Who Owns the Code? Fixing an IP Gap Before a Licensing Deal

The situation

Ayesha, a surgeon, and Iryna, a specialist physician, built their company almost by accident. Years into their clinical careers, both frustrated by the same problem — clinic scheduling software that could not handle the complexity of surgical bookings, pre-operative workups and multi-site referrals — they paid a freelance developer to build something better for their own use. The tool worked so well that colleagues at other clinics asked to use it too.

What started as a side project became a company. Ayesha and Iryna incorporated once outside clinics began asking to pay for access, hired a small internal engineering team to rebuild and extend the original tool, and kept licensing the platform clinic by clinic for several years. By the time the business had grown into a platform licensed to clinics across the province, with annual revenue in the range of $20 million to $60 million, Ayesha and Iryna were no longer thinking about the software's origins at all. Their attention was on scheduling logic, integrations with clinic billing systems, and the day-to-day work of running a growing company, not on a contractor engagement from years earlier that had never caused a problem. They were fielding an approach from a much larger health system operator that wanted to license the platform across dozens of facilities in a single agreement — the kind of deal that would more than double the company's revenue inside two years.

The operator's legal team asked for the usual due diligence package before signing anything: corporate records, existing licence agreements, and a full chain of title for the software itself. That last request was the one that caused the problem.

What due diligence found

The operator's lawyers wanted proof that the company actually owned the intellectual property it was proposing to licence. Ayesha pulled together everything she had from the earliest days of the project: a handful of emails with the original developer, Natalia, describing the scope of work, and records of the flat fee that had been paid on delivery. There was no written agreement assigning copyright in the code to Ayesha, to Iryna, or to the company once it was incorporated.

Under the Copyright Act, this mattered more than it might seem. The default rule in Canada is that the author of a work owns the copyright in it — full stop — unless one of two things is true: the work was created by an employee in the course of employment, or the copyright was assigned in writing, signed by the person giving it up. Paying someone to build software does not, on its own, transfer ownership of what they built. It buys a copy and, at most, an implied licence to use it for the purpose the parties understood at the time. Natalia had been a contractor, not an employee, and nothing in writing had ever moved the copyright to anyone else.

In practical terms, that meant the core codebase the entire company was built on, and was now proposing to licence to a national operator, technically still belonged to the person who had written the first version of it years earlier — even though she had been paid in full and had no further involvement with the business. If the deal closed without fixing that, the company would be licensing intellectual property it did not clearly own, and Natalia would remain in a position, however unlikely she was to use it, to make a competing claim over the software's foundation. The operator's lawyers flagged it as a condition that had to be resolved before closing, not a detail to note and move past.

What we did

1. Confirmed the gap and ruled out easy fixes. We reviewed every piece of correspondence and every invoice from the original engagement. None of it contained assignment language, and the flat-fee payment structure did not, by itself, imply a transfer of ownership under Canadian copyright law. There was no shortcut around getting a proper written assignment.
2. Located Natalia and opened a direct conversation. She was no longer working with the company but was still active as a developer and reachable through her professional network. We approached the conversation as a straightforward business matter rather than a dispute — she had been paid fairly for work she completed years earlier, and the company simply needed the paperwork to reflect what everyone had always assumed was true.
3. Negotiated and drafted a retroactive assignment agreement. The agreement transferred all copyright in the original code to the company in exchange for a negotiated lump-sum payment, and included a standard waiver of moral rights — the separate personal right an author has to be credited for or to object to changes in their work, which does not transfer automatically even when copyright does and had to be dealt with in the same document.
4. Preserved a narrow carve-out for Natalia's portfolio. She wanted to be able to reference the early version of the project in her own professional materials. We drafted that as a limited, non-exclusive right to describe and display screenshots of her original work, carefully worded so it did not create any ongoing licence back to her or any claim on the current, much-evolved product.
5. Audited every other contractor engagement the company had ever used. The original gap was not unique — two smaller contract projects from the company's early years had the same problem. We secured written assignments for both before they could surface in a future deal, and replaced the company's contractor template going forward with a standard agreement that assigns intellectual property and waives moral rights automatically, signed before any work begins rather than after.
6. Delivered a clean chain-of-title package to the operator's counsel. With every assignment executed and on file, we prepared the documentation the due diligence process had asked for and confirmed there were no remaining gaps in ownership anywhere in the codebase being licensed.

The outcome

Natalia agreed to the assignment without difficulty. She had no ongoing stake in the software's success and welcomed a clean, documented resolution as much as Ayesha and Iryna did. The lump-sum payment was modest against the scale of the deal it protected, and the agreement closed within a few weeks of the first conversation.

With clear title established and documented, the licensing agreement with the health system operator closed on the timeline both sides had originally planned. The due diligence flag that could have delayed or derailed the deal became, in the end, a footnote resolved before it ever reached the negotiating table.

The broader contractor audit turned out to be just as valuable as the fix itself. Two other gaps were closed quietly, on the company's own terms, rather than surfacing during a future round of investment or a future licensing negotiation when there would be far less room to negotiate calmly. Ayesha and Iryna now treat IP assignment as a standing item in every contractor engagement, not an afterthought handled once a deal forces the question.

What you can learn from this