Former contractor claiming he owns the code he wrote for us - we never signed IP assignment agreement

I'm freaking out. We hired a contractor in 2023 to build our core platform. Paid him $85K over 6 months. He did great work, we launched, everything was fine.

Now he's threatening to sue us claiming he owns the copyright to all the code he wrote because we never had him sign an IP assignment agreement. He wants $250K to "license" it to us or he says he'll file a DMCA takedown.

I just went through our paperwork and he's right - we have invoices and a basic SOW, but nothing about IP ownership. Our lawyer at the time apparently never sent the IP assignment agreement.

Are we completely screwed here? Can he really claim ownership of work we paid him to create?

I had this exact same issue in 2019. Contractor came back 2 years later claiming he owned the code. We settled for $25K and got a clean IP assignment.

Expensive lesson but cheaper than litigation. Now we have a checklist and won't even start work with a contractor until the IP assignment is signed.

For anyone reading this: get IP assignments signed BEFORE contractors start work. Not when they finish, not "eventually" - before they write a single line of code.

Final update: Settled at $45K. He signed a comprehensive IP assignment covering all past and future work, plus a release of all claims.

Painful but necessary. And we immediately had our lawyer draft IP assignment templates that we're now using with all contractors and new hires. Lesson learned teh hard way.

Thanks everyone for the advice and reality check.