Background, foreground - and now AI
Commercial IP allocation traditionally turns on two categories. Background IP is what each party brings - pre-existing tools, code, methods, know-how. Foreground IP is what is created during the project - the bespoke deliverables. A good clause lets each party keep its background IP while the client secures the foreground IP it is paying for. Generative AI adds a third, awkward category: outputs that may not be legally created by anyone, and may attract no copyright at all in some jurisdictions.
Each category needs its own treatment, and the supporting articles take them in turn - background IP, foreground IP ownership, assignment mechanics, AI-generated output, and the cross-cutting issues of indemnities, licensing, and moral rights.
The English-law default: the contractor owns it
The single most common IP dispute starts from a false assumption: I paid for it, so I own it. Under English law that is wrong. The author is the first owner of copyright, and the employer exception applies only to employees - not independent contractors. Since the Intellectual Property Act 2014, the same is true of design rights. So without an express written assignment, a client that commissions and pays for bespoke work typically receives only an implied licence to use it - which may be narrower than it needs.
The fix is an express assignment of foreground IP, drafted with present-assignment language. Relying on statutory defaults or implied terms is how clients end up paying for software whose copyright the developer still owns.
The cross-border reality: English law does not set IP ownership
A deeper trap catches international deals. Choosing English law governs the contractual questions - the interpretation and validity of the assignment and licensing provisions (party autonomy under assimilated Rome I). But it does not govern who initially owns the IP. Whether copyright subsists and who first owns it is determined by the IP law of each country where protection is sought (the lex loci protectionis), and assimilated Rome II expressly excludes party choice of law for those proprietary questions.
So the CDPA 1988 and the Patents Act 1977 set initial ownership only for IP with a UK connection. For a Singapore developer building software for a Japanese client under an English-law contract, English law governs whether the assignment clause works as a matter of contract - but each country's IP law decides who first owned the copyright. The clause must therefore be robust across the Berne Convention and TRIPS states, not just under English statute.
Allocate by contract, not by default
Because statutory defaults differ by country and AI output may have no owner at all, the safe approach is to allocate everything expressly by contract. Define and schedule background IP; assign foreground IP with present-assignment and further-assurances wording; add a dedicated category for AI-generated output with belt-and-suspenders provisions that bind whether or not IP rights subsist; and handle indemnities, licence survival, and moral rights deliberately.
The contract should not assume any single jurisdiction's default will favour you. It should create the allocation it wants and make it enforceable wherever the IP will be protected.
What is changing
The law here is moving quickly, especially on AI. The Supreme Court has confirmed that AI cannot be an inventor (Thaler) and, in Emotional Perception AI Ltd v Comptroller General of Patents [2026] UKSC 3, has reshaped how AI systems are assessed for patentability. The UK Government published its copyright and AI report in March 2026 under the Data (Use and Access) Act 2025, keeping the future of the computer-generated-works provision (section 9(3) CDPA) under active review, and the EU AI Act's training-data transparency duties took effect on 2 August 2025.
For drafters, the message is to build in flexibility: allocate AI-related IP expressly, do not rely on uncertain statutory defaults, and consider change-of-law provisions so the contract can adapt as the legislation settles.
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Practical checklist
- Treat background IP, foreground IP, and AI-generated output as three separate categories.
- Do not assume paying for work means owning it - under English law the contractor owns it absent an express assignment.
- Remember choosing English law governs the contract, not who initially owns the IP (that is local IP law).
- Assign foreground IP expressly with present-assignment and further-assurances wording.
- Add a dedicated AI-IP category with provisions that bind whether or not IP rights subsist.
- Make the allocation enforceable across the Berne Convention and TRIPS states, not just under the CDPA 1988.
This guide is informational only and is not legal advice. It does not replace advice from licensed counsel on the facts of a specific transaction.
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