This clause determines who owns new intellectual property created during the contract—the "work product" or "deliverables." It matters because IP ownership determines who can sell, license, or profit from the work after the contract ends. For example, if a software developer writes custom code for you, this clause decides whether you own that code or whether the developer retains ownership and merely licenses it to you. In both UK and US law, the creator typically owns what they create unless the contract says otherwise—so this clause is your chance to claim ownership of work you're paying for. High risk means getting this wrong can be extremely costly.
If you're paying someone to create something for you, insist on "full assignment" language stating that you own all new IP created under the contract, with no retained rights for the other party. If the other party resists, negotiate for exclusive ownership (they can't sell it to competitors) or a perpetual, royalty-free license to use it. Avoid vague language like "work made for hire"—instead use clear phrases like "all IP created shall be owned solely by [your company]." Get specific about what counts as "created under the contract" (does it include improvements they make after termination?).
Frequently Asked Questions
What does this clause mean in simple terms?
This clause determines who owns new intellectual property created during the contract—the "work product" or "deliverables." It matters because IP ownership determines who can sell, license, or profit from the work after the contract ends.
Why should I care about this clause?
For example, if a software developer writes custom code for you, this clause decides whether you own that code or whether the developer retains ownership and merely licenses it to you.
What are my options?
In both UK and US law, the creator typically owns what they create unless the contract says otherwise—so this clause is your chance to claim ownership of work you're paying for.
How does this affect small businesses?
High risk means getting this wrong can be extremely costly.