A Client Wants To Own All The IP In Your Work - What Should You Check Before Agreeing?

A client sends you a contract, but there’s a catch - they want to own all the intellectual property in the work you create.

That may be completely reasonable for the final deliverables they are paying for. The issue is that some IP clauses are drafted broadly enough to cover more than just the finished work. If your business uses existing templates, systems, code, frameworks or processes to create the deliverable, those materials could also fall within the wording unless they are clearly excluded.

For example, a client may reasonably expect to own a logo designed specifically for their business. That does not necessarily mean the designer should also give up ownership of the tools, templates or methods they use across other projects.

The key is to work out what the client should own, what your business needs to keep, and whether the contract makes that distinction clear.

What Does It Mean To Give A Client The IP?

A client paying for a piece of work does not necessarily mean they automatically own all of the intellectual property in it. Who owns the IP will depend on what has been created, who created it and what the parties have agreed.

Where a client is meant to receive rights to the IP, this will commonly happen through an assignment or a licence.

An assignment transfers ownership of the relevant IP. A licence allows someone to use IP without necessarily becoming its owner.

For example, a developer might create a custom website for a client using a framework they have built and refined across many different projects. The parties might agree that certain elements created specifically for the client will belong to them, while the developer keeps ownership of the underlying framework and gives the client the rights needed to use it as part of the website.

For copyright specifically, an assignment generally needs to be in writing and signed by or on behalf of the person assigning it.

If ownership needs to be transferred formally, an IP Assignment Deed can document what is being transferred and on what terms.

What Exactly Is The Client Asking To Own?

Before deciding whether an IP clause is reasonable, look closely at what it actually covers.

There can be a big difference between a clause saying the client owns the final deliverables created specifically for the project and one saying the client owns all intellectual property created, developed, used or incorporated in connection with the services.

The second version can go much further.

Imagine a marketing agency creates a campaign for a client. The final artwork and copy might have been developed specifically for that business, but the agency may have created them using an existing reporting framework, briefing process, template library or internal methodology.

Those underlying materials might never be handed over as separate deliverables. However, if the wording is broad enough, questions can still arise about whether they have been swept into the IP being transferred.

The same issue could arise where a developer uses an existing code library to build custom software, a consultant adapts their standard assessment framework or a designer uses a system or template they rely on across multiple projects.

This is why it is worth checking how terms such as Intellectual Property, Work Product, Project Materials or Developed IP are actually defined in the contract.

This is also where background IP becomes important.

What Is Background IP?

In commercial agreements, background IP is commonly used to describe intellectual property a party already owns, or develops independently of the particular project.

Depending on the business, that might include templates, code libraries, software, frameworks, systems, methodologies or standard materials.

Take a consulting business that has spent years developing its own business assessment methodology.

A client hires the consultant to review its operations and prepare a customised report. The report itself may contain analysis and recommendations created specifically for that client. The methodology used to create it, however, might be something the consultant uses across almost every engagement.

If the agreement simply assigns all IP used or created in connection with the services, the consultant needs to check whether that wording could also affect the methodology sitting behind the report.

That matters because giving away ownership of something your business depends on across future projects is very different from transferring ownership of one bespoke deliverable.

Can The Client Own The Deliverable While You Keep Your Background IP?

Yes. Depending on the project, the contract can distinguish between new IP created specifically for the client and the background IP the supplier already owns.

For example, a client might own a bespoke report, design or piece of software created specifically for the engagement, while the supplier keeps ownership of its existing templates, systems or reusable code.

Sometimes the two cannot be completely separated.

A software developer might build a bespoke platform for a client using code the developer already relies on across other products. The client still needs to be able to use the platform properly, but that does not necessarily mean they need to own every piece of underlying code.

The agreement might therefore transfer ownership of certain project-specific IP while giving the client a licence to use the background IP that sits within the finished product.

That kind of arrangement can give the client the rights they actually need without forcing the supplier to give up assets they use elsewhere in the business.

Where background IP needs to stay with one party but be used by the other, an IP Licence can help set out how that material can be used.

What About Reusing Your Work?

This is where a broad IP clause can create problems well beyond the current project.

Say a developer has built a library of generic components that they reuse to make projects faster and more efficient. While working for one client, they use some of those existing components and develop another generic function that could also be useful in future projects.

