What happens if I discover the seller never registered their software's IP properly?
It depends on what "never registered properly" actually means, since not all software intellectual property requires formal registration to exist. Copyright in original software code generally arises automatically once it's created, without any registration requirement, so a lack of registration alone doesn't necessarily mean the business doesn't own it. The more serious version of this problem is uncertainty over who actually owns the code in the first place — whether it was written by employees (generally owned by the employer if created within their duties), by a contractor or freelance developer (who, without a written assignment, may retain ownership even though they were paid to build it), or using licensed third-party components with terms that restrict resale or commercial use.
This last scenario is the one that should worry a buyer most: software built partly on someone else's code, under a licence that doesn't permit what you're planning to do with it, is a real liability, not a paperwork gap. Reviewing who actually wrote the software, under what arrangement, and what licences it depends on is the practical fix.
A Treadstone business lawyer can help review contractor agreements and licence terms before you rely on software as a core business asset.
Key takeaways
- Copyright in software generally exists automatically; missing registration alone isn't necessarily the problem.
- Ownership can be unclear if contractors built the code without a written assignment.
- Third-party licensed components with restrictive terms are a bigger risk than missing registration.
- Review who wrote the code, under what agreement, and what licences it depends on.