Does your company actually own its IP?

The question sounds rhetorical until a buyer's counsel asks it in diligence. In a surprising number of companies, the honest answer is no, or not entirely.

Employees versus contractors

Under the Canadian Copyright Act, where a work is made by an employee in the course of employment, the employer is generally the first owner of copyright, absent an agreement to the contrary. That default does the heavy lifting for work created by actual employees.

It does nothing for contractors. An independent contractor who writes your code, designs your brand or drafts your content owns the copyright in it unless they have assigned it in writing. A purchase order and an invoice are not an assignment. Neither is a statement that the work is "for" the company.

The company that has never used contractors is rare. The company with a written IP assignment from every contractor it has ever used is rarer still.

The founder problem

Work created before incorporation belongs to the individual who created it, not to the company that came later. Founders frequently build the first version of a product, a brand or a codebase months before the certificate of incorporation exists, and then never formally transfer it in. The company operates on the assumption that it owns everything, and the assumption holds right up until someone conducts diligence.

Moral rights

Copyright and moral rights are distinct in Canada, and moral rights cannot be assigned; they can only be waived. Moral rights include the right of integrity and the right of attribution. An assignment of copyright without a waiver of moral rights leaves the creator able to object to modification of the work in certain circumstances. In a software or brand context, where the work will be altered continuously, the waiver is not boilerplate.

Inventions and patents

Copyright assignment does not carry patent rights. If your business creates patentable subject matter, the agreement needs a separate assignment of inventions and an obligation to cooperate with filings, including after the individual has left. Chasing a signature from a former contractor who has no remaining relationship with the company is an unpleasant way to discover the gap.

Trademarks

Two recurring issues. First, ownership: brand assets developed by an agency need the same written assignment as code. Second, registration: rights in Canada can arise through use, but registration provides national protection and a considerably stronger position in a dispute, and it is prudent to clear a mark before investing in it rather than after. If you plan to file, do it before a launch makes the name expensive to change.

Cleaning it up

1. Inventory what the business depends on: code, brand, content, designs, data.
2. Identify who created each, and in what capacity: employee, contractor, agency, founder pre-incorporation.
3. Collect the paperwork you have. Look for a written assignment with a moral rights waiver, not merely a services agreement.
4. Fix the template so every future engagement includes assignment, waiver and invention obligations. This stops the problem growing while you address the backlog.
5. Obtain confirmatory assignments for the material gaps. This is easier while relationships are good, and it becomes progressively harder as time passes.

None of this is complicated work. It is simply work nobody does until it is urgent, and it is far cheaper to do quietly over a few weeks than under a diligence deadline with a purchase price at stake.

This article is general information, not legal advice, and does not create a solicitor-client relationship. The law changes and its application depends on your circumstances. Speak to a lawyer about your situation.