Imagine the scenario: You are the founder of a high-growth SaaS platform based in San Francisco. Your Series B funding round is approaching. The venture capital firm sends over their legal team for “Due Diligence.” They want to see the “Chain of Title” for your intellectual property.
You aren’t worried. You hired brilliant developers in Brazil, Germany, and Ukraine. You paid them on time. You signed contracts—standard templates downloaded from the internet that state clearly: “All work is ‘Work Made for Hire’ and belongs to the Company.”
The VC lawyers review the documents and pause. They frown. Then they deliver the news: “You don’t own your core algorithm. Your lead engineer in Munich does. And because of local labor laws, your contract claiming otherwise is invalid. We can’t invest until you fix this.”
This is the nightmare of the modern, distributed tech company. In the rush to hire global talent, companies assume that American copyright laws function like a universal currency. They do not. The “Work Made for Hire” doctrine is a uniquely American concept, and applying it to a global workforce can leave your intellectual property (IP) stranded in a legal no-man’s-land.
The Great Legal Divide: Common vs. Civil Law
To understand why your contract failed, you have to look at the foundation of the legal systems involved.
The United States and the UK operate under “Common Law.” In this system, copyright is viewed largely as an economic asset. It is a commodity. Therefore, the law allows for a frictionless transfer of ownership. If an employee creates something, the employer is automatically considered the “author” and owner. If a contractor creates something under a written “Work Made for Hire” agreement, the ownership transfers instantly.
However, most of Europe and South America operate under “Civil Law.” In these systems, copyright is viewed as a personal, almost spiritual extension of the creator. This introduces the concept of Droit Moral or “Moral Rights.”
Under Moral Rights, the author (the human being who wrote the code) retains inalienable rights to their creation, regardless of who paid for it. These rights often include:
- The Right of Attribution: The right to be named as the author.
- The Right of Integrity: The right to prevent the work from being altered or destroyed in a way that hurts their reputation.
In strict jurisdictions like Germany or France, you generally cannot fully transfer authorship. You can only license the economic rights. A contract that tries to assign “all rights, title, and interest” using American phrasing may be deemed null and void because it attempts to do something legally impossible under local law.
The “Contractor” Gap
The risk is magnified ten-fold when dealing with independent contractors rather than employees.
In many countries, the default position of the law is: The creator keeps the IP unless explicitly assigned otherwise in a compliant manner.
If you use a US-centric “Independent Contractor Agreement” for a developer in Poland, and that agreement relies on the phrase “Work Made for Hire” to transfer IP, you are in trouble. “Work Made for Hire” is a statutory term defined in the US Copyright Act. It has no legal meaning in Polish law.
Since the term is meaningless there, a judge might rule that the transfer clause is ineffective. The default law kicks in, which means the developer still owns the copyright. You have an “implied license” to use the code, but you don’t own it. You cannot sell it, and you cannot stop the developer from selling that same code to your competitor.
The “Specificity” Trap
Even if you avoid the “Work for Hire” language and use an “Assignment” clause, you can still fail on specificity.
In countries like South Africa or parts of the EU, broad assignment clauses (“I assign all future IP I create to the company”) are viewed with suspicion. Courts view them as restrictive covenants that stop a person from earning a living.
To be valid, the assignment often needs to be specific. It needs to detail exactly what is being assigned. If your contract is too vague, the assignment fails. Furthermore, some jurisdictions require additional compensation specifically for the transfer of IP rights, separate from the monthly retainer. If you didn’t pay that separate fee, the transfer didn’t happen.
The M&A “Chain of Title”
Why does this matter? It matters because of the “Exit.”
When a larger company wants to buy you (M&A) or a bank wants to lend you money, they audit your Chain of Title. They need to trace every line of code from the keyboard it was typed on to the corporate entity they are buying.
If there is a break in that chain—a developer in Brazil whose contract was invalid, or a designer in France who retains moral rights—the asset is “encumbered.” The acquirer knows that a disgruntled former contractor could technically sue for copyright infringement or hold the code hostage.
This risk creates “hair on the deal.” It lowers your valuation. In extreme cases, like the fictional scenario above, it kills the deal entirely until you go back and get every single contractor to sign a “Confirmatory Assignment” document—which they will likely demand a hefty bonus to sign.
The Solution: Localization and Intermediaries
The solution is not to stop hiring globally. The talent advantages are too great. The solution is to stop pretending the world is governed by California law.
- Localized Contracts: You cannot use a one-size-fits-all template. Your IP assignment clauses must be localized for every single jurisdiction where you have talent. They must reference the specific local statutes (e.g., the German Copyright Act) and waive moral rights to the fullest extent permitted by that specific law.
- The Corporate Shield: This is where the structural model matters. If you cannot afford to have local legal teams in 15 countries drafting these contracts, you need an entity that is local to do it for you.
This is the primary legal function of an eor partner. By acting as the legal employer of the professional in their home country, the provider ensures that the employment contract is locally compliant. Crucially, they ensure the IP flows correctly: from the talent -> to the local legal entity -> to your company. They bridge the gap between Civil Law and Common Law, ensuring that when you finally sit down with those VC lawyers, the Chain of Title is unbreakable.
