"Work for Hire" Won't Save Your Startup's Code: An Indian Founder Dispute

By Aristo Legal

We recently advised on a startup matter that plays out in some version almost every week across Bengaluru, Hyderabad and Pune, which is exactly why it's worth writing about.

Two founders team up. One brings the business - vision, capital, customer relationships. The other brings the tech, except he doesn't bring it personally: he routes it through a software services company he already owns, which deputes its engineers to build the new venture's product. Everyone shakes hands, the platform gets built, the company gets incorporated, and equity gets allotted - usually before anyone has stopped to ask a basic question: who actually owns the code?

The question surfaces, as it always does, at the worst possible time — when the startup is approaching investors, and due diligence starts pulling on every thread in the cap table. That's the moment someone finally asks for the paperwork proving the company owns its own platform, and that's the moment everyone discovers there isn't any.

In our case, the founders' original collaboration agreement said, in effect, "all IP belongs to the company." That sentence feels like it should settle things. It doesn't.

A collaboration agreement between two individuals cannot, by itself, move copyright out of a separate legal entity (the services company) that never signed it and was never a party to it.

The company that actually built the software still owned what it built, in law, regardless of what the two humans behind it had agreed between themselves.

So we had to fix it properly, after the fact, with the platform substantially built and the developing company's engagement winding down. And the client's other side — advised, it seemed, from a template pulled off the internet — came back with a specific request: draft it as a "work for hire" agreement.

That single phrase is the reason this article exists, because it's a trap a surprising number of Indian founders and even lawyers fall into.

Why "work for hire" doesn't work here

"Work for hire" is a term of art under American copyright law — Section 101 and Section 201(b) of the US Copyright Act. It does two things: for employees, it makes the employer the author (not just the owner) of anything created within the scope of employment; and for a narrow list of commissioned works, it lets an independent contractor's client become the author too, provided both sides sign a written work-for-hire agreement before the work begins. It's a genuinely useful piece of drafting machinery. In the United States.

India has no equivalent doctrine. Ownership of copyright here is governed entirely by Section 17 of the Copyright Act, 1957, and Section 17 asks a much narrower question than American law does: was the creator an employee, under a genuine contract of service?

If yes — Section 17(c) — the employer owns the copyright automatically, subject to any contrary agreement.

If no — if the creator was an independent contractor, a freelancer, or in our case, a separate company engaged to provide services — the default flips entirely. The contractor owns the copyright. The client that paid for it gets, at most, an implied licence to use it for the purpose it was commissioned for. Full ownership requires a written instrument.

There is one narrow exception, Section 17(b), which lets a commissioning party become first owner for a handful of named categories — a photograph, a painting, a portrait, an engraving, a cinematograph film — created for valuable consideration at that party's instance. It is a closed, specific list. Software is not on it, and courts have consistently declined to stretch it.

So when a client's counterparty asks you to paper an Indian software development arrangement as "work for hire," what you're being handed is an American label sitting on top of a legal vacuum. It doesn't transfer anything, because Indian law was never built to recognise it.

The trap gets worse when the work is already done

There's a second problem, more subtle than the first, and it's the one that actually should worry a drafting lawyer more than the missing doctrine.

"Work for hire" is a prospective concept. It tries to determine who counts as the author at the moment of creation — which only makes sense if you're signing the agreement before the work exists. In our case, the platform was already built. Copyright in every line of that code vested the instant it was written — in the services company, under ordinary Indian principles, because that company's own engineers wrote it under a contract for service.

You cannot sign a document today that retroactively rewrites who owned something in the past. You can only transfer what has already vested. And the transfer of already-vested copyright has a name in Indian law: it's not a work-for-hire agreement, it's an assignment, and Section 19 of the Copyright Act governs its form in specific and unforgiving detail.

There's a third, almost paradoxical problem worth flagging to any founder tempted to use "work for hire" language anyway: if you insert a recital stating that the developing company never held any copyright at all, you've just handed a future litigant — or a diligence lawyer poking holes in your cap table — a clean argument that your assignment deed transferred nothing, because there was nothing to transfer. A document can't simultaneously insist "you never owned this" and "you're hereby assigning it to us." Every deed we drafted on this file said the opposite, deliberately: title vested in the services company first, exactly as the law requires, and is now being assigned — because that's the only version of events a court can actually give effect to.

What Section 19 actually demands — and why founders get burned here too

Even once you accept you need an assignment, not a fictional label, Section 19 has teeth that catch people who think a one-line "all IP belongs to the company" clause is sufficient.

Section 19(2) requires the assignment to identify the work and specify the rights, duration and territory covered. Sections 19(5) and 19(6) then supply defaults if you don't: silence on duration means the assignment is deemed to last five years only; silence on territory means it's deemed to cover India only. The Delhi High Court's division bench made this exact point in Pine Labs Pvt. Ltd. v. Gemalto Terminals India Pvt. Ltd. & Ors. (3 August 2011) — where the absence of any stated duration or territory in the underlying agreements meant the statutory deeming provisions kicked in automatically, cutting a supposedly permanent assignment down to a five-year, India-only licence in all but name.

