --- ## What a Strong IP Assignment Clause Should Cover For several IP rights, including copyright and registered trade marks, statutory formalities require an **IP assignment agreement UK** founders rely on to be in writing and signed precise requirements differ by right. Section 90(3) of the CDPA 1988 requires this for copyright, with comparable formalities for patents (Patents Act 1977, s.30) and trademarks (Trade Marks Act 1994, s.24(3)). For copyright, a verbal agreement isn't enough: section 90(3) requires writing signed by or on behalf of the assignor. A well-drafted clause should also cover future **IP under section 91**, so future copyright transfers under the existing agreement without a fresh assignment each time. ![IP assignment agreement](https://storage.ghost.io/c/05/a4/05a4a052-18ab-4836-8924-ec8b322c371c/content/images/2026/09/IP-assignment-agreement.png) IP assignment agreement It should address moral rights too: these aren't assigned like copyright, but can be waived by written instrument under section 87\. Any founder with pre-incorporation IP should get it expressly documented in the company's favour without that, ownership can stay genuinely unclear. --- ## Building Both Into Your Startup's Contracts: A Practical Checklist Match the clause to the risk: reasonable restrictive covenants for senior or high-access roles, and well-documented IP assignment for everyone who touches your product. - Limit non-compete clauses to roles with genuine access to trade secrets, key clients or strategic information don't apply them blanket-wide - Pair any non-compete with a non-solicitation clause and confidentiality terms for more targeted protection - Put an IP assignment agreement UK compliant and signed into every employment and contractor contract, covering existing and future work, plus moral rights - Document pre-incorporation founder IP expressly in the company's favour, rather than assuming incorporation transfers it automatically - Review restrictive covenants whenever a role changes a covenant drafted for one job rarely survives a promotion unchanged. --- ## FAQs ### 1\. Are non-compete clauses enforceable in the UK? Yes, but not automatically. An employer must show that a non-compete clause enforceable in the UK protects a legitimate business interest and goes no further than reasonably necessary. Courts assess this on the facts, and Tillman v Egon Zehnder Ltd \[2019\] UKSC 32 is a leading authority on enforcement and severance of restrictive covenants. ### 2\. Who owns IP created by an employee in the UK? For copyright, the employer is generally the first owner where a qualifying work is created during employment, subject to any agreement otherwise, under section 11(2) of the CDPA 1988\. Patents differ: under section 39 of the Patents Act 1977, an invention belongs to the employer only where the statutory conditions are met. Contractors shouldn't be assumed to have transferred copyright or other IP just by being paid; this should be addressed expressly in an IP assignment agreement. ### 3\. How long can a non-compete clause last in the UK? There's no statutory maximum duration today enforceability depends on reasonableness and necessity. In a business survey cited by the government's 2025 working paper, six months was the most common duration, followed by 12\. The paper also discussed statutory limits, including three- and six-month models, but these haven't become law. ***Also Read:*** [***R&D Tax Credit Changes 2026: What the Merged Scheme Means for Claims***](https://entrepreneurplus.co.uk/r-d-tax-credit-changes-2026-what-the-merged-scheme-means-for-claims/) --- **Sources:* Tillman v Egon Zehnder Ltd \[2019\] UKSC 32 (UK Supreme Court, decided 3 July 2019); the Copyright, Designs and Patents Act 1988; the Patents Act 1977; the Trade Marks Act 1994; and the Department for Business and Trade's November 2025 working paper on non-compete clause reform, via GOV.UK (updated 19 February 2026). This is an editorial summary, not a substitute for UK legal advice on a specific contract.* ***The EP+ Editorial Desk covers UK startups, founder stories, and venture capital. All editorial content is independently produced and human-reviewed before publication.***