Who Owns the IP You Paid For? Developer and Supplier Contracts

One of the most consequential and least understood principles of Australian intellectual property law is this: the person who creates a work generally owns the intellectual property in it, regardless of who paid for it, unless ownership has been assigned in writing. A business that commissions a developer to build its software, a designer to create its logo, or an agency to develop its website may have paid in full and still not own the asset it paid for.

This article explains how IP ownership works in commissioned work, the difference between ownership and a licence, the specific issues that arise with software and source code, and how to secure ownership through properly drafted contracts. It is a practical overview, not legal advice. Speak to a lawyer before relying on or transferring any intellectual property.

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The default rule: the creator owns it

Under the Copyright Act, copyright in most works, including software, designs, drawings, written material, and websites, vests initially in the author or creator. There is a limited exception for works created by employees in the course of their employment, where the employer is generally the owner. But there is no equivalent default for independent contractors. When a business engages a contractor, the contractor is the author, and absent a written assignment, the contractor retains ownership of the copyright, even though the business commissioned and paid for the work.

This is the gap that catches businesses out. The commercial expectation, that paying for it means owning it, is not the legal position. The invoice records payment for a service; it does not transfer ownership of the resulting IP.

Ownership versus licence: a critical distinction

Where there is no express assignment, a court may imply a licence permitting the business to use the work for the purpose for which it was commissioned. But an implied licence is a weak and uncertain right. It may be limited in scope, it may not permit modification, it may not be transferable to a buyer of the business, and its exact terms are a matter of inference rather than agreement. Many contractors also expressly grant a licence while retaining ownership, a common and legitimate model, but one the business must understand it is accepting. A licence is permission to use; ownership is the asset itself. Only ownership can be freely modified, transferred, licensed to others, and sold with the business.

The economic consequence: value that cannot be sold

The point at which unclear IP ownership becomes most costly is at a transaction. When a business is sold or raises capital, the buyer or investor conducts due diligence, and one of the central questions is whether the business owns the intellectual property it depends on. If the software, the brand, or the platform was built by contractors without written assignments, the due diligence process will surface it. The consequences are predictable: a reduced valuation, a delay while assignments are chased from contractors who may no longer be cooperative or contactable, indemnities and holdbacks to cover the risk, or, in the worst case, a collapsed transaction. IP that cannot be shown to be owned is IP that cannot be confidently sold.

Software and source code: special considerations

Where the commissioned work is software, ownership is only part of the picture. A business that owns the copyright in its software but does not hold the source code, or lacks access to the repositories and development environment, may be unable to maintain or develop the product if the relationship with the developer ends. Three things should be addressed in any software development contract: assignment of ownership of all code and deliverables; delivery of, and ongoing access to, the source code and related materials; and, for critical systems, a source code escrow arrangement under which the code is held by a third party and released to the business on defined trigger events such as the developer’s insolvency.

Moral rights

Separate from ownership of copyright, the individual creator of a work holds moral rights, including the right to be attributed as the author and the right against derogatory treatment of the work. Moral rights cannot be assigned, but the creator can consent to acts that would otherwise infringe them. A well-drafted contract includes a moral rights consent so that the business can use, modify, and reproduce the work without attribution concerns.

Pre-existing and third-party IP

Contractors frequently incorporate pre-existing materials, such as their own tools, libraries, frameworks, or stock assets, into commissioned work. The contract should make clear what is being assigned (the new, bespoke work) and what is being licensed (any pre-existing or third-party material), and should warrant that the contractor has the right to grant what it purports to grant, with an indemnity for third-party IP infringement. A business that unknowingly builds on infringing or improperly licensed material inherits that risk.

What a proper IP clause should contain

  • A present assignment of all intellectual property in the deliverables to the business, taking effect on creation.
  • A clear treatment of any pre-existing or third-party material, by licence rather than assignment, with appropriate scope.
  • A moral rights consent from each individual creator.
  • An obligation to deliver source files, source code, and access, and to provide further assistance to perfect the assignment if required.
  • Warranties that the work is original and does not infringe third-party rights, supported by an indemnity.
  • For software, a source code escrow arrangement where the system is business-critical.
Make Sure Your Business Owns The IP It Paid For
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Paying a developer, designer, or supplier does not always mean your business owns the intellectual property. CMI Legal can review your contracts and help secure proper IP assignment before a dispute or sale.

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If you have already commissioned work without an assignment

Many businesses discover this issue only after the fact, having already paid for software, branding, or a website without a written assignment. The position is recoverable, but it requires action while the relationship with the contractor remains cooperative. A confirmatory deed of assignment, executed now, secures ownership before the question arises in a transaction or a dispute. The longer it is left, the greater the risk that the contractor is unavailable, uncooperative, or in a position to extract value for what should have been transferred at the outset.

CMI Legal advises Sydney businesses on IP ownership, assignment and licensing, developer and agency contracts, source code and escrow arrangements, and IP due diligence for sales and capital raises. Book a free 15-minute consultation to confirm your business owns the assets it depends on.

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I’ve been incredibly lucky to have Tina as my solicitor. She has been outstanding throughout the entire contract exchange and settlement process. She is always the first to respond, timely, and extremely efficient. Her attention to detail is exceptional, and she consistently makes sure everything is in the buyer’s best interest. Super attentive, helpful, and genuinely caring. I wouldn’t hesitate to recommend Tina to anyone looking for reliable and professional legal services.
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I was very fortunate to have Tina TANG from CMI as my conveyancing solicitor for the recent sale of my property. She demonstrated exceptional professionalism and dedication throughout the entire process — from preparing the contract, exchanging contracts, right through to settlement. What impressed me the most is that even after settlement, she continued to go above and beyond to assist me as the vendor, making sure everything was properly taken care of.

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We had the pleasure of working with Tina as our solicitor for our first home purchase, and we couldn’t have been in better hands. She carefully explained every step of the process, guiding us through what initially felt overwhelming and unfamiliar. Buying off the plan made us particularly cautious, especially when it came to reviewing legal documents. Tina’s meticulous approach put us at ease—she ensured we both clearly understood each aspect, taking the time to highlight and reorganise information to make it more accessible. Her dedication and professionalism made the entire experience far less daunting, and we’re truly grateful for her support.
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