Copyright Ownership in Tech Teams: Employees, Contractors, and Assignments
In technology companies, code is the core of the business. Israeli law sets default ownership rules that don't always match employer expectations, and gaps can be costly during fundraising due diligence.
1. Default Rules: Employees vs. Employer
Section 34 of the Copyright Act 2007 assigns works created by employees in the course and scope of employment to the employer. But the scope of employment definition has limits.
2. Contractors: The Assignment Gap
Unlike employees, independent contractors retain ownership by default. There is no work-for-hire doctrine in Israeli law. Written IP assignment agreements are required before work begins.
3. Managing IP in Practice
Structured IP management requires explicit assignment clauses in employment contracts, separate IP agreements with every contractor, and ongoing documentation.
4. Pre-Incorporation IP
Code written by founders before incorporation belongs to those founders individually. Formal written assignment to the company must occur after incorporation.
5. Due Diligence Preparation
An IP register tracking all assets, their creators, assignment status, and open-source license obligations is essential preparation for fundraising due diligence.
Checklist
- Include explicit IP assignment clauses in all employment contracts
- Sign a separate IP assignment agreement with every contractor before work begins
- Prepare and maintain an updated IP register of all company assets
- Ensure founders assigned IP developed before incorporation
- Review and document all open-source software usage and its licenses
- Conduct an annual IP audit before any fundraising or M&A event
Common Pitfalls
- Assuming all contractor work belongs to the company without an assignment agreement
- Old employment agreements that do not contain explicit IP clauses
- Not resolving IP ownership of code developed before incorporation by founders
- Using open-source software under a copyleft license that could affect proprietary code
- Discovering IP ownership gaps during due diligence — leading to reduced valuation
שאלות ותשובות
Does my company automatically own code written by employees?
Generally yes, under Section 34 of the Copyright Act, work created by employees in the course and scope of employment belongs to the employer. However, code written outside work hours for personal purposes may not fall within this rule. Explicit assignment clauses in employment agreements remove this ambiguity.
What happens if a contractor writes code for us without an IP assignment agreement?
Without a written assignment, the contractor retains ownership of the code they wrote, even if you paid for it. This is a common and serious problem for tech companies. You would need to negotiate an assignment after the fact, which can be difficult and expensive.
Do I need separate IP agreements if I have them in employment contracts?
For employees, well-drafted employment contracts with explicit IP clauses are typically sufficient. For contractors, a separate IP assignment agreement tailored to each engagement is strongly recommended, since contractors are not covered by the employee default rules.
What IP issues come up during fundraising due diligence?
Investors typically check for signed IP assignment agreements from all founders and key contributors, clear chain of title for core technology, no outstanding ownership disputes, proper handling of open-source licenses, and that all pre-incorporation IP has been formally assigned to the company.
How does open-source software affect IP ownership?
Copyleft licenses like GPL require that any software incorporating GPL code must also be released under GPL. Using such code in proprietary software without understanding the license obligations can force you to open-source your core product. Always review open-source licenses before incorporating them.