Read that again: a company can believe, in good faith, that it owns its own core technology outright and forever — right up until a court points out that its own founding paperwork gave it five years and domestic rights only.

Section 19(4) adds a further sting: if the assignee doesn't exercise the assigned rights within a year, they lapse — unless the agreement says otherwise. Section 19(3) requires the consideration to be identified. None of this is exotic. It's the ordinary, well-established statutory scaffolding around copyright assignment in India, and it is routinely ignored by founders who assume a single sentence in a shareholders' or collaboration agreement has already done the job.

What we actually drafted instead

The fix, once you set "work for hire" aside, is not complicated — it just has to be built correctly and in the right order:

A deed of assignment, not a labelling exercise, executed by the entity that actually holds the rights (the services company), in favour of the entity that should own them (the startup) — with duration stated as the full term of the right plus renewals, and territory stated as worldwide, so Section 19(5) and (6) never get a chance to apply.

Where the platform was substantially built before the assignment was signed, the deed has to say so honestly and handle it through confirmation and trust language — recording that title vested in the developer first (because it did), was always intended for the client's benefit, and is now being formally assigned and confirmed — rather than pretending, through "work for hire" phrasing, that it was the client's property from day one. Courts can enforce an honest transfer. They tend to unravel a fictional one.

For any intellectual property created after the assignment is signed, a present assignment of future rights clause does the forward-looking job that founders often mistakenly expect "work for hire" to do — automatically vesting new IP in the company the moment it's created, without needing a fresh document every time.

And underneath all of it, the assignment has to trace every individual who touched the code. A services company can only assign what it actually owns, and it only owns its employees' contributions automatically under Section 17(c) if they were genuine employees under a contract of service. Freelancers, sub-contractors and vendors one layer down each need their own written assignment back to the services company — a chain-of-title problem that "we're the client, obviously we own it" completely ignores, and that diligence lawyers are specifically trained to go looking for.

Frequently Asked Questions

Does India recognise "work for hire" at all?

No. It's a term from the US Copyright Act with no counterpart in the Indian Copyright Act, 1957. Using the phrase in an Indian agreement doesn't transfer anything by itself; the document still has to work as a valid assignment or licence under Indian law regardless of what it's titled.

We have a services agreement that says "all work product is a work made for hire and shall belong to the client." Does that protect us?

Not reliably. A well-drafted Indian lawyer will usually read a clause like this as evidence of intent and try to give it effect as an assignment — but if it's missing the particulars Section 19 requires (duration, territory, identification of the rights), you're exposed to exactly the five-year, India-only default that hit the assignee in Pine Labs. If your existing contracts use this language, they should be reviewed, not assumed to be safe.

Who owns code written by a freelancer or vendor in India, if nobody signed anything?

The freelancer or vendor does — by default, and completely. The client that paid for it typically gets nothing more than an implied licence to use it for the purpose it was commissioned for. This surprises a lot of founders who assume payment alone settles ownership. It doesn't.

Can we backdate an assignment deed to when the work actually started?

No — not the execution date. What you can and should do is state a retrospective Effective Date in the deed itself, and have the deed expressly confirm and assign whatever vested earlier, including through trust language for the period before the effective date. That achieves the commercial outcome you want without anyone signing a document and writing a false date on it — which carries its own risks under the Stamp Act and in any future diligence exercise.

Does the same problem apply to patents, not just copyright?

Yes, with its own statutory machinery. Patent assignments are governed by Section 68 of the Patents Act, 1970, which independently requires a written, signed instrument. The "who owns it by default" analysis is different in the details but the underlying lesson is identical: ownership of IP created by someone other than a genuine employee has to be affirmatively transferred in writing — it is never assumed.

What about the individual engineers — do we need anything from them directly, or is the company-to-company assignment enough?

It depends entirely on how those engineers were engaged. If they were bona fide employees of the services company under a contract of service, Section 17(c) means the company already owns their contributions, and the one company-to-company assignment covers everything. If any of them were freelancers, interns, or sub-contractors, the services company may not actually own what it's purporting to assign — and you need a signed assignment from each of them, flowing up through the chain, before the top-level deed means anything at all.

We're a startup facing this exact issue right now — what should we actually do?

Get the actual chain of title mapped before you touch a term sheet: who wrote what, under what kind of engagement, and what paperwork (if any) already exists. Then have a proper deed of assignment drafted — not a work-for-hire label, not a bare sentence in a shareholders' agreement — with duration, territory, and consideration stated explicitly, executed by everyone who might have a claim. Investors' diligence teams look for exactly this gap, and it is far cheaper to close it now than to renegotiate your cap table over it during a funding round.

This article discusses a matter we recently advised on, with all identifying details changed to protect client confidentiality. It is intended for general informational purposes and does not constitute legal advice. If you're facing a similar IP ownership question, please get in touch with us directly.