How Do I Protect My IP When Hiring Developers or Contractors?

Confirm whether the worker is an employee or a contractor

The single most consequential fact in any hiring arrangement is the worker’s legal status, because it flips who owns the intellectual property by default. Under section 13(1) of the Copyright Act, the author of a work, meaning whoever actually wrote the code, is the first owner of copyright. That default only flips to the employer under section 13(3) if the author was a true employee working under a contract of service and created the work in the course of that employment. Independent contractors do not fall into this exception, no matter what the contract calls them.

Courts decide employee-versus-contractor status using the multi-factor test the Supreme Court of Canada set out in 671122 Ontario Ltd v Sagaz Industries Canada Inc, asking whether the worker is “in business on his or her own account.” Relevant factors include who supplies the equipment, who hires helpers, and who bears the financial risk of the work. This test applies the same way in Ontario, Alberta, and every other province, because copyright is exclusively federal jurisdiction.

Put a written, signed copyright assignment in place before work starts

Because contractors own their code by default, a business that wants to own it has to take an active step: a written assignment. Section 13(4) of the Copyright Act states that no assignment of copyright is valid unless it is in writing and signed by the owner of the right. An email exchange, a verbal understanding, or an invoice that says “all rights included” does not meet this bar. The assignment should be signed before the contractor starts, or at the latest before they are paid for the relevant work, since a signature obtained after the fact from a contractor who has walked away is far harder to get.

Add a moral rights waiver alongside the assignment

Copyright ownership and moral rights are legally separate things. Section 14.1(3) of the Copyright Act states that an assignment of copyright does not, by that act alone, waive moral rights, which cover a creator’s right to be associated with (or dissociated from) a work and to object to changes that harm their reputation. If the contract only assigns copyright and says nothing about moral rights, the developer can, in theory, still object to how the code is modified or attributed later. A separate, express waiver clause closes this gap.

Add an invention-assignment clause for anything patentable

Copyright covers the code itself; it does not cover an underlying invention, such as a novel process or system the code implements. Canada grants patents on a first-to-file basis, and the Canadian Intellectual Property Office (CIPO) warns that without a contract defining ownership, a contractor who invents something while working for you could file for the patent themselves and become its owner. CIPO’s guidance recommends invention-assignment clauses in contractor agreements so inventions are identified and assigned to the hiring business as soon as they are created, rather than left until a dispute arises.

Address trademark ownership in writing too

The same CIPO guidance flags a parallel risk for branding: without a contract that defines who can file and own a trademark, a contractor working on a product name, logo, or brand asset could register it themselves before the business does. If a contractor’s scope of work touches naming or branding, the agreement should say explicitly that any resulting marks belong to the hiring business, not the person who happened to design them.

Protect trade secrets with a confidentiality agreement

Confidential know-how, source code architecture, and unreleased product plans have no registration system to fall back on the way copyright, patents, and trademarks do. Protection instead comes from the common-law action for breach of confidence, which the Supreme Court of Canada in Cadbury Schweppes Inc v FBI Foods Ltd rooted in the existence of a relationship of confidence between the parties, not in any special legal quality of the information itself. Because that relationship has to exist and be provable, CIPO’s guidance is to use non-disclosure and confidentiality agreements with every external contractor and to share sensitive information on a need-to-know basis, since a secret that is disclosed too broadly is difficult to protect once it is out.

Know your enforcement options if a contractor breaches the agreement

If a contractor breaches the assignment, moral rights waiver, or confidentiality clause, and the dispute is a monetary one within the cap, Ontario’s Small Claims Court hears claims up to $35,000, while Alberta’s Small Claims Court hears claims up to $50,000, the highest cap in the country. Claims above those amounts, or disputes seeking an injunction rather than money, go to the applicable superior court.

A worked example

An Ontario startup hires a freelance developer to build a scheduling feature, paying a flat project fee with no written contract beyond a one-line email confirming the price. Under section 13(1), the developer is the first owner of the copyright in the code they wrote, because they are not an employee. Because there was no written, signed assignment as required by section 13(4), the startup has a licence to use the code at best, not ownership, even though it paid in full. If the startup later wants to sell the business, an investor’s due diligence review would flag the missing assignment as a gap in the chain of title, and the startup would need to go back to the developer, who has no further obligation to sign, to fix it after the fact.

Common mistakes

• Treating an invoice or email as an assignment. Section 13(4) requires a written, signed assignment; an invoice marked “paid in full” does not transfer copyright on its own.
• Assigning copyright but forgetting moral rights. Under section 14.1(3), a copyright assignment does not waive moral rights, so a contractor can still object to changes even after selling the copyright, unless a waiver is added.
• Assuming “contractor” in the contract settles the legal question. Courts apply the Sagaz factors regardless of the label used, so a worker who looks like an employee under those factors may trigger the employer-ownership exception, or vice versa.
• Covering copyright but not inventions or trademarks. A copyright assignment does not automatically cover a patentable invention or a brand name the contractor helped create; each needs its own assignment language, per CIPO’s guidance.
• Signing the assignment after the contractor has left. Once the work is done and paid for, a departed contractor has little incentive to sign anything; the assignment should be in place before or during the engagement, not after.