Tech Consulting IP Ownership Disputes Overview
Intellectual property ownership is one of the most contentious issues in California tech consulting relationships. Unlike employees, independent contractors may retain ownership of their work unless properly assigned. California's unique laws - including Labor Code 2870 and Business & Professions Code 16600 - provide significant protections that can invalidate overbroad IP assignment clauses.
Common tech consulting IP disputes include:
- Work-for-hire misclassification - Client claims ownership but independent contractors aren't automatically "employees" under copyright law
- Pre-existing IP disputes - Client claims ownership of tools, libraries, or code you brought to the project
- Invention assignment overreach - Client claims inventions developed on your own time
- Open source contribution conflicts - Disputes over contributions made during engagement
- AI/ML training data and model ownership - Emerging disputes over who owns trained models
- Trade secret misappropriation claims - Client alleges you took proprietary information
Work-for-Hire Doctrine (17 USC 101)
Copyright Act - 17 USC 101 Definition
A "work made for hire" is: (1) a work prepared by an employee within the scope of employment; or (2) a work specially ordered or commissioned for use as a contribution to a collective work, as part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation, as an instructional text, as a test, as answer material for a test, or as an atlas, IF the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire.
Critical Limitation for Tech Consultants
Most software and tech consulting deliverables do NOT fall into the nine enumerated categories for commissioned works. This means:
The Two-Prong Test
- Employee Work: Work created by an employee within the scope of employment (uses the common law agency test from Community for Creative Non-Violence v. Reid)
- Commissioned Work: Work specially ordered and fitting one of nine categories, with a signed written agreement
Reid Factors for Employment Status
Courts examine factors including:
- Skill required and source of tools/materials
- Location of work and duration of relationship
- Method of payment and hiring party's control
- Whether the hired party has discretion over when/how to work
- Tax treatment and employee benefits
| Work Type | Qualifies as WFH? | Ownership Solution |
|---|---|---|
| Custom Software/Code | NO (not in 9 categories) | Requires written assignment |
| Technical Documentation | MAYBE (supplementary work) | Written WFH agreement + assignment |
| Website Design | NO | Requires written assignment |
| Mobile App | NO | Requires written assignment |
| API/SDK | NO | Requires written assignment |
| Training Videos | MAYBE (audiovisual work) | Written WFH agreement + assignment |
California Labor Code 2870 - Employee Invention Rights
Labor Code Section 2870 - Invention Assignment Limitations
(a) Any provision in an employment agreement which provides that an employee shall assign, or offer to assign, any of his or her rights in an invention to his or her employer shall not apply to an invention that the employee developed entirely on his or her own time without using the employer's equipment, supplies, facilities, or trade secret information except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of the invention to the employer's business, or actual or demonstrably anticipated research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
Application to Independent Contractors
While Labor Code 2870 technically applies to "employees," California courts and the DLSE have increasingly applied similar principles to independent contractors, especially those who are misclassified or who work in employee-like arrangements under AB5.
What LC 2870 Protects
- Personal projects developed entirely on your own time
- Side businesses unrelated to the client's business
- Open source contributions to unrelated projects
- Inventions not using client equipment/facilities/trade secrets
Required Disclosure Notice
Under Labor Code 2872, employers must provide employees with a written copy of LC 2870 when requiring invention assignment agreements. Failure to provide this notice can affect enforceability.
Labor Code Section 2871 - Void Provisions
Any provision in an employment agreement purporting to require an employee to assign rights to inventions protected by Section 2870 is against public policy and unenforceable.
Business & Professions Code 16600 - Non-Compete Limitations
B&P Code Section 16600 - Void Restraints
Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.
