Work Product Ownership: Who Owns What You Create?
When you provide services in exchange for equity, the question of who owns the work you create is critical. The answer depends on your employment status, the type of work, and the specific agreements you sign.
The Work for Hire Doctrine
Under U.S. copyright law, "work for hire" means the employer or commissioning party owns the copyright from the moment of creation. The creator has no ownership rights whatsoever.
Work is automatically work for hire in two situations:
- Employee work: Work created by an employee within the scope of their employment belongs to the employer automatically.
- Commissioned work: Work specially ordered or commissioned falls under work for hire ONLY if it fits one of nine statutory categories AND there is a written agreement signed by both parties stating it is work for hire.
The Nine Work for Hire Categories
For commissioned work to be work for hire, it must fall into one of these categories:
- Contribution to a collective work
- Part of a motion picture or audiovisual work
- Translation
- Supplementary work (forewords, illustrations, etc.)
- Compilation
- Instructional text
- Test or answer material
- Atlas
- Sound recordings (added in 1999)
Notice: Software, websites, and most custom creative work do NOT fall into these categories. Work for hire does not apply automatically to most contractor work.
Contractor vs. Employee: It Matters
If you are an independent contractor (not an employee), work for hire does not apply automatically to most types of work. The company needs an IP assignment agreement to own your work.
Common Misconception
Many startups assume they automatically own everything a contractor creates simply because they paid for it. This is false. Without a proper IP assignment clause, contractors may retain ownership of code, designs, content, and other deliverables, even if they received equity compensation.
IP Assignment vs. Licensing
There are two fundamentally different ways to transfer intellectual property rights: assignment and licensing. Understanding the difference is crucial for negotiating equity-for-services deals.
IP Assignment
An assignment is a complete transfer of ownership. The assignor gives up all rights, and the assignee becomes the full owner. It is like selling a house you no longer own it after the sale.
- Complete transfer: All rights transfer permanently
- Irrevocable: Cannot be taken back (absent fraud or breach)
- Registration: Can be recorded with USPTO/Copyright Office
- Future rights: Typically includes derivative works
IP License
A license is permission to use IP while the licensor retains ownership. It is like renting a house the owner still owns it and can impose conditions on its use.
- Permission only: No ownership transfer
- Conditions apply: Scope, duration, territory, exclusivity
- Revocable: May be terminated per agreement terms
- Types: Exclusive, non-exclusive, sole license
When to Use Each
Assignment: Best for core business IP, company branding, critical software, anything the company needs to own outright.
License: Better for tools, libraries, reusable components, portfolio samples, and situations where the creator wants to use the work elsewhere.
Sample IP Assignment Clause
Sample Work Product Assignment Clause
Assignment of Work Product. Contractor hereby irrevocably assigns to Company all right, title, and interest in and to any and all Work Product, including all Intellectual Property Rights therein. "Work Product" means all inventions, discoveries, works of authorship, developments, improvements, designs, code, documentation, and other materials that Contractor solely or jointly creates, conceives, develops, or reduces to practice in connection with the Services.
Further Assurances. Contractor agrees to execute any documents and take any actions reasonably requested by Company to evidence, perfect, or protect Company's rights in the Work Product, including patent and copyright applications.
Moral Rights Waiver. To the extent permitted by applicable law, Contractor waives any and all moral rights in the Work Product, including rights of attribution, integrity, and disclosure.
Background IP Exclusions
Background IP (also called "prior IP" or "pre-existing IP") is intellectual property that the service provider owned before the engagement began. Properly excluding background IP from assignment is essential for protecting your existing work.
Why Background IP Matters
Without a clear background IP exclusion, you might accidentally assign to the company:
- Code libraries you developed over years
- Design templates and frameworks
- Proprietary tools and utilities
- Prior client work you have rights to reuse
- Personal projects you want to commercialize
The Overbroad Assignment Trap
Many standard IP assignment clauses assign "all intellectual property created during the term of this agreement" without exclusions. If you sign such a clause without modification, you could be assigning your pre-existing work, your side projects, and even work you do for other clients during the same period.
Negotiating Background IP Exclusions
Always negotiate to add a Background IP Schedule that lists specific exclusions:
Background IP Schedule Template
| Item |
[Name of pre-existing IP] |
| Description |
[Brief description of what it is] |
| Date Created |
[When you created or acquired it] |
| Ownership |
[Confirm you own it or have rights to use] |
| Permitted Use |
[How it may be used in the project] |
| License Granted |
[If any license granted to Company] |
Sample Background IP Clause
Sample Background IP Exclusion Clause
Background IP Exclusion. Notwithstanding the foregoing, the assignment of Work Product shall not include any Background IP. "Background IP" means any Intellectual Property that: (a) Contractor owned or had rights to prior to the Effective Date; (b) Contractor develops independently outside the scope of the Services without use of Company resources or Confidential Information; or (c) is listed on Exhibit A (Background IP Schedule).
