Last updated: August 31, 2026
By Robert Ardell, Co-Founder and Strategic Advisor, KORE1
Your contractor owns the code they write for you unless a signed agreement assigns it to you, because software is not one of the nine work-made-for-hire categories in U.S. copyright law. That surprises almost every hiring manager who hears it. The invoice was paid, the laptop was yours, the repo lives in your GitHub organization, and none of that decides the question. A signature does.
A second problem sits behind that one. It costs more. Even with the paperwork done right, ownership almost never travels in a single hop, and the route it takes runs through whoever employed the person at the keyboard.
My stake in telling you this is not subtle. KORE1 runs a contract staffing desk, we employ most of the technologists we place, and an agency that holds a clean assignment from its own W2 workers is easier to buy from than a stranger with an LLC and a handshake. So I benefit from you caring about this. I also watched a client lose six weeks of an acquisition timeline to it, which is the part that made me start bringing it up on intake calls instead of waiting for legal to find it.
Your counsel gets the last word on all of it, not me. What follows is just what we watch land on people’s desks.
The Default Runs Backwards From What Most Buyers Assume
Two rules govern almost every version of this question, and they point in opposite directions.
When your own employee writes code inside the scope of their job, the work is a work made for hire and your company is treated as the author from the moment the file is saved. No assignment needed. The U.S. Copyright Office spells this out in Circular 30, and courts apply a three-part scope-of-employment test that asks whether the work was the kind the person was hired to do, whether it happened on the clock and roughly in the workplace, and whether it served the employer at least in part.
Contractors get the reverse treatment. The author is the human who wrote it. Ownership stays with them until something in writing moves it, and paying an invoice is not that something.
Nine Categories, and Software Is Not One of Them
Here is the specific mechanism, because the generalized version of it causes more bad drafting than ignorance does.
Under 17 U.S.C. section 101, a commissioned work can be a work made for hire only if the parties sign a written instrument saying so and the work fits one of nine listed categories:
- A contribution to a collective work
- A 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
Read that list again. No tenth entry. No catch-all, and no line item that a Terraform module, a React front end, a Snowflake transformation, or an embedded firmware build slides into cleanly. Congress wrote that list in 1976 and has not touched it since. Fifty years.
So the clause that says “all deliverables shall be considered works made for hire” does approximately nothing for software on its own. What does work is an assignment: a present-tense transfer of copyright from the person who wrote it to the party paying for it. Every competent agreement carries both, with the assignment written as a fallback that catches whatever the work-for-hire language misses.
One more wrinkle that almost nobody plans for. An assignment can be terminated by the author roughly 35 years later under section 203 of the Copyright Act. A true work made for hire cannot. For a payments API nobody will run in 2061, this is trivia. For a codebase that becomes the company, it is not, and it is the reason acquirers still ask which mechanism you used.
Three Contracts, Three Places the Chain Snaps
Now the staffing part, which is where the theory stops being theory.
Ownership has to travel from the fingers on the keyboard to your balance sheet, and the number of hops depends entirely on how the engagement was papered. Each hop is a place the chain can break.
| How the person is engaged | Who owns it the second it is written | Hops to reach you | Where it usually breaks |
|---|---|---|---|
| Your own W2 employee | You, automatically | Zero | Side projects and nights-and-weekends work |
| W2 contractor through a staffing firm | The staffing firm | One, firm to you | An MSA that covers confidentiality but never says “assigns” |
| 1099 individual | The individual | One, person to you | Work-for-hire language with no assignment behind it |
| C2C through their own LLC or S-corp | The human being, not the entity | Two, person to entity to you | The owner never assigned anything to their own company |
| SOW with a project vendor | The vendor, or its subcontractor | Two or more, subs included | Background IP carve-outs, and assignment conditioned on payment |
Circle the C2C row.
A single-member LLC is not a person and cannot write code. Its owner can. That owner is the author, and unless they executed an assignment to their own entity, the entity has nothing to convey to you, no matter how confident the vendor agreement sounds. Most solo consultancies have never done this. Their accountant set up the S-corp for tax reasons and nobody involved was thinking about copyright.
We watched it detonate at a fintech in Irvine two years ago. Series B, mid-diligence. Their entire ingestion layer had been built by one very good data engineer working corp-to-corp through his own LLC. His agreement with the client was fine. His agreement with himself did not exist. Nobody had asked. The buyer’s counsel spotted the gap, the engineer had since moved to a competitor, and closing the loop took a retroactive assignment, a lawyer on both sides, and about $18,000 in fees for something that would have cost one signature at kickoff. Six weeks. On a deal timeline where six weeks is a real number.
