Who Owns Startup Code and Branding Before Incorporation?

Introduction

Technology startups often begin operating before they become corporations. Founders may write software, design logos, choose a business name, create databases, prepare marketing materials, or commission developers and designers. When the company is later incorporated, disagreements may arise over whether these assets belong to the individual founder, the other co-founders, or the newly formed corporation.

The answer depends on the type of intellectual property involved, the identity of its creator, the parties’ agreements, the circumstances of its creation, and whether the asset was properly assigned to the corporation. A founder’s informal understanding that “everything belongs to the startup” may not be sufficient to transfer all intellectual property rights.

This article discusses ownership disputes involving software code and branding created before incorporation under Philippine law.

What Intellectual Property May Be Involved?

Startup disputes commonly involve several separate intellectual property rights. Software code is generally examined under copyright law, while names, logos, symbols, and slogans may be examined under trademark and trade-name law. A single startup asset may also involve confidential information, trade secrets, inventions, or patentable subject matter.

Startup asset	Possible legal protection	Typical ownership issue
Source code and object code	Copyright	Whether the founder, developer, contractor, or corporation owns the copyright
Logo, brand name, and slogan	Trademark, service mark, or trade name	Whether registration, prior use, or assignment establishes the stronger right
Technical process or software-related invention	Patent or other protection, subject to statutory requirements	Whether the invention was created and assigned before or after incorporation
Source code repository, customer list, and business methods	Confidential information and contractual protection	Whether the information was disclosed or used without authority

Copyright, trademark, patent, and confidential-information rights should not be treated as interchangeable. The Supreme Court has expressly recognized that copyright and trademark rights are distinct. In Juan v. Juan, et al., G.R. No. 221732, 2017, the Court explained that copyright protection over a work does not automatically determine whether a similar word or name may be used as a trade or service name.

Who Owns Software Code Created Before Incorporation?

Under Section 178 of R.A. No. 8293, otherwise known as the Intellectual Property Code of the Philippines, copyright in an original literary or artistic work generally belongs to its author. Software code may qualify as a protected work when it satisfies the requirements for copyright protection.

When two or more persons jointly create a work, they are generally treated as co-owners in the absence of an agreement. If the portions of the work can be used separately and the author of each portion can be identified, each author may own the copyright in the portion created by that person.

Accordingly, a founder who personally writes the code before incorporation may initially own the copyright, even if the code was intended for the future startup. The later incorporation of the business does not, by itself, prove that ownership was transferred to the corporation.

Does the Startup Automatically Own Code Made by a Founder?

No. Incorporation alone does not automatically transfer pre-incorporation copyright to the corporation. A corporation has a legal personality separate from its stockholders, directors, and officers. Assets created or acquired by a founder before the corporation existed generally require a valid transfer, contribution, or other legal basis before the corporation can claim ownership.

The parties may transfer copyright through a written assignment or another legally sufficient agreement. The incorporation documents, founders’ agreement, intellectual property assignment, subscription agreement, or board-approved contribution of assets may provide evidence of such transfer, provided that the documents clearly identify the rights being transferred.

A general statement that all “business assets” belong to the startup may be disputed if it does not identify the software, source code, repositories, documentation, derivative works, and related rights. The parties should therefore use specific language covering existing works and future works.

When Does a Developer or Employee Own the Code?

Section 178.3 of R.A. No. 8293 distinguishes between works created by an employee and works created by an independent contractor.

For an employee, copyright generally belongs to the employee if creating the work was not part of the employee’s regular duties, even if the employee used the employer’s time, facilities, and materials. If the work resulted from the performance of regularly assigned duties, copyright generally belongs to the employer unless there is an express or implied agreement to the contrary.

This rule may be difficult to apply to a startup because founders may perform several roles at once. A co-founder may be a shareholder, director, officer, employee, software developer, and business partner. The parties should examine the actual duties performed, the employment agreement, the founders’ agreement, payment arrangements, and the company’s instructions.

A freelance developer is not automatically an employee. Under Section 178.4 of R.A. No. 8293, in a commissioned work, the person who commissioned and paid for the work generally owns the work itself, but copyright remains with the creator unless there is a written stipulation to the contrary.