The client may have a legitimate reason to own the custom software built specifically for them. But if the contract says the client owns everything created or used during the engagement, the developer needs to consider whether that wording could also capture components they would normally continue using elsewhere.

The same issue can arise with an agency's reporting framework, a consultant's methodology or a designer's templates.

This does not mean a supplier should be free to reuse a client's confidential information or bespoke work for somebody else. Those are separate issues.

The question is whether the contract clearly separates client-specific IP from the underlying tools, systems and materials the supplier needs to continue running their own business.

If it does not, an agreement intended to give the client ownership of their particular project could have much wider consequences.

Does The Client Actually Need To Own Everything?

Sometimes they do.

If a client commissions an agency to create a bespoke brand identity, for example, they may have good commercial reasons for wanting ownership of the final logo and other unique brand assets.

A business commissioning custom software might similarly want ownership of code developed specifically for its core product.

In other situations, though, ownership may not actually be what the client needs.

They might mainly want certainty that they can continue using the finished work, modify it, commercialise it or bring another supplier in to work on it later.

Depending on the project, those rights may be dealt with through a licence rather than transferring ownership of every piece of IP involved.

That is why it is worth asking what the client is actually trying to achieve. The answer may still be an assignment, but in some cases the better fit is for the client to own the bespoke deliverable while receiving appropriate rights to use any background IP sitting underneath it.

UK copyright guidance also recognises that where commissioned work is used without a clear ownership agreement, there may in some situations be an implied licence to use the work for the purpose for which it was commissioned. That does not necessarily mean ownership has transferred or that every possible use is permitted.

Clear wording is much safer than leaving those questions to be worked out later.

Do You Actually Have The Right To Transfer It?

Before promising to transfer IP to a client, check that your business actually owns what it is promising to give them.

A finished deliverable might include licensed fonts, stock photography, software libraries, plugins or other third-party materials. You may have permission to use those assets without owning them, which can limit what rights you are able to pass on.

The same issue can arise where freelancers or contractors have contributed to the project.

Under UK copyright law, an independent contractor will generally own the copyright in work they create unless the parties have agreed otherwise.

So if your agency promises a client ownership of a website, but part of that website was built by a freelance developer, you need to check whether your agreement with the developer actually gave your agency the rights it is now promising to the client.

Your agreements should line up in both directions.

A Contractor Agreement can deal with IP ownership alongside the work being provided, payment and other key terms.

The practical question is simple: do you own enough of the IP to give the client what you have promised?

When Does Ownership Transfer?

Even if both sides agree that the client will ultimately own certain IP, there is still another question: when does ownership actually transfer?

The contract might say ownership passes when the work is created, when it is delivered, once the project is completed or only when the client has paid in full.

That timing can be particularly important for suppliers.

For example, if ownership transfers as soon as the work is created but the client later fails to pay the final invoice, the supplier may already have transferred the relevant IP before receiving the full agreed price.

Another agreement might instead link the transfer to full payment.

There is no single structure that suits every engagement. The important thing is knowing what the agreement says rather than assuming ownership will transfer at the point you expect.

What Should You Check Before Signing?

Before agreeing to a client's IP clause, ask:

• What am I actually transferring? Is it the final bespoke deliverable, or does the wording go further?
• What existing IP am I bringing into the project? Check whether your templates, code, systems, frameworks or processes are clearly dealt with.
• Will I need to use any of this again? Make sure the agreement does not unintentionally restrict your ability to reuse your own underlying materials.
• Do I actually own everything I am promising to transfer? Check your contractor arrangements and any third-party materials used in the work.
• When does ownership transfer? In particular, consider how the clause interacts with delivery and payment.

An IP clause may only take up a few paragraphs of a contract, but it can determine who owns some of the most valuable things your business creates.

The Bottom Line

A client asking to own the IP in work created specifically for them is not unusual, and in many cases it makes commercial sense.

The issue is making sure the clause does not go further than either side intended.

The finished work created for the client, your existing business assets and the tools you use to produce that work are not necessarily the same thing. A clear agreement should spell out what is being transferred, what stays with you and what rights each side has to use anything that sits between the two.

If a client has sent you an agreement with a broad IP clause, a Contract Review can help you understand exactly what you would be giving up before you sign. You can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.