Does my company own what its employees create?
Written by For Founders Law, a Toronto firm licensed by the Law Society of Ontario. About us
Short answer
Mostly, for copyright. Under section 13(3) of Canada's Copyright Act, an employer is the first owner of copyright in work an employee makes in the course of employment, unless they agree otherwise. The gaps are work made outside the job, moral rights, which stay with the employee unless waived, inventions, and anyone who isn't really an employee, so a written IP assignment and moral rights waiver in every employment agreement is standard.
Most founders assume the company owns everything the team builds. For employees’ copyright, Canadian law largely agrees. The exceptions are where investors and acquirers look.
What does the Copyright Act say?
Under section 13(3), where an author was employed under a contract of service and made the work in the course of that employment, the employer is the first owner of copyright, in the absence of an agreement to the contrary. That covers code, documentation, designs and content an employee creates as part of their job.
Where are the gaps?
| Gap | Why it matters | Fix |
|---|---|---|
| Work outside the course of employment | Code written on weekends for a side project, or before the start date, may belong to the employee | Assignment clause covering work related to the business; disclosure of prior inventions |
| Moral rights | Stay with the author and can only be waived, under s. 14.1 | Moral rights waiver |
| Inventions | The Patent Act has no equivalent employer-ownership rule. Courts have generally treated the employee as owning an invention unless there’s an agreement to the contrary or they were hired to invent, which turns on the facts of their role | Express assignment of inventions |
| Founders | Founders often aren’t employees, and much of their work predates the company | Founder IP assignment. See founder vesting |
| Contractors | Not employees; they own copyright unless they assign in writing | See who owns code a contractor writes |
| Misclassified workers | A “contractor” may be an employee, or the reverse | See employee or contractor |
| AI-generated material | Ownership of purely AI-generated output is unsettled | See who owns AI-generated content |
What should the employment agreement say?
- The employee assigns to the company all IP created in the course of employment or related to the company’s business, using company resources or confidential information.
- A waiver of moral rights in favour of the company and its licensees.
- A schedule of prior inventions the employee is keeping, so there’s no later argument.
- Cooperation to sign documents needed to register or enforce IP.
- Confidentiality that survives the end of employment. See how to protect trade secrets.
Sign it before the employee starts. Adding IP terms to an existing employee’s agreement may need fresh consideration to be enforceable.
Why do investors care?
Because a gap in IP ownership is a gap in what they’re investing in. Due diligence usually asks for signed IP assignments from every founder, employee and contractor who contributed to the product. See what investors check in due diligence, and run our free who owns your code check.
What to do next
Our employment agreement template includes confidentiality and IP assignment terms, and we prepare founder IP assignments, at fixed fees on our fees page.
This guide is general information about Ontario and Canadian law, not legal advice for your situation. To check your team’s IP paperwork, book a free 15-minute consult.