Impact on IP Assignment Clauses
California's prohibition on non-competes affects IP ownership disputes in several important ways:
- Overbroad IP assignments that effectively prevent you from working in your field may be void
- Assignment of future inventions unrelated to the engagement may be unenforceable
- Non-solicitation provisions are void in California (except narrow trade secret exceptions)
- "Trailer clauses" requiring assignment of inventions after the engagement ends are suspect
Trade Secret Exception
B&P 16600 does not prevent protecting legitimate trade secrets under the California Uniform Trade Secrets Act (CUTSA). However, clients often overreach by claiming broadly that all client information is a "trade secret."
| Clause Type | Likely Enforceable? | Notes |
|---|---|---|
| Assignment of work product created for client | YES | Valid if properly drafted |
| Assignment of all inventions during engagement | PARTIAL | LC 2870 carve-out applies |
| Assignment of inventions for 1 year post-engagement | UNLIKELY | Likely void under B&P 16600 |
| Non-compete with any competitor | NO | Void under B&P 16600 |
| Non-solicitation of client's customers | NO | Void in California |
| Trade secret non-disclosure | YES | If properly limited to actual trade secrets |
Copyright Ownership vs. License Distinctions
One of the most common IP disputes involves confusion between ownership and licensing. A consultant may grant a license without transferring ownership - and vice versa.
Assignment vs. License
Copyright Assignment
Complete transfer of ownership. Client becomes the copyright owner with all exclusive rights. Must be in writing and signed by the assignor (17 USC 204).
Exclusive License
Grants exclusive rights but consultant retains underlying ownership. Must be in writing. Licensee can sue for infringement in their own name.
Non-Exclusive License
Consultant grants permission to use but retains ownership and can license to others. Can be oral or implied from conduct. Most flexible arrangement.
Implied License
Created by conduct when consultant delivers work and accepts payment, even without written agreement. Scope limited to intended purpose.
17 USC 204(a) - Writing Requirement
A transfer of copyright ownership, other than by operation of law, 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 or such owner's duly authorized agent.
Common Dispute Scenarios
No Written Assignment
Client paid for custom software but the agreement only says "consultant will develop software." Without explicit assignment language, consultant retains copyright ownership. Client may have an implied license to use the software for its intended purpose, but not ownership.
Pre-Existing Materials
Consultant uses existing frameworks, libraries, or code in the deliverable. Even with an assignment clause, pre-existing IP typically remains with the consultant (or third parties). Consultant should reserve a license to use their pre-existing materials.
Trade Secret Protection (CUTSA)
California Uniform Trade Secrets Act (Civil Code 3426-3426.11)
"Trade secret" means information, including a formula, pattern, compilation, program, device, method, technique, or process, that: (1) Derives independent economic value from not being generally known to the public or to other persons who can obtain economic value from its disclosure or use; and (2) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
CUTSA in Tech Consulting Disputes
Trade secret claims are frequently raised in tech consulting IP disputes. Clients may allege that departing consultants have misappropriated trade secrets, while consultants may claim their own methodologies are protected.
What Qualifies as a Trade Secret?
- Proprietary algorithms and source code (if kept secret)
- Customer lists and pricing information
- Business processes and methodologies
- Technical specifications and designs
- Training data sets and AI model weights (emerging area)
What Does NOT Qualify
- Generally known information or industry practices
- Information disclosed without confidentiality protections
- Skills, knowledge, and experience gained during engagement
- Publicly available code or open source software
- Information reverse-engineered from public products
Statute of Limitations
CUTSA claims must be brought within 3 years of when the misappropriation was discovered or should have been discovered (Civil Code 3426.6).
Remedies Under CUTSA
- Injunctive relief to prevent use or disclosure
- Damages for actual loss and unjust enrichment
- Exemplary damages up to 2x actual damages for willful misappropriation
- Attorneys' fees for bad faith claims or willful misappropriation
Open Source Contribution Issues
Open source software creates unique IP challenges in consulting relationships. Both consultants and clients may have legitimate concerns about open source use and contributions.
Common Open Source Disputes
GPL Contamination Claims
Client alleges consultant used GPL-licensed code without disclosure, potentially requiring client to open source their proprietary code.
Contribution Attribution
Disputes over whether consultant's open source contributions during engagement belong to consultant or client.
License Compliance
Client discovers deliverables include open source under restrictive licenses, claiming breach of "original work" representations.
CLA Requirements
Client's corporate open source policy conflicts with consultant's desire to contribute to community projects.
