Who Owns the Code Your Contractors Wrote?

Most founders assume paying for work means owning it. In UK law that is true of employees and false of contractors, and the gap usually surfaces in diligence.

There is a moment, usually in the data room of a funding round or a sale, when somebody asks a simple question: can you show me the assignment from the developer who built the first version?

Often nobody can. The developer was a contractor, invoiced monthly, paid promptly and thanked warmly. There was a one-page scope of work, or a message thread. And under English law, unless that paperwork said otherwise in writing, they still own the copyright in what they wrote.

The default rules, plainly

Three separate regimes decide who owns what, and they do not all point the same way.

Copyright. Where a literary, dramatic, musical or artistic work is made by an employee in the course of their employment, the employer is the first owner of the copyright, subject to any agreement to the contrary. That is section 11 of the Copyright, Designs and Patents Act 1988, and software counts as a literary work for these purposes. Note what the rule requires: an employee, and the course of employment. A contractor is neither, and the default flips — the person who wrote the code owns it, and you have a licence at best.

Inventions. Under section 39 of the Patents Act 1977, an invention made by an employee belongs to the employer where it was made in the course of the employee's normal duties and an invention might reasonably be expected to result, or where the employee had a special obligation to further the employer's interests. Again, a rule about employees. It says nothing about the consultant who solved the hard problem on a six-week engagement.

Designs. The Intellectual Property Act 2014 removed the old rule under which the person commissioning a design owned the UK unregistered design right in it. Since then the designer is the first owner unless the design was made in the course of employment. Businesses that commissioned product design either side of that change often have inconsistent ownership across a single product line without knowing it.

Why "we paid for it" is not the answer

The commercial intuition is strong, and it is wrong. Payment buys what the contract says it buys. Where the contract is silent, a court will usually imply a licence to use the work for the purpose it was obviously commissioned for — but a bare licence is a long way from ownership.

The differences bite in exactly the places that matter to a growing company. A licensee cannot always sublicense, which matters the moment you resell or white-label. A licensee cannot stop a third party copying the work. A licensee cannot always modify freely, which matters when the original contractor has moved on and somebody else has to maintain what they left. And a licensee cannot give a buyer or an investor the warranty they will ask for.

Assignment has to be in writing

One procedural point catches people out repeatedly. Under section 90 of the Copyright, Designs and Patents Act 1988, an assignment of copyright is not effective unless it is in writing signed by or on behalf of the assignor.

A verbal agreement does not do it. An invoice marked "including IP" does not do it. A later email saying "of course the company owns it" is evidence of intention, not an assignment.

That is genuinely good news, because it also means the fix is cheap. A short, properly drafted deed of assignment, signed by the contractor, closes the gap entirely. The difficulty is finding that contractor five years later, once they have left the country, joined a competitor, or worked out that their signature has become worth something.

Where the gaps usually are

In practice the same five recur.

The founding technical co-founder who never signed anything, because at the time there was nothing worth signing over. The agency that built the first website or app on its own terms, which almost certainly retain ownership and grant you a licence. The freelance designer who made the logo before there was a trade mark application to attach it to. The academic collaborator whose institution has an IP policy nobody read. And open-source components carrying licence terms that impose obligations on whatever you distribute alongside them.

None of these is unusual. All of them are cheaper to fix now than in diligence, where the discovery is made by a buyer's lawyer and priced accordingly — as a retention, a warranty, or a reduction in the number.

What an audit actually looks like

The work is less forbidding than it sounds. It is a list of everyone who has contributed to the product since the beginning, what each of them signed, and what the default position is where they signed nothing. That list is usually shorter than founders fear and messier than they expect.

Then it is triage. Contributors whose work is still in the product and who never assigned anything go to the top. People whose contribution has since been rewritten from scratch matter less. Open-source obligations get read rather than assumed.

Then it is repair: chasing and executing assignments while the relationships are still warm, which is the single largest determinant of how much this costs.

Where a specialist is needed

Filing and prosecuting a patent is work for a registered patent attorney, and the decision of what to file and when is best taken with one in the room. Trade mark oppositions and contentious registry proceedings sit with specialists too. So does the tax side: the treatment of IP within a group, and reliefs such as R&D or the Patent Box, are questions for your accountant and a tax adviser.

Dinmore Bell brings those people in and manages the instruction, so that the commercial position and the filing strategy are decided together rather than in sequence by people who never speak.

What Dinmore Bell does

Dinmore Bell establishes what a business actually owns, puts that ownership in the right entity, and protects it commercially through assignment and licensing.

In practice that is the audit, then the repair work, then the prevention: contractor and employment templates that assign IP on day one, moral rights waivers where they are needed, and a clean record of what sits in which entity.

The point of all of it is a single outcome. The next time somebody asks the question in a data room, the answer is a document rather than a search.