You hired a freelance developer, paid every invoice, and shipped the product. Two years later a buyer's lawyer asks for the assignment agreement, and there isn't one. Or a competitor ships something built on what looks like your codebase, and you find out the same developer wrote theirs.

The short answer: if the developer was an independent contractor and never signed a written assignment, the developer owns the copyright in the code. You probably have a license to use it. You don't own it, and that difference matters when you try to sell the company, register the copyright, or sue someone.

The default rule: the author owns the code

Copyright "vests initially in the author or authors of the work." 17 U.S.C. § 201(a). The author is normally the person who wrote it. Payment doesn't change that. There are two ways a company ends up as the owner:

  1. The code is a work made for hire, so the company is treated as the author from the start. § 201(b).
  2. The author assigns the copyright to the company in a signed writing. 17 U.S.C. § 204(a).

Employees: the company owns it automatically

A work "prepared by an employee within the scope of his or her employment" is a work made for hire. 17 U.S.C. § 101. No contract is needed.

Who counts as an employee is a question of agency law, not job titles. In Community for Creative Non-Violence v. Reid, 490 U.S. 730 (1989), the Supreme Court listed the factors: who controls the manner and means of the work, who supplies the tools, where the work is done, how the person is paid, whether benefits are provided, and how the person is treated for tax purposes.

Startups get more room here than you might expect. In JustMed, Inc. v. Byce, 600 F.3d 1118 (9th Cir. 2010), a programmer worked from home, set his own hours, was paid in stock, and had no employment paperwork. The Ninth Circuit still held he was an employee and that the company owned the source code, because that informality is how small technology companies operate. I wouldn't plan around that result. It took a trial and an appeal to get it.

Contractors: "work made for hire" usually doesn't work for software

A commissioned work is a work made for hire only if two things are true. The parties signed a written agreement saying so, and the work falls into one of nine categories listed in § 101:

  • a contribution to a collective work
  • part of a motion picture or other audiovisual work
  • a translation
  • a supplementary work
  • a compilation
  • an instructional text
  • a test
  • answer material for a test
  • an atlas

Computer programs aren't on the list. A contract that says "all code is a work made for hire" may do nothing for ordinary contract software. Arguments exist that some software fits a listed category, such as a contribution to a collective work, but you don't want your ownership to depend on winning one of them.

The fix is an assignment. A well-drafted contractor agreement says the work is made for hire to the extent the law allows, and that the contractor "hereby assigns" all rights to the extent it isn't.

The verb tense matters. "Hereby assigns" transfers rights as they come into existence. "Agrees to assign" is only a promise to transfer later. The Supreme Court's patent decision in Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, Inc., 563 U.S. 776 (2011) turned on exactly that difference between two competing agreements.

No writing: what the company that paid actually has

A transfer of copyright ownership "is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed." 17 U.S.C. § 204(a). An oral promise or a paid invoice isn't a transfer.

Courts don't leave the paying customer with nothing. In Effects Associates, Inc. v. Cohen, 908 F.2d 555 (9th Cir. 1990), a special-effects company created footage for a film without a written agreement. The court held that the filmmaker had no ownership, but did have an implied nonexclusive license to use the footage in the film.

Asset Marketing Systems, Inc. v. Gagnon, 542 F.3d 748 (9th Cir. 2008) applied the same rule to software. A contractor wrote custom programs for a company over several years, was paid for them, and installed them on the company's machines without stating any limit on their use. The court held that the company had an unlimited, irrevocable implied license to use and modify the programs.

What an implied license gives you: the right to keep using the code, and usually to modify it.

What it doesn't give you:

  • Exclusivity. The developer can license the same code to your competitor.
  • The right to sue. Only the legal or beneficial owner of an exclusive right can bring an infringement action. 17 U.S.C. § 501(b).
  • A clean registration. You can't register as the copyright claimant for code you don't own.
  • A clean sale. A buyer or investor will want to see a chain of title, and an implied license is something you prove in litigation, not something you hand over in a data room.

How to fix a gap

  1. Inventory the authors. List everyone who wrote code, designed screens, or wrote content: employees, contractors, agencies, co-founders before incorporation, and friends who helped. The commit history in your repository is a good starting point. Run git shortlog -sne and compare the names against your signed agreements.
  2. Get a written assignment from each non-employee. A confirmatory assignment signed today can transfer rights in work done years ago. It's far easier to get before there's a dispute or a deal on the table.
  3. Cover founders. Code a founder wrote before the company existed belongs to the founder until it's assigned.
  4. Check the agency's subcontractors. A development agency can assign only what it owns. If it used freelancers, ask for its agreements with them, or get a representation and indemnity.
  5. Account for code nobody can assign. Open-source components stay under their licenses. Code generated by an AI tool may not be protected by copyright at all, to the extent no human wrote it.
  6. Record the assignment if the code matters. Recording a transfer with the Copyright Office gives constructive notice of it and helps against a later conflicting transfer. 17 U.S.C. § 205.

One caution for California: a work-made-for-hire clause in a contractor agreement can cause the contractor to be treated as an employee for some state-law purposes. Many California agreements use an assignment alone for that reason.

Practical takeaways

  • Paying for code gets you a license at best. Ownership takes employment or a signed assignment.
  • Use both a work-made-for-hire clause and a present assignment ("hereby assigns") in contractor agreements.
  • Fix gaps before you need to register, sell, or sue. The price of a signature goes up once the other side knows you need it.

Ownership problems are routine, and they're usually cheap to fix early. If you're preparing for a financing or a sale and aren't sure your code's chain of title is complete, that's the kind of review I do.

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Related resources

This article provides general information and is not legal advice. Copyright Office practices and fees change, and the law varies by circuit; confirm current requirements at copyright.gov and consult qualified counsel about your situation.