What is Intellectual Property?

Intellectual property is a complex area of law, but its practical implications for contract management are relatively straightforward. The central question in every outsourcing agreement is: who owns what is created?

In software development, the default rule is that the creator holds the copyright unless the contract explicitly provides otherwise. A client who commissions a bespoke application but has not included an IP assignment in the contract has no ownership right to the source code. This is a common and costly mistake.

Many IT contracts use a licence structure rather than full assignment: the supplier retains ownership of the source code but grants the client an extensive licence to use it. That is often acceptable, provided the licence is broad enough and it is clear what happens when the contract ends.

The same mechanisms apply to marketing agencies, advertising studios, and design firms. Photographs, copy, logos, and other creative works are owned by their creator by default. Without an explicit assignment or broad licence, the client cannot use those works freely.

In employment relationships, works created in the course of employment are owned by the employer under copyright law. This does not apply automatically to freelancers and independent contractors.

IP clauses are rarely well-handled by SMEs until a dispute arises. If a supplier terminates the relationship, it may invoke its copyright and deny you access to your own website, software, or marketing material.

IP also matters when switching suppliers: can the new party continue with the existing code or materials? Without proper IP provisions, switching becomes expensive or impossible. A clear IP clause prevents lock-in and protects your investments.