Who owns the code? What Indian businesses should check before they pay a developer.

The short answer

If your employee writes code as part of their job, your company owns it. If a freelancer or a development company writes it, they own the copyright until they assign it to you in writing. Paying the invoice is not enough on its own.

What the Act says

Code is a literary work

The Act defines a computer programme as a set of instructions that can make a computer perform a task or achieve a result. It says a literary work includes computer programmes, tables and compilations, including computer databases (section 2(ffc) and 2(o)). So your source code has the same copyright protection as a book.

The author is the first owner (section 17)

The author of a work is the first owner of its copyright. The main exception covers employees. When an employee makes a work in the course of their employment under a contract of service, the employer is the first owner, unless they have agreed otherwise (section 17, clause (c)).

A freelancer or an outside development company is not your employee, so this exception does not help you. The freelancer, or the company whose staff wrote the code, is the first owner. You become the owner only through an assignment.

An assignment must be in writing and signed (sections 18 and 19)

Copyright can be assigned in full or in part. You can also take an assignment of work not yet created, which takes effect when the work comes into existence (section 18(1)). But an assignment is valid only if it is in writing and signed by the person assigning it or their authorised agent (section 19(1)).

The assignment must identify the work and state the rights assigned, how long the assignment lasts and where it applies (section 19(2)). It must also state the royalty or other consideration payable (section 19(3)). For a software project, that is usually the project fee.

The gaps the law fills, and why you should not rely on them

• No period stated: the assignment is treated as lasting five years from the date of assignment (section 19(5)).
• No territory stated: the assignment is presumed to cover India only (section 19(6)).
• Rights not used within a year: if you do not exercise the assigned rights within one year, the assignment of those rights is treated as lapsed, unless the assignment says otherwise (section 19(4)).
• New media: an assignment does not cover a medium or mode of use that did not exist, or was not in commercial use, when it was made, unless the assignment specifically mentions it (section 18(1), second proviso).

A careless one-line clause can leave you owning your own product for five years, and in India only. A good assignment states the full term of copyright, every country, and that the rights do not lapse if unused.

Moral rights stay with the author (section 57)

Even after an assignment, the author keeps the right to claim authorship and to object to distortion or changes that would harm their honour or reputation. For code, the Act says the author cannot object to adaptations of a computer programme covered by section 52(1)(aa). For designs, illustrations and written copy, moral rights matter more. Many contracts include the author's promise not to enforce these rights. Ask your lawyer how far that works in your case.

Licences follow the same rules (sections 30 and 30A)

A licence must also be in writing, and the rules in section 19 apply to licences too. If your developer licenses you their own tools or code libraries rather than assigning them, the licence should say it is permanent, worldwide and royalty-free. Otherwise the five-year and India-only defaults can apply to it.

Code written with AI tools

For a computer-generated work, the Act names as author the person who causes the work to be created (section 2(d)(vi)). How this applies to code written with AI assistants is not settled. Keep it simple: the contract should assign to you everything the developer delivers, however it was produced.

What investors and buyers check

When you raise money or sell the business, the investor's or buyer's lawyers check that the company owns its product. Expect to be asked for:

• a signed assignment from each founder for code written before the company was formed, because until then it belongs to the founder personally;
• employment contracts with a clear IP clause for every employee who worked on the product;
• signed assignments from every freelancer and outside company, with the term, territory and payment stated;
• proof that the domain, cloud, code repository and app store accounts are in the company's name;
• a list of open-source components and their licences.

Gaps can delay a funding round or lower the price. Fixing them before due diligence is much easier than fixing them during it.

Code is only part of it

Ownership problems are usually practical before they are legal. A developer who controls your domain, hosting or app store account can stop your business even if the paperwork is perfect. Check that your company holds:

• the domain name, with your company as the registrant;
• the hosting and cloud accounts, in your company's name and paid with your card;
• the code repository, in your company's own GitHub, GitLab or Bitbucket organisation;
• the Apple and Google developer accounts for any app;
• the analytics, payment gateway, WhatsApp Business Platform and email accounts, with you as the owner.

Open-source code

Almost every product uses open-source components. They stay under their own licences, which is normal. Some licences, such as the GPL and AGPL, carry duties that matter for commercial software. Ask your developer for a list of open-source components and their licences, and keep it with your IP paperwork.

What to put in the contract

1. An assignment to your company of the copyright and other IP in everything delivered, including work not yet created, signed by the developer.
2. The full term of copyright and every country, with wording on new media that your lawyer drafts with section 18 in mind.
3. A statement that the assigned rights do not lapse if you do not use them within a year.
4. The consideration, usually the project fee, stated in the document.
5. A permanent, worldwide, royalty-free licence for any of the developer's existing tools built into your product.
6. A list of open-source components and their licences.
7. A duty to hand over code, credentials and documentation when the work ends.

This is the approach our own terms take. Whoever you hire, ask your lawyer to review the contract. They can also tell you whether stamp duty applies in your state.

If you already have a gap

It is usually fixable. Ask the developer to sign a confirmatory assignment of the work already done, using your lawyer's wording, and move the accounts into your company's name as soon as you can. If the developer cannot be reached, a lawyer can advise on your options. Our project rescue audits flag these gaps as part of the review.