What Happens To Your Ip Under The Canadian Patent Act When A Co-founder Resigns Unexpectedly?

By Author: AirCounsel
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What Happens to Your IP Under the Canadian Patent Act When a Co-Founder Resigns Unexpectedly? When a co-founder unexpectedly resigns from a Canadian startup, it triggers immediate operational stress. Beyond the sudden shift in day-to-day operations, an even bigger risk emerges: who actually owns your core product? Many entrepreneurs assume that because the technology was built for the startup, the startup automatically owns it. Under Canadian law, this is a dangerous misconception. In fact, research shows that 42% of small businesses do not have written IP assignment agreements with key personnel , leaving their most valuable assets exposed to costly legal disputes. To protect your business from being held hostage by a departing team member, you must secure a formal founder ip assignment agreement . Without this specific legal document, your startup’s intellectual property (IP), including critical patents and software code, remains personal property. This guide will walk you through how Canadian patent law handles IP ownership during a co-founder exit and how you can protect your startup's future. Table of Contents Quick Summary ...
... How Canadian Law Treats Patent Rights at Exit The Role of the Founder IP Assignment Agreement Submitting an Assignment to CIPO: Costs and Steps Inventorship vs. Ownership: A Crucial Distinction The Hired-to-Invent Rule in Canada Common Post-Exit IP Mistakes to Avoid Secure Your Startup Assets Frequently Asked Questions Recommended Quick Summary Key Takeaway Explanation Default Legal Ownership Under Canada's Patent Act , patent rights belong solely to the inventor unless an express, written assignment agreement exists. No Automatic Transfer A co-founder's resignation does not automatically transfer their IP to the company, even if they were paid or held equity. CIPO Filing Requirement To formalize ownership, you must submit a signed founder ip assignment agreement directly to the Canadian Intellectual Property Office (CIPO). Inventorship Remains Fixed Even after an assignment, the departing founder remains the named "inventor" for patent validity; only ownership of the patent changes. How Canadian Law Treats Patent Rights at Exit Under Section 49 of the Canadian Patent Act, the right to obtain a patent initially belongs entirely to the actual inventor. This default rule applies regardless of whether the inventor is a founder, an executive, or an early-stage partner. When a co-founder resigns unexpectedly without signing an IP transfer document, they retain full personal rights to the innovations they created. Under Canadian law, this means the departing founder can: Exploit the technology independently or license it to third parties. Block your company from obtaining patents or securing exclusive rights. Prevent future venture capital funding or acquisition, as investors will refuse to fund a startup that does not own its core technology. To prevent this nightmare scenario, your company must execute a written agreement tha