3 IP Risks Your Contracts Must Address (Before You Hire That Designer)

If you're a business that innovates, hires freelancers, uses agencies, or develops custom software, your contracts can stop you sitting on an Intellectual Property (IP) time bomb.

It's tempting to focus only on the scope and the fee. But without clear IP clauses, you risk losing ownership of your core asset, spending a fortune in court, or facing a claim for infringement simply because you used an outside resource.

IP risks are often silent until they turn into a major legal headache. Here are the three non-negotiable protections your commercial contracts need to build:

1. The Accidental Ownership Trap

You hire a brilliant freelance developer to build a new feature. You pay them handsomely. Six months later, you find out they own the code because the contract didn't say otherwise.

The Danger: In England & Wales, without explicit assignment in a contract, the creator of the work (the freelancer, the agency, the supplier) retains the copyright and ownership of the IP they create. You might only have an implied license to use the work, not the right to own, modify, or sell it exclusively.

The Fix: Your contract must contain a clear clause transferring ownership of the IP from the creator to you the moment the work is created. If you miss this, you lose.

2. The Third-Party Infringement Lawsuit

When you buy custom software or content from a supplier, you are relying on their word that the asset is original and doesn't steal anyone else’s IP. What happens when the real owner of the IP sues you for using it?

The Danger: The lawsuit lands on your desk, not the supplier's. You are the one selling the product or running the website, so you are the target. Defending an IP infringement claim is one of the quickest ways to burn through your operating budget.

The Fix: Seek an IP indemnity clause. This clause transfers the financial risk back to the supplier who caused the problem. It requires them to:

1. Defend you against any third-party claims that the work they supplied infringes someone else's IP.

   
   

2. Pay all associated costs and damages.

   
   

Without a clear IP indemnity clause, you might be left paying the legal fees for a mess your supplier created.

3. The Licence Scope Creep

If you are the supplier - the graphic designer, the software developer, or the content creator - you face the opposite risk: your client using your IP far beyond what they paid for.

The Danger: You licensed your software to a client for use by 50 named users in the UK office. They then roll it out to their 5,000 global employees without paying you an extra penny. Without strict licence terms, enforcing that limit becomes complex, costly, and open to interpretation.

The Fix: Be super specific in your licensing terms. For suppliers, the contract must be extremely narrow and specific about what is permitted and what is prohibited. Define the usage limits by:

• Territory (e.g., UK only).

• Duration (e.g., 5-year term).

• User Count (e.g., maximum 100 named users).

• Purpose (e.g., internal business use only).

  
  

Every use outside those defined parameters should trigger a breach and an obligation to pay additional fees and/ or face termination.

Protect Your Value. Don't Just Pay For It.

Your IP is your competitive advantage. It needs to be treated like the valuable asset it is, not an afterthought in an email or a generic footnote in a contract. Whether you're commissioning new work or licensing your own assets, the contract is your single most powerful tool for value creation and risk mitigation. Engage us to ensure you negotiate watertight IP provisions.