Entrepreneurs often develop intellectual property (IP), such as copyrightable source code, before forming a corporation to commercialize the IP.
The corporation will need to own the IP, and eventual investors will require this.
Section 13(1) of the Canadian Copyright Act provides that the author of the copyrightable work is the first owner.
Section 13(4) of the Act provides for transfer of the copyright by written assignment.
The Canada Patent Act likewise contains provisions for initial rights of the actual inventor and for transferability.
With respect to IP developed by a founder before incorporation, or by founders who form the corporation as business partners, the incorporation documents should contain a signed assignment of that IP to the corporation in exchange for the shares issued to each founder (as the typical consideration).
In absence of an assignment, the individual creator, and not the newly formed corporation, is the owner of the IP.
In addition, if the founders have been employed or engaged as independent contractors by another business (e.g., as a source of income while working on the start-up), the employment agreement or contractor agreement should be reviewed for any assignment that results in conflict with the assignment intended to be made to the new corporation, and that could deprive the founder of the rights meant to be assigned. This could be the case in the event of overlap between the IP that the relevant agreement purports to apply to and the IP that the founder intends to use. This topic has been discussed recently by Ontario courts.[1]
Once incorporated, a business should have an IP strategy that protects the product, brand, and that can be communicated to investors. The IP strategy will be specific to the business and can use various legal tools to its competitive advantage, including registration of IP rights, contractual protections, etc. The founders will also need to turn their mind to the corporation’s own employment and independent contractor agreements to ensure developed IP is fully secured. This can be a more nuanced process than might be expected.
Establishing the correct legal foundation sets up the corporation for success and creates a platform for optimizing growth and securing the value of the business and its core IP assets.
If you have questions about or need any assistance with respect to this topic, please reach out to me, Jay Judson, or any member of Siskinds’ Intellectual Property Group.
[1] Nexus Solutions Inc. v. Krougly, 2026 ONCA 199.