I am currently working part-time as an independent contractor, software developer, in the United States for a startup my friend founded. I saw it mostly as helping a friend, so we never formalized the agreement (i.e. I have not signed any statement of work or otherwise agreements with the startup), however I am clearly paid with the startup's money.

Over the last few months the startup has been having troubles with one of the three founders, and long story short, my friend and one other founder are deciding to leave the company and create a competitor business on their own. The three current founders have equal equity and voting rights, so technically the two leaving could instead push out the third partner, but they are worried that partner would torpedo the company's reputation if they did so they would prefer to just quietly start fresh.

So on to the question, my friend would like to take the code I have written with them to their new company. I understand if I were an employee, all my work would inherently be the IP of the original company, however because I am a contractor - and notably have not signed any formal agreements to the current company, could we have any legal claim that I independently own my code and get to chose who I allow to use it?

  • One idea I had was, since I have not yet signed any agreement with the current company, we could enter into a licensing agreement that clearly indicates I own the code and they are simply licensing it from me. At which point the new company could also license my code from me. However I'm not sure if it's legal to enter such an agreement at this stage, given the intent is clearly to take the IP with them.

  • Another consideration I had was that since the two founders have majority voting, and could technically vote / sign whatever they wanted without the third founder's agreement, they could just make the decision before leaving to give me ownership of the code (e.g. "sell" it to me for $1). But here again I'm not sure if that's legal, given they would be clearly acting against the best interest of their current company and could probably be sued by external shareholders.

Are there any legal options we can take to move the IP I've developed to the new company? And would I be putting myself at legal risk by agreeing to any of this (e.g. if the founders decided f- it and to just take the code, is it illegal for me to keep working on it)?

  • 1
    Copyright.gov: Work For Hire...
    – Ron Beyer
    Apr 22, 2022 at 22:42
  • @RonBeyer thank you that's helpful. I think the follow-up question would be given this line at the bottom right of page 2 If a work is made for hire, the employer or other person for whom the work was prepared is the initial owner of the copyright unless both parties involved have signed a written agreement to the contrary., could we legally enter such an agreement after work has begun?
    – Eric
    Apr 22, 2022 at 23:06

1 Answer 1


Is this work for hire?

There is an arguable case to be made that you are an employee for copyright law purposes and, if so, the copyright belongs to the company.

The closer an employment relationship comes to regular, salaried employment, the more likely it is that a work created within the scope of that employment will be a work made for hire. But because no precise standard exists for determining whether a work is made for hire under part 1 of the definition in section 101 of the copyright law, consultation with a lawyer may be advisable.

Second, if you do own the copyright, there is clearly an implied licence with the company to allow them to use it. It is arguable that the licence is exclusive since the software is bespoke and made specifically for the company.

Can you sign an agreement now

Yes, but …

It is clear that the purpose of signing the agreement is to screw the company over (with the compliance of 2 of the directors). That’s a contract entered into in bad faith and possibly for an illegal purpose and would likely be found invalid.

You need to understand that the company is a distinct legal entity from its owners and it has its own rights. People make the mistake of thinking the owners are the company: they aren’t.

The two rebel founders are on dangerous legal ground. Assuming they are the directors of the company, they have a fiduciary duty to act in the best interests of the company. That is, they must put the company’s interests ahead of their own. It is clearly not in the company’s interest to have a rival business start so they cannot plan to do that while they are directors - they need to resign first.

You are not so much at risk - as an employee/contractor your duty is to follow the directions of the company (the company - not a faction within the company). However, if you aid the other two in what might be a crime, you could be in trouble.

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