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Say you have a tech company that over the course of its run develops several projects worth of proprietary software and related IP. Then for whatever reason (insolvency/winding up, voluntary deregistration, etc.), the company ceases to be a valid corporate entity.

My question is: What happens to the IP held by this company? For instance, if someone were to get ahold of the software/IP developed by the company and publish (or otherwise use) it, is there any legal recourse against them? And if so, who would have standing to take that action, and how is that standing established?

Though this question is tagged with 'Australia', I think it would also be interesting to know how it might work in other jurisdictions such as the U.S. and/or other common-law nations, and what the key similarities/differences might be.

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Companies dissolve by one of two modes: voluntarily or involuntarily.

If it's a voluntary dissolution: the assets remaining after paying all the creditors are distributed among the owners according to their ownership percentages or by some other agreement. The successor owner of the IP will be determined at that time.

In the case of an involuntary dissolution: usually as part of a bankruptcy proceeding, the bankruptcy court will first transfer all the corporate assets into a receivership managed by a trustee. The trustee will then disposition the company's assets (including the IP) per the laws of bankruptcy. The successor owner of the IP will be determined through that process. Many of the company's assets will be liquidated by auction and sold to the highest bidder; and the auction proceeds will be used to pay the company's creditors. So in the event of an involuntary bankruptcy dissolution, the successor owner of the IP will have most typically outbid all other bidders at the liquidation sale/auction. If there is any money left over after all the creditors and bankruptcy fees are paid, the remainder will be distributed to the shareholders as above described.

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The rules governing ownership of intellectual property are essentially the same as the rules governing ownership any other property. Somebody retains ownership when a company goes defunct. It may not be as easy to determine who that owner is, because with real property "possession is nine-tenths of the law." But a good starting point would be a presumption that, absent a contract indicating transfer to another entity, the original author of the IP still owns it.

I.e., if someone can establish authorship, the burden would fall to the entity claiming legitimate license to that author's IP to prove by a preponderance of evidence that rights passed from the author to it.

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  • Authorship meaning whomever actually wrote the code in question; as in one of the developers employed by the company? – aroth Dec 19 '15 at 7:00
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    @aroth - Yes. Now, typically somebody will hold up an employment contract showing that the company paid that author for ownership of IP developed in its employ, and then it's a matter of showing a paper trail from there to the person claiming present rights to the IP. – feetwet♦ Dec 19 '15 at 17:32
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    If the company has gone away, there may be nobody having a copy of that employment contract, or any paper trail. There may be no records of the software in question to be found. So the developer's correct claim "I wrote this code" might be the strongest claim that is supported by any evidence. – gnasher729 Dec 20 '15 at 15:31

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