Who owns the code your agency's AI wrote?

Somewhere in your agency's codebase right now is a file neither a human nor a court can confidently say anyone owns. That is not a hypothetical. It is the default position under a contract written before your vendor started shipping AI-generated code, and most contracts in circulation were.

The short version: purely AI-generated output may not be copyrightable at all, and a standard agency contract usually assigns you the work product its people produced, which quietly stops covering the parts a model wrote. The gap between those two facts is where disputes live.

This is general information about how these clauses typically work, not legal advice for your specific contract. Have a lawyer review anything you are about to sign.

Why "AI-generated" breaks the old assumption

Traditional software contracts assign IP through a simple chain: your vendor's employees create the work, the vendor owns it as a work made for hire or through their own employment agreements, and the contract assigns that ownership to you. Every link in that chain assumes a human author.

Take a human out of the authorship step and the chain has a broken link. Multiple jurisdictions' copyright offices and courts have converged on the same position: copyright requires human authorship. Output with no meaningful human creative contribution (a prompt in, a function out, unedited) sits outside what copyright protects. Nobody owns it in the way you assumed "the code" was owned.

That does not mean AI-assisted code is unprotectable. Code a developer prompted, then materially edited, restructured, selected and integrated carries human authorship in the parts that matter. The safer reading: the more human judgment shaped the final file, the stronger the ownership position. The part to worry about is the code that went in exactly as generated.

The clause that actually decides this

Most disputes are not about the law. They are about a sentence.

Look for whether your contract says the vendor "agrees to assign" or "hereby assigns" intellectual property to you.

"Agrees to assign" is a promise about a future act. It requires the vendor to do something later (sign a further document, complete a step) to make the transfer real. If the relationship ends before that step, if the vendor disputes what was covered, or if the vendor is acquired or dissolved, you are left enforcing a promise rather than holding a transfer.

"Hereby assigns" (the present-tense assignment) transfers ownership the moment the contract is executed. Nothing further is required. This is the version that survives a bad breakup with your vendor.

The fix, if your contract has the weak version, is one word: change "agrees to assign" to "hereby assigns, and shall further assign as needed to perfect," which keeps the present transfer and adds a fallback for anything that needs additional paperwork later (a patent filing, for instance).

A checklist for the actual clause

Before you sign, or before you accept what you already signed, check that the IP clause:

1. Uses present-tense assignment language: "hereby assigns," not "agrees to assign" or "shall assign."
2. Explicitly covers AI-assisted and AI-generated output, not just "work product" or "deliverables"; a clause drafted before 2023 almost certainly does not mention this and should not be assumed to cover it by implication.
3. Names the assignor correctly. If the vendor uses subcontractors or individual contributors, the vendor needs a matching assignment from them to itself, or the chain breaks one link up.
4. Addresses third-party AI tool terms. Some AI coding tools' own terms of service claim rights over generated output or restrict commercial redistribution. Your vendor's assignment to you is only as good as what the tool's terms allow the vendor to assign in the first place.
5. Covers moral rights waiver where your jurisdiction recognises them, separately from copyright assignment.

We publish our own position rather than asking you to take it on faith: complete transfer of source code and IP is written into every engagement we sign, and it uses present-tense assignment language for exactly the reason above.

What to ask a vendor before you sign anything

• Does your standard contract use "agrees to assign" or "hereby assigns"?
• Which parts of a typical deliverable are AI-generated, and is that disclosed?
• Does the IP clause explicitly mention AI-assisted or AI-generated work?
• If a dispute arose today, could you show me the present-transfer language in writing?

A vendor who answers all four without hesitation has actually thought about this. A vendor who says "our standard contract covers that" without pointing to the sentence has not.

The offer

Send us any vendor's contract (yours, a prospective vendor's, it doesn't matter) and we will tell you plainly who actually owns the code under it, free, no sales pitch attached. It is a fifteen-minute read for us and it is the single highest-leverage thing you can check before a project starts rather than after a dispute. See how we structure engagements if you want the fuller picture of what a present-transfer clause sits inside.

Common questions