He was not being difficult, incidentally. He signed the moment they asked. That is usually how it goes, which is exactly why the fix is so cheap when you do it early and so ugly when you do not.
The W2 row deserves a second look too. When a contractor is employed by a staffing firm, the firm is the employer, so the firm becomes the author under the work-made-for-hire rule. Your ownership comes entirely from what the master services agreement says next. If that MSA has a strong confidentiality section and nothing that reads “hereby assigns,” you have a vendor holding your source code. Ask us for our language. Ask any firm for theirs. It is a fair question, and the answer takes about thirty seconds.
The Clause Everyone Copies Is the One That Bites in California
Belt and suspenders is good instinct. In California it carries a price tag.
Go read California Labor Code section 3351.5(c). It pulls into the definition of “employee” anybody engaged by contract to create a specially ordered or commissioned work of authorship, where the parties agree in writing that the thing is a work made for hire and the commissioning party takes the copyright. The Unemployment Insurance Code says the mirror image of that from the employer side.
Read what that does. Drop a work-for-hire clause into an independent contractor agreement in California and you have signed a document that makes that contractor your statutory employee for workers’ compensation and state disability purposes. Not a factor in a test. A definition.
So a clause added for safety creates the exact exposure the independent contractor structure was meant to avoid. Companies in Irvine, San Jose, and San Francisco run into this constantly, usually because the template came from a New York firm or a Delaware incorporation packet and nobody re-read it against California code.
The workaround is not complicated. Use a straight assignment. Say the contractor “hereby irrevocably assigns” all right, title, and interest in the work product, skip the work-for-hire recital entirely for California engagements, and let the assignment do the job it was always doing anyway. Your counsel will have a view on this. Give them the citation and let them have it.
If the classification question underneath all of this is still open on your side, our breakdown of W2, 1099, and corp-to-corp engagement models takes the tax and misclassification side apart separately.
Copyright Was the Easy Half
Patents run on different rules. Plenty of assignment clauses quietly fail at them.
An invention belongs to the inventor. Not the funder, not the employer, not the company whose problem it solved. It moves by assignment, and the tense of the verb in that assignment decides whether it moved at all.
“Agrees to assign” is a promise to do something later. “Hereby assigns” transfers the interest the moment the invention exists. That distinction is not drafting fussiness. It is what sank Stanford’s claim in Stanford v. Roche, the case that reached the Supreme Court in 2011. A researcher’s later agreement using present-tense language beat Stanford’s earlier agreement using future-tense language, and Stanford lost patents it had spent years assuming it owned.
Which matters for exactly the engagements you would expect. Firmware. Medical device work. Anything with a novel algorithm in it. A contract firmware engineer at a device manufacturer we staffed for signed a perfectly standard agreement full of “will assign” language, invented something patentable in month four, and then took a job elsewhere before the filing. Getting his signature took the client’s IP counsel two months and a favor. He was happy to help. He was also on a different continent by then.
Two sentences of fix. Present tense, plus a further-assurances clause that obligates cooperation on filings after the engagement ends, including a power of attorney if the person goes unreachable.
Nobody Can Hand You Rights a Machine Created
This part is new. It is also the part where the contract cannot save you.
In January 2025 the Copyright Office published Part 2 of its report on copyright and artificial intelligence, and its conclusion was direct. Human authorship is required. Prompts alone, however long and however carefully iterated, do not make the person typing them the author of what comes back. What is protectable is human expressive input that survives into the output, plus creative selection, arrangement, and modification of whatever the model produced.
Set that next to the 2025 Stack Overflow Developer Survey, where 84 percent of developers said they use or plan to use AI tools in their workflow, up from 76 percent the year before. Trust went the other way. Only 29 percent said they trust its accuracy.
Now do the arithmetic on your assignment clause. An assignment transfers the rights the contractor has. If a meaningful share of a deliverable was generated rather than written, there may be less there to transfer than either party assumed, and no amount of contract language creates copyright where the statute says none exists.
Nobody has clean guidance on this yet. The clients handling it sensibly are doing three unglamorous things. They ask in the SOW which AI tools were used and where. They keep commit history and design docs, because that record is what later shows a human made the decisions. And they quietly stop treating the copyright clause as the real protection, because for generated output it is not. Trade secret law does not care who authored something. It cares whether you kept it quiet.
