Who owns an invention developed by co-founders?
Most founders assume the company owns the technology they built for it. Under Canadian law, that is not the default. Unless something on paper says otherwise, an invention usually belongs to the people who invented it.
That gap rarely matters while everyone gets along. It matters a great deal when a founder leaves, an investor asks for proof of title, or a buyer's lawyers start their diligence.
The starting point: inventors own inventions
The Patent Act, RSC 1985, c P-4, s 27(1), grants a patent to "the inventor or the inventor's legal representative." A company is never an inventor. It can only own an invention if the inventors transferred it, or if the law treats the company as entitled to it for some other reason.
Who counts as an inventor is a narrower question than who worked on the project. The Supreme Court of Canada has said the inventors are the people responsible for the inventive concept (Apotex Inc v Wellcome Foundation Ltd, 2002 SCC 77). The founder who raised the money, managed the team, or ran tests to confirm that someone else's idea worked is not an inventor on that basis alone.
So the first question in any ownership dispute is factual. Who conceived what, and when?
Employment helps less than founders expect
Unlike the Copyright Act, RSC 1985, c C-42, the Patent Act has no rule giving an employer ownership of what employees invent. The common law fills the gap, and its presumption favours the employee. An employer owns an employee's invention only where a contract says so or where the person was hired to invent (Comstock Canada v Electec Ltd (1991), 38 CPR (3d) 29 (FCTD)).
Co-founders are an awkward fit for that analysis. Many are not employees at all in the early months. Some do the inventive work before the company exists. Courts will look at the whole relationship, including whether the inventor was a director or officer who owed the company fiduciary duties, but that is an argument to be won, not a rule to be relied on.
Software is a different regime, with the same trap
Code is protected mainly by copyright. The Copyright Act does give an employer first ownership of works made in the course of employment. But a founder who is not yet an employee, or a contractor, owns what they write. An assignment of copyright is valid only if it is in writing and signed by the owner.
A handshake agreement that "the company owns everything" does not meet that requirement.
What co-ownership actually means
Suppose two founders are joint inventors and neither has assigned to the company. They co-own the invention. In Canada, each co-owner can generally use the invention without the other's consent. Neither can license it to a third party, or carve up their share, without the other's agreement (Forget v Specialty Tools of Canada Inc (1995), 62 CPR (3d) 537 (BCCA)).
In practice, a departed co-founder who still holds an undivided interest can block the licensing deal the company depends on. They may also be free to compete using the same technology. Neither outcome is what the founders intended on day one.
What to put in place
The fix is inexpensive when everyone is still on good terms.
Written assignments from every founder to the company, covering inventions, code, designs and know-how, including work done before incorporation.
Assignment clauses in employment and contractor agreements, signed before the work starts.
Recording transfers with the Patent Office. An unrecorded transfer of a patent is void against a later transferee who records first.
A shareholders' agreement that says what happens to a departing founder's role, shares and access.
Records of who contributed what: notebooks, commit history, dated design files.
If the dispute has already started
Once a founder has left and the assignment was never signed, the questions change. Who can prove conception? What did the parties agree to, in writing or by conduct? Was the inventor a fiduciary? Is there an application pending, and in whose name?
The Patent Act gives the Commissioner some power to sort out disputes between joint applicants. The Federal Court can order that Patent Office records relating to title be varied or expunged, and it can interpret the underlying agreements in doing so (Salt Canada Inc v Baker, 2020 FCA 127). Claims about fiduciary duty or the shareholders' agreement, on the other hand, usually belong in a provincial superior court. Choosing where to start is a strategic decision in its own right.
The evidence that decides these cases is created years before anyone thinks to look for it. If ownership of your core technology rests on an assumption, test the assumption now.
This post is general information about Canadian law. It is not legal advice about your situation.