Key License Categories
| License Type | Example | Commercial Use Risk |
|---|---|---|
| Permissive | MIT, BSD, Apache 2.0 | LOW - Can include in proprietary software |
| Weak Copyleft | LGPL, MPL | MEDIUM - Modifications must be shared |
| Strong Copyleft | GPL, AGPL | HIGH - Derivative works must be open |
| Network Copyleft | AGPL | HIGHEST - SaaS use triggers obligations |
Protecting Your Open Source Contributions
Under California Labor Code 2870, open source contributions made entirely on your own time, without using client resources, and unrelated to client's business should remain yours. However, explicitly address this in your contract:
- Carve out existing open source contributions
- Reserve right to continue contributing to community projects
- Define what constitutes "client business" narrowly
- Retain right to contribute generic improvements back to community
AI/ML Model Ownership Disputes
Artificial intelligence and machine learning projects create novel IP ownership questions that existing law doesn't fully address. These disputes are increasingly common as AI consulting grows.
Key Ownership Questions
Training Data Ownership
Who owns or controls the training data? Client's proprietary data vs. consultant's curated datasets vs. publicly available data.
Model Architecture IP
The structure, layers, and design of the neural network. May be consultant's pre-existing expertise vs. custom work.
Trained Model Weights
The learned parameters after training. Derivative of both data and architecture - who owns the result?
Generated Outputs
Content generated by AI systems. Copyright status of AI-generated works is currently unsettled.
Current Legal Framework (Evolving)
- Copyright Office position: AI-generated works without human authorship are not copyrightable (Thaler v. Perlmutter, 2023)
- Model weights: May be protectable as trade secrets if kept confidential
- Training data: Original compilation may be copyrightable; fair use questions for training
- Architecture: Likely protectable if sufficiently original and documented
Practical Considerations
Structure AI/ML consulting agreements to address:
- Input data ownership: Client provides data under license vs. assignment
- Pre-existing consultant IP: Base models, training pipelines, architectures
- Work product: Custom-trained models, fine-tuned weights specific to client
- Residual knowledge: Consultant's right to use general learnings
- Improvement rights: Who owns improvements made to base models?
Trade Secret Consideration for AI/ML
Trained model weights may qualify as trade secrets under CUTSA if they: (1) derive economic value from being secret; and (2) are subject to reasonable secrecy measures. However, once a model is deployed, reverse engineering may be possible, potentially defeating trade secret status.
Code Repository and Version Control Ownership
Disputes frequently arise over access to and ownership of code repositories, version control history, and development infrastructure.
Common Repository Disputes
Repository Access After Termination
When an engagement ends, questions arise:
- Who controls the primary repository?
- Does the consultant retain a copy of the code?
- What about commit history showing consultant's contributions?
- Who owns forks, branches, and development branches?
Hosted Repository Considerations
| Scenario | Ownership Consideration | Best Practice |
|---|---|---|
| Consultant's GitHub account | Consultant controls access; client may have license only | Use client's organization/repo from start |
| Client's GitHub organization | Client controls access; consultant has contributor rights | Document consultant's retained license rights |
| Shared private repository | Depends on account ownership and contract terms | Clarify ownership in agreement |
| Forked public repository | Original license terms apply; fork may be owned by forker | Understand upstream license obligations |
Commit History as Evidence
Git commit history provides valuable evidence in IP disputes:
- Authorship proof: Commits show who wrote what code and when
- Timeline evidence: Demonstrates development sequence
- Contribution quantification: Lines of code, files modified
- Integration points: Shows where pre-existing code was incorporated
Development Environment IP
Don't forget associated infrastructure:
- CI/CD pipeline configurations
- Docker containers and deployment scripts
- Database schemas and migration scripts
- API keys, credentials, and secrets
- Documentation and technical specifications
Sample Demand Letters for IP Disputes
Use these templates as starting points. Customize with specific facts, agreements, and applicable law.