I am glossing over a genuinely unsettled area of law here, and the honest answer is that this one is going to move.
What We Put in Our Own Paperwork
Since I disclosed the bias, here is the specific thing it buys you.
Our W2 contractors sign an assignment to KORE1 at onboarding, before the first day, and our client MSA assigns work product forward to the client. Two links, both papered. Neither depends on anybody’s memory. When a client’s counsel asks for the chain, we send the chain.
That structure is also why we push W2 for anything that produces durable IP. We have been placing technologists since 2005 in 30-plus U.S. metros, with a recruiting bench averaging 15-plus years apiece, and our twelve-month retention on placements sits at 92 percent against an average IT time-to-hire of 17 days. Retention matters here more than it looks. The person who is still reachable in month fourteen is the person who signs the further-assurances document when your patent counsel calls.
Where somebody is running a real consultancy and corp-to-corp is honestly the right shape, we set it up that way, and then we ask their entity for proof of the internal assignment before anyone starts. Some vendors have it ready. Some go quiet for a week and come back with a freshly executed document, which is fine, and which is a lot better than finding out during diligence.
For deliverable-shaped work where you are buying a defined outcome rather than a person’s time, project-based staffing handles the SOW side and the IP terms sit in the statement of work itself. If the role is permanent and the code is the product, direct hire placement removes the question altogether, because an employee’s work is yours by default.
Where This Usually Gets Argued
We hired through a staffing firm. Doesn’t that mean we own it?
Two assignments have to exist, not one. The firm employs the worker, so the firm is the author under work-made-for-hire, and your ownership comes only from what the MSA does next. Search your agreement for the word “assigns.” If it appears only in the confidentiality section, you have a gap. Most reputable firms will fix it in an amendment the same week, because they are not trying to own your code and have no use for it.
Our agreement says “work made for hire.” Is that enough for software?
Not for software. The nine categories in section 101 do not include code, so the recital transfers nothing on its own. Pair it with a present-tense assignment and the pair works: the recital covers anything that does qualify, the assignment catches everything else. In California, skip the recital entirely and use the assignment alone.
Our contractor used GitHub Copilot for most of it. Does that change what we own?
Possibly, and not in a way a contract can fix. The Copyright Office’s January 2025 report holds that prompting alone does not create human authorship, so purely generated portions may not be protectable at all. You still own everything your contractor actually authored, plus their creative selection and arrangement of what the model returned. Ask for disclosure in the SOW and lean on confidentiality and trade secret terms for the rest.
Does an NDA cover any of this?
An NDA keeps a secret. It does not move ownership. A contractor can be fully bound not to disclose your codebase and still be its legal owner, which means they can license it elsewhere in a form that does not reveal anything confidential. The two documents solve different problems and companies conflate them constantly.
There is already code in production with no assignment on file. Now what?
Common, fixable, and much cheaper today than during diligence. Get a retroactive assignment signed, worded to cover work already delivered, before the person becomes hard to reach. The cost is a signature while the relationship is warm. It is a lawyer, a search for a forwarding address, and a negotiation once it is cold. We have seen that gap run five figures.
Is it worth negotiating IP terms on a six-week engagement?
Six weeks of throwaway integration work, probably not worth a redline. Six weeks of anything that ships, absolutely. The test is not duration. It is whether the output will still be running when somebody does diligence on your company, and a two-month contract can easily produce code that outlives three CTOs.
Go Look at What You Actually Signed
Pull the last contractor agreement you executed. Find the word “assigns.” Check its tense.
If it says “agrees to assign,” you have a promise. If it says nothing at all and leans on work-for-hire language, you have a recital that does not reach software. If the person was engaged corp-to-corp, go one level further and ask whether their entity holds an assignment from the human who did the typing, because that is the link that fails most often and the one nobody thinks to check.
Fifteen minutes with a contract you already have. That is the whole exercise, and it is a better use of an afternoon than most things on your calendar this week.
If you would rather have someone read the staffing side of it with you, bring it to our recruiting team and we will map the engagement structure with you before the req goes out. If contract rates are the open question instead, our 2026 tech contractor rate breakdown covers what those hours actually cost. And if you want the wider view of how contract engagements fit alongside permanent hiring, the IT staffing services overview is the place to start.
