Saya & Associates
Who owns AI-generated code? What founders should check before promising rights
The first enterprise customer asks for an IP warranty
The product works and the development team has handed over the repository. Your first large customer now wants a warranty that you own all the software, and an indemnity against third-party claims.
Some of the code came from an AI coding assistant, some from an agency's reusable module, and some from open-source packages. A promise that "all deliverables are ours" may go further than your rights do. This example is hypothetical.
Permission, ownership and exclusivity
| Question | What it asks | Where the answer is |
|---|---|---|
| Permission | May the company use, modify and supply the code? | Supplier licences, open-source licences and the AI tool's terms |
| Ownership | Who holds the copyright, if any exists? | Authorship, employment and written assignments |
| Exclusivity | Can anyone else use the same material? | The assignment and any licence for retained components |
A customer often needs only a licence to use the platform. A request for ownership of a bespoke feature, or exclusivity, is a different promise and needs a different check.
What Indian law says about computer-generated work
Under section 2(o) of the Copyright Act, 1957, a "literary work" includes computer programmes. Code can therefore be protected as a literary work, and section 17 makes its author the first owner, subject to exceptions such as employment.
Section 2(d)(vi) adds a specific rule: for a literary work that is computer-generated, the author is "the person who causes the work to be created". That provision predates generative AI.
Whether it makes a developer who prompts an AI tool the author of the output, and how much human input it requires, has not been settled by the courts.
The US Copyright Office's 2025 report also notes it is unclear how provisions like this will apply to AI-generated works.
The same report records that India's Copyright Office registered an AI-assisted artwork in 2020, listing the AI tool as a co-author, and issued a withdrawal notice a year later. Treat the Indian position as open.
The UK and US take different approaches
| Jurisdiction | The rule | Source |
|---|---|---|
| India | The author of a computer-generated work is the person who causes it to be created | Copyright Act, section 2(d)(vi) |
| United Kingdom | The author of a computer-generated work is the person who undertakes the arrangements necessary for its creation | Copyright, Designs and Patents Act 1988, section 9(3) |
| United States | Prompts alone do not give enough control to make the user an author; human expression in the output, and creative selection, arrangement or modification, can be protected | US Copyright Office report, January 2025 |
The US Copyright Office also concluded that using AI as an assistive tool does not affect protection for a work as a whole. The UK government has consulted on the future of its section 9(3) rule.
A product sold in several markets cannot rely on one country's answer. Where the customer contract is governed by foreign law, take advice there too.
What the AI tool's terms do and do not settle
An AI provider's terms allocate rights between the provider and its customer, and may restrict how outputs are used. Some business terms assign to the customer whatever rights the provider has in outputs.
Those terms cannot create copyright where the law gives none. Nor do they clear third-party rights in material an output happens to resemble, or transfer a contractor's rights to your company.
Check which tool, account and plan your developers actually used. A developer working on a personal account may be bound by different terms from your company's business licence.
Ask the development team for the right records
- A deliverables schedule: the custom work and the versions handed over, described precisely enough to identify the code.
- The ownership documents: the signed assignments from the agency, its employees and any subcontractors, and any material the supplier keeps.
- A licence inventory: the main third-party and open-source components, their versions and conditions.
- An AI-use record: the tools and accounts used, what they produced, and the human review and changes made.
- Operational access: the repository, deployment accounts, build instructions and documentation.
A percentage labelled "AI-generated" is not a legal conclusion. What matters is which parts were generated, and what people then selected, changed and reviewed.
For what the development agreement itself should say, see our guide to software development agreements.
Match your customer promises to your rights
Read the customer's ownership warranty, infringement indemnity, source-code obligations and exclusivity terms against what your supplier agreements and records support. Note every gap.
Giving a customer access to a SaaS platform does not usually require transferring the platform's underlying rights. A bespoke development deal may need a different allocation, limited to the custom work.
Where AI-generated material is involved, consider a warranty that speaks to what you can do, such as the right to use and supply, rather than an absolute statement that the company owns every line.
See our guide to SaaS liability caps for how the indemnity and cap fit together.
Checking rights before a customer contract
- Identify the promise. Read exactly what the customer asks you to warrant: a licence, ownership or exclusivity.
- Map the components. List custom code, supplier modules, open-source packages and AI-generated material.
- Check the paper trail. Confirm signed assignments from everyone who wrote custom code, and the licences for the rest.
- Record the AI use. Note the tools, accounts and terms used, and the human review and changes made.
- Close the gaps. Obtain missing assignments or licences while the developers are still available.
- Draft the warranty to fit. Promise what the records support, and limit exclusivity to the custom work.
Frequently asked questions
Who owns AI-generated code in India?
It is not settled. Section 2(d)(vi) of the Copyright Act treats the person who causes a computer-generated work to be created as its author, but the courts have not decided how that applies to generative AI.
Is AI-assisted software protected by copyright?
It can be. Code written by people remains a literary work, and the US Copyright Office has said assistive use of AI does not affect protection for a work as a whole. Purely AI-generated parts are less certain.
Does paying a developer make the company the owner of the code?
Not by itself. For contractors, ownership needs a written assignment under section 19 of the Copyright Act. Employees' work belongs to the employer under section 17, unless agreed otherwise.
Do the AI tool's terms make us the owner of its output?
They can assign whatever rights the provider has, but they cannot create copyright the law does not recognise, or clear third-party rights in the output.
Does a prompt log prove we own the code?
No. A prompt log helps show what happened, but authorship depends on the human contribution and the law that applies. Keep it with the record of review and changes.
The takeaway
Before the customer contract, list what is custom, licensed, open-source and AI-generated, and promise only what the records support. Close any gaps while the people who built the product are still reachable.
To review an IP warranty or a handover, contact Saya & Associates with the customer's draft and a short description of how the product was built.
This article provides general information as at 1 November 2026, with expressly identified UK and US positions. Rights in AI-assisted software depend on the work, the agreements and the law of each country. It is not legal advice.