This distinction is important. Payment for the development of software does not necessarily transfer copyright. A written agreement should expressly assign the copyright and related economic rights to the startup or to the intended corporate entity.

What If the Corporation Did Not Yet Exist When the Code Was Commissioned?

A corporation cannot ordinarily contract as a legal person before it is incorporated. If a founder signs a development agreement personally and later causes the corporation to be formed, the founder may initially be the contracting party unless the agreement clearly identifies an existing principal or the corporation later adopts and assumes the contract.

The corporation should execute a written instrument after incorporation confirming the transfer or assignment of the relevant intellectual property. The instrument should identify the code, repository, documentation, updates, derivative works, and rights to modify, reproduce, distribute, license, and commercialize the software.

The parties should also preserve proof of payment, delivery, acceptance, and authority. These records may become important if a former founder later restricts access to the repository or claims that the corporation merely received permission to use the code.

Who Owns a Startup’s Name or Logo?

Branding disputes are governed principally by trademark and trade-name rules, which differ from copyright ownership rules. Under Section 122 of R.A. No. 8293, trademark rights are acquired through valid registration, subject to the rights and limitations recognized by the Intellectual Property Code.

Registration is not the only issue in a pre-incorporation dispute. The parties must also examine who selected the name, who first used it in commerce, who controlled the goods or services offered under it, who paid for the branding, and whether the mark was registered in an individual founder’s name or in the corporation’s name.

In Zuneca Pharmaceutical, et al. v. Natrapharm, Inc., G.R. No. 211850, 2020, the Supreme Court explained that the Intellectual Property Code adopted registration as the principal basis for trademark ownership, while protecting a prior user in good faith from infringement liability in appropriate circumstances. The statutory protection for rights acquired in good faith before the effectivity of the Intellectual Property Code is also recognized in Section 236 of R.A. No. 8293.

For startups, this means that a founder who used a brand before incorporation may assert relevant rights, but the result will depend on the registration, the dates of filing and use, the nature of the goods or services, and the parties’ agreements. Conversely, a founder who registered the brand personally may not necessarily be entitled to retain it if the registration was made for the corporation’s business under an agreement requiring transfer.

Can Copyright Registration Establish Ownership of a Brand Name?

Not by itself. Copyright and trademark protection serve different purposes. Copyright protects original literary and artistic works, while trademark law protects marks that distinguish goods or services and trade-name law concerns business identifiers.

In Juan v. Juan, et al., G.R. No. 221732, 2017, the Supreme Court rejected the confusion between copyright over a work and rights in a trade or business name. A party claiming ownership of a brand should therefore identify the proper legal right and prove the facts relevant to that right.

A logo may contain artistic elements capable of copyright protection and may also function as a trademark. Protection of the artistic design does not automatically settle ownership of the commercial brand. The chain of creation, commissioning, assignment, registration, and use must still be established.

What Happens When a Founder Registers the Mark Personally?

Personal registration may create substantial litigation risk. The corporation may argue that the founder registered the mark as an agent, trustee, or nominee for the business. The founder may respond that the registration was personal and that the corporation merely had permission to use the mark.

The evidence may include:

• Founders’ agreements and incorporation documents;
• emails and messages identifying the intended owner;
• branding invoices and payment records;
• marketing materials identifying the business as the owner;
• corporate resolutions and accounting records;
• the trademark application, registration, and declarations of use; and
• evidence of the parties’ conduct after incorporation.

Registration should therefore be made in the correct owner’s name whenever possible. If registration was initially made in a founder’s name, the parties should execute a written assignment and record the appropriate transfer with the Intellectual Property Office.

How Are Ownership Conflicts Resolved?

Review the founding documents

The first step is to examine the founders’ agreement, subscription documents, employment contracts, contractor agreements, confidentiality agreements, and incorporation papers. The relevant question is whether the documents expressly transfer pre-incorporation intellectual property or merely describe the founders’ business plans.

Establish the timeline

Create a chronology showing when the code, logo, name, domain, documentation, and other assets were created; when they were first used; when contracts were signed; when the corporation was incorporated; and when applications or registrations were filed.

Priority disputes often turn on dates. The chronology should also identify whether the asset changed substantially after incorporation and who paid for each stage of development.

