Your Contractor Used AI. Who Owns the Work You Paid For?

You hired a freelance developer to build a feature, an agency to write your website copy, and a designer for a new logo. The work arrived on time. Somewhere along the way, some of it was drafted with ChatGPT, GitHub Copilot, Midjourney or a similar tool.

Now an investor asks a simple diligence question: does the company own its IP? The answer depends on several separate things. AI use can make existing gaps in contractor agreements harder to spot.

Three layers to check

1. Copyright law addresses whether there is anything to own. U.S. copyright protection does not extend to material generated by AI on its own; a work that mixes human and AI material can be protected as to the human-authored parts. [1] [2]
2. Your contract with the contractor addresses rights between you and the contractor. The contractor generally starts out owning their own human-authored contribution unless a qualifying work-made-for-hire arrangement or a signed written transfer says otherwise. [3] [4]
3. The AI tool's terms address the relationship with the AI provider. [5] [6]

None of these alone necessarily decides ownership of the entire deliverable, which may also contain third-party material.

Layer 1: some of what you received may not be ownable by anyone

In its January 2025 report, the U.S. Copyright Office concluded that, based on the functioning of current generally available technology, prompts alone do not provide sufficient control to make the person prompting the author of the output. [1] Its 2023 registration guidance tells registration applicants to disclose more-than-de-minimis AI-generated content and to claim only the human authorship. [2]

In practice, a deliverable may contain three kinds of material:

• human-written material — code, copy or design the contractor created themselves;
• human changes and arrangement — edits, selection and structure the contractor added to AI output; and
• AI-only material — output accepted without meaningful human creative contribution.

The first two may carry copyright if they contain sufficient original human expression; protection does not extend simply because someone edited or arranged AI output. [1] [7] The third, under the Copyright Office's current position, generally does not. [1] An assignment can transfer rights the contractor actually holds, but it cannot create copyright in AI-generated material that does not qualify for copyright protection. [1] [3] [4]

Layer 2: "work made for hire" may not do what you think

Many contractor agreements simply say the deliverables are "work made for hire." For a genuine independent contractor, that label works only for a specially commissioned work that falls within one of the categories listed in the statute, and only with a signed written agreement; the writing alone cannot put other work into a category. [3] Ordinary standalone software code and marketing deliverables do not automatically fall within those commissioned-work categories; the intended use of a particular work matters. [3]

Outside those categories, transferring copyright ownership generally requires a writing signed by the owner or an authorized agent. [4] Absent a qualifying work-made-for-hire arrangement or a signed transfer, the contractor may retain copyright in their original human-authored contribution, and a license may instead give the company only specified use rights. [3] [4] We cover the basics in Do You Actually Own Your Company's IP?

AI does not change this rule. It makes the gap easier to miss, because the deliverable looks finished and nobody asks who wrote which part.

Layer 3: the AI tool's terms govern the relationship with the provider

AI providers set their own ownership terms. As one example, OpenAI's individual Terms of Use say that as between the user and OpenAI, and to the extent permitted by applicable law, the user owns the output, and that OpenAI "hereby assign[s] to you all our right, title, and interest, if any, in and to Output." [5] The same terms note that output "may not be unique" and that other users may receive similar output. [5] Other tools, and business plans, are governed by separate terms. [6]

Two points follow for a company hiring a contractor:

• Who is "you"? The applicable AI terms govern the relationship with the provider. If an independent contractor uses their own individual account for the work, the contractor may be the "you" to whom those terms speak; do not assume the same result for an agency account, a company account, or a business plan. The company's rights in the contractor's contribution still need to be checked under the contractor agreement. [5] [6]
• "If any" matters. OpenAI's "if any" assignment transfers only whatever rights OpenAI has to assign; it does not establish that the output is copyrightable or that the hiring company owns the contractor's rights. [5] [7]

Terms differ between tools and between consumer, team and enterprise plans, and they change. Check the terms that actually applied when the work was created.

What AI adds to the contractor risk

• Similar output elsewhere. The tool's terms warn that other users may receive similar output. Do not assume an AI-generated result is exclusive merely because it was delivered to your company. [5]
• Your confidential information in someone else's tool. A contractor who pastes your code, product plans or customer data into an AI tool may be sharing it on terms you never agreed to. See Employee NDAs and AI Tools for the same issue with employees.
• Third-party code. AI-assisted code may warrant a check for third-party code. If a deliverable incorporates code subject to an open-source license, review the applicable license and how that code is used. See Open-Source Licenses for SaaS Startups.
• No record of who made what. If nobody kept drafts, commit history or notes, it is hard to show later which parts were human-authored.

What to put in your contractor agreements now

These are contract terms to consider, not a template. What fits depends on the engagement.

1. A signed present assignment of the contractor's rights in the deliverables, including copyrightable human contributions to AI-assisted work, to the extent the contractor holds those rights.
2. AI-use disclosure. Require the contractor to say which AI tools they used and for which deliverables, or to get approval first.
3. Confidentiality rules for AI tools. Say whether your confidential information may be entered into AI tools and, if so, which ones and on what settings.
4. Third-party and open-source material. Require disclosure of any third-party material and any open-source material included in the deliverables, with the applicable license or permission information for each.
5. Records. Ask for source files, drafts and repository history to be delivered with the work.
6. Cooperation. Include an obligation to sign follow-up documents if more paperwork is needed later, for example in a financing or sale.

Already received the work? A quick check

• Do you have a writing signed by the rights owner or an authorized agent that actually transfers the relevant rights? Do not assume an invoice or an email, without reviewing its wording and signature, does that.
• Does the agreement rely only on "work made for hire"?
• Do you know which AI tools were used, and on whose account?
• Do you have the source files and history, or only the final output?
• Was any confidential information entered into an AI tool?

If rights are unclear, address the gap before a financing or sale if possible, when buyers and investors review IP chain of title closely. A later assignment may help document or transfer rights the signer holds, but cannot create copyright in unprotectable material or transfer rights the signer does not own. See our Tech M&A Due Diligence Checklist.

Frequently Asked Questions

Sources

1. U.S. Copyright Office, Copyright and Artificial Intelligence, Part 2: Copyrightability (Jan. 2025)
2. Copyright Registration Guidance: Works Containing Material Generated by Artificial Intelligence, 88 Fed. Reg. 16190 (Mar. 16, 2023)
3. 17 U.S.C. §§ 101 ("work made for hire"), 201(a), (b), (d)
4. 17 U.S.C. § 204(a)
5. OpenAI, Terms of Use (individual; effective Jan. 1, 2026), "Content" section
6. OpenAI, Services Agreement (business services)
7. 17 U.S.C. §§ 102, 103

*This article is general information, not legal advice. Whether a particular deliverable is protected, and who owns it, depends on the specific facts and documents.*