License to Background IP. To the extent any Work Product incorporates or is derived from Background IP, Contractor hereby grants Company a non-exclusive, royalty-free, perpetual, irrevocable, worldwide license to use, modify, and sublicense such Background IP solely as incorporated in the Work Product.
Document Everything
Create your Background IP Schedule BEFORE you start work. Include all relevant prior work, even if you are not sure you will use it. It is easier to exclude something upfront than to prove you owned it later.
Pre-existing Materials and Third-Party Components
Modern development and design work typically incorporates pre-existing materials: open source libraries, stock assets, licensed fonts, and third-party components. How these are handled in equity-for-services agreements matters.
Categories of Pre-existing Materials
- Open source software: Subject to various licenses (MIT, GPL, Apache, etc.) with different requirements
- Stock assets: Photos, icons, illustrations purchased with license terms
- Licensed fonts: Often have restrictions on embedding and redistribution
- Third-party APIs: Subject to terms of service and usage limits
- SaaS components: Subscription-based tools integrated into deliverables
Open Source License Compliance
Different open source licenses have different requirements:
- MIT/BSD: Very permissive, require attribution only
- Apache 2.0: Permissive, requires attribution and patent grant
- GPL: Copyleft, may require derivative works to be open source
- AGPL: Strong copyleft, applies to network use
Disclose which open source components you use and ensure the company understands any license obligations.
Handling Third-Party Materials
Your agreement should address:
- Disclosure: List all third-party materials incorporated in deliverables
- License compliance: Confirm materials are properly licensed for intended use
- Assignment limitations: You cannot assign IP you do not own
- Ongoing costs: Who pays for subscription services after handoff?
- Indemnification: Who bears risk of license violations?
Confidentiality Obligations
Equity-for-services arrangements typically involve access to confidential business information. Understanding your confidentiality obligations protects both parties.
What Constitutes Confidential Information
Typically includes:
- Business plans and financial projections
- Customer lists and pricing information
- Product roadmaps and technical specifications
- Marketing strategies and competitive analysis
- Trade secrets and proprietary processes
- Source code and technical documentation
Standard Exclusions
Information is typically NOT confidential if it:
- Was publicly available before disclosure
- Becomes publicly available through no fault of the recipient
- Was already known to the recipient before disclosure
- Is independently developed without use of confidential information
- Is rightfully obtained from a third party without restriction
Duration of Confidentiality
Confidentiality obligations often survive termination of the relationship. Trade secrets may be protected indefinitely. Make sure you understand how long your obligations last, especially if you plan to work with competitors in the future.
Portfolio Rights for Designers and Developers
Creative professionals need to show their work to get future clients and jobs. Negotiating portfolio rights is essential even when you assign IP to the company.
What Portfolio Rights Include
Portfolio rights typically allow you to:
- Display screenshots or images of the work
- Describe the project and your role
- Share the work in job applications and interviews
- Include in case studies (with limitations)
- Present at conferences and in educational settings
What Portfolio Rights Exclude
Portfolio rights typically do NOT allow:
- Redistribution of source code or design files
- Commercial use or resale of the work
- Disclosure of confidential business information
- Modification or creation of derivative works
- Use of company trademarks without permission
Sample Portfolio Rights Clause
Portfolio License. Notwithstanding the assignment of Work Product to Company, Company grants Contractor a non-exclusive, royalty-free, perpetual license to use samples of the Work Product solely for Contractor's portfolio, self-promotional materials, and job applications. Such use shall be limited to screenshots, images, and general descriptions of Contractor's contributions and shall not include disclosure of Confidential Information, source code, or proprietary algorithms.
Attribution. When displaying Work Product pursuant to this license, Contractor shall credit Company as the client or owner of the work unless Company requests otherwise in writing.
Timing. Contractor agrees not to publicly display Work Product until [30/60/90] days after public launch of the applicable product or feature, or upon Company's earlier written approval.
Negotiate Early
Portfolio rights are much easier to negotiate before you start work. Once the project is complete and the company has what they need, they have less incentive to grant additional rights. Include portfolio rights in your initial agreement.