Separate ownership from permission to use

A corporation may have received a license rather than an assignment. Continued use of the code or brand may be lawful if the corporation had permission, but the scope, duration, exclusivity, revocability, and payment terms of that permission must be determined from the parties’ agreement and conduct.

Secure the digital evidence

Parties should preserve repository history, commit records, design files, drafts, invoices, bank records, project-management messages, access logs, domain registration data, and communications concerning ownership. Altering or deleting records may impair the party’s ability to prove authorship, assignment, or authorized use.

Consider settlement or formal assignment

If the commercial relationship remains viable, a written settlement or assignment may be more efficient than litigation. It should address ownership, licenses, past use, royalties, attribution, access credentials, derivative works, confidentiality, warranties, and future development.

What Remedies May Be Available?

Depending on the facts, a party may pursue a civil action for infringement, unfair competition, breach of contract, violation of confidentiality obligations, or other appropriate relief. Administrative proceedings before the Intellectual Property Office may also be available for specified intellectual property violations.

In In-N-Out Burger, Inc. v. Sehwani, Inc., et al., G.R. No. 179127, 2008, the Supreme Court recognized the jurisdiction of the Bureau of Legal Affairs of the Intellectual Property Office over administrative complaints involving intellectual property violations, subject to the statutory requirements. The proper forum depends on the cause of action, the relief sought, and the applicable jurisdictional limits.

For unfair competition, the existence of a business disagreement is not enough. There must generally be conduct involving deception, passing off, or fraud upon the public. In Torres v. Perez, et al., G.R. No. 188225, 2012, the Court held that the remaining partners could use partnership assets after a partner had been fully bought out, where the circumstances did not establish the elements of unfair competition.

Common Startup Scenarios

A founder writes the first version of the application

The founder may initially own the copyright if the code was created before incorporation and no valid assignment was made. The corporation should obtain a written assignment covering the existing code and all related materials.

The startup pays a freelance developer

Payment alone may not transfer copyright. The development agreement should contain a clear assignment, confidentiality obligations, warranties regarding originality, and an undertaking to deliver all source code and credentials.

A founder creates the logo and registers it personally

The founder’s registration is evidence that must be examined, but it may not finally resolve the parties’ contractual and agency issues. The parties should document whether the logo was contributed to the corporation, assigned, or licensed.

The founders use the brand before incorporation

Evidence of prior use may be relevant, but it should not be confused with the registration-based ownership regime under the Intellectual Property Code. Registration, good-faith prior use, corporate records, and the parties’ agreement should all be reviewed.

Recommended Contract Terms

A founders’ or intellectual property assignment agreement should expressly cover:

• all existing code, designs, logos, names, documentation, databases, and domain names;
• all economic rights of reproduction, adaptation, distribution, licensing, and commercialization;
• future works created in connection with the startup’s business;
• the treatment of third-party libraries, open-source software, and pre-existing materials;
• delivery of source code, credentials, repositories, and technical documentation;
• confidentiality and restrictions on competing use;
• warranties that the work does not infringe third-party rights; and
• the procedure for recording assignments and transferring registrations.

The agreement should distinguish between intellectual property contributed by a founder and intellectual property created for the corporation after incorporation. It should also state what happens if a founder leaves, dies, becomes disabled, or disputes the company’s ownership.

Final Observations

Pre-incorporation creation does not automatically place software or branding in the ownership of the later-formed corporation. The decisive issues are usually authorship, commissioning, employment duties, registration, prior good-faith rights, contractual transfer, and the parties’ conduct.

Startups should inventory all intellectual property before incorporation, document each transfer after incorporation, register marks in the proper owner’s name, and maintain reliable records of creation and payment. Founders should also obtain legal review before removing a co-founder’s access, launching under a disputed brand, or copying code whose ownership has not been resolved.

About Nicolas and De Vega Law Offices

 Nicolas and de Vega Law Offices is a full-service law firm in the Philippines.  You may visit us at the 16th Flr., Suite 1607 AIC Burgundy Empire Tower, ADB Ave., Ortigas Center, 1605 Pasig City, Metro Manila, Philippines.  You may also call us at +632 84706126, +632 84706130, +632 84016392 or e-mail us at [email protected]. Visit our website https://ndvlaw.com.