Software is the core asset of most technology businesses. It powers the product, differentiates the offering, and sits at the centre of any meaningful valuation.
Which makes it all the more surprising how often the question of who actually owns that software is left unresolved - not through negligence, exactly, but through a widespread misunderstanding of how South African law treats intellectual property created by independent contractors.
The assumption is understandable. A business engages a developer, pays the invoices, and receives the finished code. Commercially, the arrangement feels like a purchase. Legally, it frequently isn't.
The default position under South African law
The Copyright Act 98 of 1978 draws a clear distinction between employees and independent contractors.
Where a work is created by an employee in the course and scope of employment, the presumption is that the copyright inherent in the work vests automatically in the employer.
The position for contractors is different. Where an independent contractor creates a work, including software, copyright vests in the contractor as the original author and owner, unless there is a written agreement to the contrary.
This is not a technicality. It is the default legal position, and it applies regardless of how much the client paid, how detailed the brief was, or how closely the developer worked with the internal team.
Without a written agreement, whether in the form of agreed terms and conditions or a copyright assignment agreement, the business commissioning the work does not automatically own it.
At best, the business may have an implied licence to use it, but the scope of that licence is uncertain, it may not be exclusive, and it almost certainly doesn't include the right to update, enhance, improve, sell, sublicence, or transfer the software to a third party - including a future acquirer.
Carla Dennehy 12 Mar 2026 Why this matters more than most clients realise
In day-to-day operations, the gap between ownership and being an implied licencee may be invisible. The business uses the software, the contractor has moved on, and no dispute arises.
The problem surfaces in moments of highest commercial consequence: due diligence for a funding round or acquisition, an IP audit ahead of international expansion, or a dispute with a former contractor who has since developed a competing product.
In M&A transactions particularly, clean IP ownership is a fundamental condition of deal value.
An acquirer's legal team will ask, for every significant piece of software being acquired: who created it, when, under what arrangement, and is there a written assignment passing ownership?
If the answer is that a substantial portion of the product was built by contractors under agreements that contain no specific IP assignment clause - or no written agreement at all - the deal slows down, the price adjusts, or specific indemnities are required.
In some cases, the business will be required to go back to former contractors to obtain retrospective assignments, at whatever commercial cost those negotiations involve.
Millisanté de Wee-Petersen and Kallen Hoather-Murphy 26 Feb 2026 What clean ownership actually requires
The Copyright Act requires that assignments or any transfer of title be in writing and signed by the assignor. A clause in a contractor's invoice, a provision buried in the client's purchase order terms, or a verbal understanding between the parties does not satisfy this requirement.
The agreement must be express, properly drafted, and executed.
A comprehensive contractor development agreement should address several things beyond the basic assignment of IP. It should cover work created during the engagement that is not specifically commissioned but forms part of the deliverables.
It should deal with pre-existing IP the contractor brings to the project - tools, libraries, frameworks developed before the engagement (so-called ‘background IP’) - which cannot be assigned because it belongs to the contractor's prior work, but which should be properly licenced for use in the deliverables.
It should address moral rights, which in South Africa vest in the author and survive an assignment of copyright.
And it should include a warranty from the contractor that the work is original, that it doesn't infringe third-party rights, and that no third-party material has been incorporated without appropriate licence.
The open-source dimension adds further complexity. Developers routinely incorporate open-source libraries into commissioned work.
Depending on the licence terms - and GPL licences in particular - this can affect what the commissioning business can do with the resulting code, including whether it can be kept proprietary.
A well-drafted contractor development agreement should require disclosure of any open-source components and impose obligations around licence compatibility.
Dina Biagio and Patrick o' Brien 27 Sep 2022 The practical fix
The solution is not complicated, but it requires consistency.
Every contractor engagement involving the creation of software, content, designs, or other copyright-protected works should be governed by a written agreement that includes clear delineation between background IP (what IP the contractor brings to the development) and foreground IP (what IP results from the contractor’s development post commissioning by a business), and a clearly defined IP assignment clause transferring title to the foreground IP.
This applies to offshore developers, freelancers engaged through platforms, agencies, and to former employees re-engaged on a consultancy basis.
Businesses that establish this discipline early will find that it costs very little. Those that establish it retrospectively, under pressure from an acquirer's due diligence team, will find that it costs considerably more.