Demand: Client Claiming Ownership of Consultant's Pre-Existing IP
Demand: Consultant Asserting Work-for-Hire Doesn't Apply
Response to Trade Secret Misappropriation Allegation
When to Hire an IP Attorney
IP ownership disputes in tech consulting can determine who controls valuable code, algorithms, and data. Here's when you can handle matters yourself versus when professional representation is essential.
✅ May Handle Yourself When:
- Clear written agreement specifies IP ownership
- Dispute involves generic or commodity code
- Both parties willing to negotiate assignment terms
- No commercial use of disputed IP yet
- Simple license clarification needed
⚠️ Hire an Attorney When:
- Valuable proprietary algorithms or AI models at stake
- No written agreement or ambiguous terms
- Client is using your IP commercially without license
- Trade secrets may have been misappropriated
- DMCA takedown or copyright registration needed
- Multiple parties claim ownership
- Open source licensing compliance issues
- The other party has engaged legal counsel
📊 Not Sure If You Need an Attorney?
IP ownership disputes can affect your ability to use your own work in future projects. Take our free assessment to determine whether your situation warrants professional legal representation.
Frequently Asked Questions
No. Software code does not fall within the nine statutory categories for commissioned works-for-hire under 17 USC 101. For a commissioned work to be "work for hire," it must be: (1) specially ordered; (2) fall within one of nine categories (collective work, motion picture, translation, supplementary work, compilation, instructional text, test, answer material, or atlas); and (3) covered by a signed written agreement. Since software isn't in these categories, consultants retain copyright ownership unless they sign a written assignment.
Labor Code 2870 protects inventions you develop entirely on your own time, without using your employer's/client's equipment, supplies, facilities, or trade secrets, except for inventions that: (1) relate to the employer's business or R&D; or (2) result from work you performed for them. Any contract provision requiring assignment of protected inventions is unenforceable. While technically an "employee" statute, courts have applied similar principles to misclassified contractors and as public policy.
No. Business & Professions Code 16600 makes non-compete agreements void in California, with very narrow exceptions for sale of business goodwill and partnership dissolution. This includes: non-compete clauses, non-solicitation of customers clauses, and overbroad IP assignment clauses that effectively prevent you from working in your field. As of 2024, employers cannot even ask you to sign a void non-compete, and you can void prior agreements even if signed in other states.
An assignment transfers complete ownership - the client becomes the copyright owner with all exclusive rights. A license grants permission to use while you retain ownership. Assignments must be in writing signed by the owner (17 USC 204). Licenses can be exclusive (written, one licensee) or non-exclusive (can be oral/implied, multiple licensees). Even without a written assignment, clients typically receive an implied non-exclusive license to use deliverables for intended purposes.
This is legally unsettled and depends heavily on contract terms. Typically: Training data - client owns/controls their data but you may have rights to aggregate/anonymized data. Model architecture - likely your pre-existing IP if you brought it to the project. Trained weights - arguably derivative of both, ownership should be explicitly assigned. Generated outputs - may not be copyrightable at all if AI-generated without human authorship. Always address these issues explicitly in your contract.
Yes, if properly structured. Your pre-existing tools and frameworks should be carved out of any IP assignment. Reserve a broad license to use, modify, and sublicense your pre-existing IP. For new code, distinguish between client-specific implementations (assigned) and generic components you want to reuse (retained with license granted). Many consultants use a "residual knowledge" clause allowing them to use general skills, ideas, and techniques learned during an engagement.
It depends on the claim type. Copyright infringement: 3 years from when the claim accrued (17 USC 507). Trade secret misappropriation (CUTSA): 3 years from discovery or when it should have been discovered (Civil Code 3426.6). Breach of contract (written): 4 years (CCP 337). Breach of contract (oral): 2 years (CCP 339). Patent infringement: 6 years. Federal trademark: No statute but laches defense applies.
Include specific carve-outs in your consulting agreement: (1) Reserve existing open source contributions you've made; (2) Retain rights to contribute to community projects unrelated to client's business; (3) Define "client's business" narrowly; (4) Reserve rights to contribute generic improvements back to open source projects; (5) Cite Labor Code 2870 for contributions made entirely on your own time. Document your open source contributions before and during the engagement with dated commits.