AI-assisted coding and intellectual property for a software house

A software house's value is the code it owns, and code written with AI assistants raises questions its contracts did not anticipate: whether generated code has an author the law recognises, whether the company has taken the rights from the employees and contractors who prompted it, what the assistant's terms grant or reserve, whether the output contains open-source code under a licence the company did not choose, and what the assistant saw of the codebase. The clauses fix the chain of title and the warranties across the company's customer, contractor and employment terms. Drafting or reviewing the AI provisions for the agreement is £595 fixed, delivered in five working days.

Who this is for

Software houses, product companies, development agencies and start-ups in England and Wales whose engineers use AI coding assistants and whose investors, acquirers and customers will ask who owns the code.

What matters in AI-assisted coding and IP

The code the assistant wrote and the author the law looks for

section 9(3) of the Copyright, Designs and Patents Act 1988 treats whoever made the arrangements as the author of a computer-generated work, a provision untested on modern tools, and the Act protects only original works, so a function the assistant generated from a one-line prompt may have no human author in the ordinary sense and may be protected, if at all, as a computer-generated work with the engineer (or the company) as the person who made the arrangements and a shorter term under section 12; code the engineer wrote with the assistant's suggestions and their own judgement is the engineer's work in the ordinary way; the company's position is strongest where the human contribution is visible, and its records should show it, because due diligence in a sale or a funding round now asks who owns the generated code.

Employees, contractors and the chain of title to the company

Section 11 of the 1988 Act gives the company copyright in works its employees make in the course of employment, which covers an employee's AI-assisted work but leaves generated code (where the employee is at most the arranger) in a position the Act does not clearly address, so the employment contract assigns to the company whatever rights the employee has in generated and AI-assisted code, prompts and configurations; contractors own what they create unless they assign it, so every contractor agreement must assign the contractor's rights including rights in generated code and warrant that the contractor used only approved assistants on approved terms; a software house that cannot show the assignments has a gap in its chain of title that an acquirer's lawyers will find.

The assistant's terms and the rights they grant or reserve

The coding assistant's terms decide what the provider grants in outputs (usually a broad licence or an assignment to the user on business tiers), what it reserves, whether it may use the company's code to train its models, how long it retains the code it sees, and whether it offers an indemnity for infringement claims about generated code (which some providers offer on business tiers subject to conditions, such as the duplication filter being on); whether inputs train or improve the provider's models, and how long they are kept, is set by the provider's terms, with business tiers generally excluding training and consumer tiers generally not, so the company uses business tiers, records the terms in force, keeps the duplication filter on where the indemnity depends on it, and prohibits consumer tools on the codebase.

Open-source code in the output and the licence the company did not choose

Generated code may reproduce code from the training data under open-source licences, including copyleft licences whose terms (if the code is incorporated into the company's product) require the product's source to be made available on the same terms, which is the contamination a customer's licence scan or an acquirer's audit finds; the company applies its open-source policy to generated code (licence scanning, a bill of components, the duplication filter, review for recognisable reproduction), records the use of assistants in the repository history, and warrants to customers the steps taken rather than an absolute absence of third-party code; a software house that treats generated code as clean because the assistant produced it has outsourced its licence compliance to a tool that does not do it.

Trade secrets, the codebase and what the assistant sees

nothing confidential (trade secrets, clients' data, unreleased plans) goes into a tool whose terms let the provider train on or keep the input, because the Trade Secrets (Enforcement, etc.) Regulations 2018 and the business's confidentiality obligations turn on the steps taken to keep it secret, and the company's source code, its architecture and its customers' data are the trade secrets an assistant sees; the company uses assistants whose terms exclude training and limit retention, keeps credentials, keys and production data out of the context, disables the assistant in the repositories that hold its most sensitive code, and includes its customers' restrictions (a customer contract that prohibits AI tools on its code) in the configuration, because a trade secret shared with a provider on terms that let it train is no longer a secret kept by reasonable steps.

The clauses in customer, contractor and employment terms that fix it

The customer terms warrant the company's own work and the steps taken on generated code, assign what the company owns and license what it cannot, disclose the use of assistants and limit the infringement indemnity to the steps warranted; the contractor agreements assign all rights including generated code, require approved assistants on approved terms, and warrant compliance; the employment contracts assign the employee's rights in generated and assisted work, incorporate the AI use policy and extend confidentiality to the assistants; and the company's agreements with its assistant providers are kept on business tiers with the terms recorded; the three sets of clauses are drafted together, and the company's AI use policy, drafted separately, makes the practice match the paper.

What it costs

AI provisions in a contract, £595. Review or draft AI-specific terms in a supply or customer agreement. Five working days.

AI use policy, £995. Internal policy plus the accompanying contract provisions. Five working days.

Email me at geoffrey@caesar.co.uk with what you need and any documents, and I will confirm the scope and the fee in writing, usually the same working day.

What you get

• An internal AI use policy your staff will follow, rather than a document that bans everything and is quietly ignored
• Contract provisions covering output ownership, training data, confidentiality and liability
• A defensible position to give customers who ask what your AI governance looks like
• Review of your AI suppliers' terms, including what they reserve the right to change
• Practical guidance on what to permit, what to restrict and what to prohibit outright
• One round of amendments

What is not included

• Technical AI assurance, model testing or bias auditing
• Sector-specific regulatory approval
• Advice on non-UK regulatory regimes beyond flagging where they apply
• Ongoing regulatory monitoring

Questions I am often asked

Does our company own code our engineers generate with an assistant?

Employees' AI-assisted work, yes, under section 11; purely generated code is less clear, so the employment contract assigns whatever rights the employee has. Contractors own what they create unless assigned, so every contractor agreement must assign generated code too.

Does the assistant provider claim rights in our code?

Read the terms: business tiers usually grant broad output rights, exclude training and limit retention; consumer tiers often do not. Use business tiers, record the terms in force, and keep the duplication filter on where the provider's indemnity depends on it.

How do we stop copyleft code getting into our product through the assistant?

Licence scanning, a bill of components, the duplication filter and review for reproduction, applied to generated code as to any other, with the use of assistants recorded in the repository history. Warrant the steps to customers, not an absolute absence.

Related guidance and services

• AI contracts and AI use policies, £595, the service this page describes
• SaaS and technology contracts, £995
• Data protection agreements and privacy terms, £795
• AI clauses in a software development agreement
• AI use policy for a software company

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: October 2026. Email geoffrey@caesar.co.uk.