Within the framework of a founder's claim to certain shares
and intellectual property of a private company
("Company"), the District Court of Tel
Aviv (Economic Division) ("Court")
reviewed principles of intellectual property ownership in the event
of a founder's separation from a venture
In the case at hand, a group of founders executed a founders
agreement providing that the intellectual property developed by any
of the founders would be owned by all of the founders
("Agreement"). Subsequently, one of the
founders left the project prior to the Company's
The Court noted that a start-up company's intellectual
property is its only asset and sole basis for securing investments.
Without exclusive ownership of intellectual property, a start-up
would not have any value and would not be successful in raising
The Court observed that even though the Agreement did not
explicitly address ownership of intellectual property upon founder
separation, it did address share ownership in the event of founder
separation prior to incorporation. As the value of shares of a
start-up company is tied to ownership of its intellectual property,
the Court found it reasonable to interpret the Agreement as also
governing the ownership of the intellectual property developed by
the founders in the event of founder separation prior to
As the Agreement did not specify what would happen to the
intellectual property upon founder separation, the Court held that
the parties' intentions were to be determined through
principles of contract interpretation, such as understanding the
intent of the parties, assuming fair and reasonable parties, and
through completing the missing details of the contract in
accordance with mechanisms provided for under Israeli contracts
law. Using these techniques, the Court ruled that the intent of the
parties directed that even upon separation of a founder, ownership
of the intellectual property developed by such founder would remain
with the Company and that the contractual provision as to joint
ownership by the founders applied only to the pre-incorporation
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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