You hired a freelance developer to build your app. A design agency to create your brand. A contractor to write the software that runs your operations.
The work is finished. You paid the invoice. You assume you own it.
Copyright law disagrees.
What the Law Actually Says About Ownership
Under U.S. copyright law, the person who creates a work owns it by default. Not the person who paid for it. The creator.
That means the freelancer who wrote your code, the agency that designed your platform, the independent writer who produced your training materials — they own that work the moment they create it, unless something specific and documented changes that default.
Most founders learn this during due diligence. A buyer asks who owns the core IP. The answer turns out to be complicated. That is a very bad time to find out.
Work for Hire: Narrower Than You Think
“Work for hire” is a legal term with a specific meaning that almost nobody uses correctly.
For employees, the rule is relatively straightforward. Work an employee creates within the scope of their employment is automatically owned by the employer. If your staff engineer builds a feature while on the clock, doing the job you hired them to do, that belongs to your company without any additional documentation.
For contractors and freelancers, the rule is the opposite.
Contractor work qualifies as work for hire only if two conditions are both satisfied: the work falls into one of nine narrow statutory categories defined by copyright law, and there is a written agreement signed by both parties that explicitly designates the work as work for hire. The categories include things like contributions to collective works, audiovisual works, translations, and a handful of others. Software created by an independent contractor does not fall into any of them.
Read that again. Software written by a contractor is almost never work for hire under copyright law, regardless of what your contract says about it.
If your agreement says “all work created is work for hire” and the work is software, that clause likely does not accomplish what you think it does.
What IP Assignment Actually Does
An IP assignment is a separate mechanism. Instead of relying on a legal classification that may not apply, an assignment is a direct transfer of ownership from the creator to your company.
Think of it like a deed transferring property. The contractor creates the work, owns it briefly by default, and then assigns all rights to you. Done correctly, an assignment covers copyright, patent rights, trade secrets, and any other intellectual property that may arise from the work.
Where work-for-hire is a classification that either applies or does not, assignment is a deliberate act that transfers rights regardless of category. That makes it more reliable and more flexible.
What Both Look Like in Practice
A properly drafted contractor agreement should include IP assignment language that covers a few key things: assignment of all work product created under the engagement, assignment of rights to any inventions arising from the work, a representation that the contractor has the right to make that assignment, and a commitment to execute any additional documents needed to perfect the transfer.
That last piece matters more than most people realize. Sometimes completing a patent filing or registering a copyright requires a formal standalone assignment document. The agreement should require the contractor to cooperate with that process after the engagement ends.
Imagine a scenario where a founder parts ways with a contractor on good terms, then discovers two years later that an invention assignment document needs to be signed to complete a patent application. If the original agreement did not require future cooperation, tracking that person down becomes an unnecessary complication with real stakes.
Two Timing Issues Worth Understanding
Retroactive assignment is possible. If you have contractors who worked without an IP assignment clause in their agreements, you can ask them to sign a standalone assignment now. Many will. But it creates friction, requires cooperation you cannot compel, and occasionally surfaces disputes about what was actually created and when.
The cleaner path is to start every contractor relationship with a proper agreement before any work begins.
One additional note for founders whose contractors are creating anything inventive: copyright assignment handles the creative work, but patent rights operate on a separate clock. In the United States, public disclosure of an invention starts a one-year window after which certain patent rights are lost. Copyright assignment does not affect that timeline. If contractors are building something that might be patentable, that is a conversation to have before the product demo, not after.
What We Address Before It Becomes a Problem
This is exactly the kind of issue that surfaces during due diligence, right when the stakes are highest and there is no clean fix available. The legal exposure is invisible until it is not.
A contractor agreement reviewed before work starts takes us an hour. Untangling IP ownership questions two years later, in the middle of a transaction, takes considerably longer and costs considerably more.The Garcia-Zamor Law Firm provides outsourced in-house counsel combining business law and intellectual property expertise. Led by Ruy Garcia-Zamor (founder and business strategy expert), Elliott Alderman (IP specialist with 40+ years experience), and Claudia Castillo (employment law specialist), our team serves growing companies with strategic legal leadership. Learn more at garcia-zamor.com or call (410) 531-9853.
