When a subsidiary paid for work the parent uses: what to do first
When a subsidiary pays for code, designs or data and the parent company then uses the result, ownership does not follow the invoice. The developer or contractor holds the rights unless a written assignment says otherwise, and a separate transfer is needed before the parent can use anything the subsidiary itself received. Fix the paper trail first.
Basis
Two EU frameworks anchor this fact pattern, depending on what was actually produced. Directive 2009/24/EC sets the baseline for rights in computer programs: the person who created the code holds the economic rights unless they are assigned in writing to someone else. Directive 96/9/EC does the same for databases, but through a different test — the sui generis right belongs to the maker, the party that bore the risk of the investment in obtaining, verifying or presenting the data, not automatically to whoever paid the invoice.
Neither directive answers who counts as the maker in a three-party set-up where a subsidiary commissions and a parent consumes. That depends on the underlying contract and on national assignment formalities, which sit outside the two anchors above.
| What the parent is using | EU-level anchor | What must exist first |
|---|---|---|
| Software code | Directive 2009/24/EC | A written assignment or licence naming the parent, not only the subsidiary |
| A compiled database | Directive 96/9/EC | Confirmation of who bore the investment risk, and a transfer if that was the subsidiary |
| Designs or other non-software output | No EU-level anchor in this file | Ownership follows the applicable national regime for that type of work |
What changes in practice
Three separate ownership questions sit on top of each other, and treating them as one is the most common mistake. First: did the subsidiary's contract with the developer transfer the rights, or only grant a licence? Second: if the subsidiary owns nothing more than a licence, can that licence be passed on to a different legal person, namely the parent? Third: has anyone actually documented the parent's use — a group licence, an intra-group services agreement, anything in writing at all?
A missing answer to any of the three means the parent's current use rests on assumption, not on a right. This is the same structural problem as When secondary trading starts without consent in detail: use is already happening before the underlying right has been cleared, and the gap does not close itself with time.
What to do first
- Pull the original contract between the subsidiary and the developer or contractor. Confirm whether it contains an assignment clause or only a licence. The subsidiary's contracts team should do this within days, not weeks.
- Identify what was actually produced — code, a database, or another form of output — because the applicable framework differs. Someone technical, not only legal, needs to confirm this.
- Check whether any document authorises the parent's use specifically. A licence granted to the subsidiary does not automatically extend to a related company, however wholly owned.
- If no such document exists, prepare a written assignment or licence from the subsidiary to the parent, dated and signed by both, covering the period of use to date and going forward.
- Flag the gap to whoever manages the developer relationship before renewing or expanding the contract, since the same drafting gap will repeat on the next deliverable.
- Keep the paper trail — invoices, correspondence, drafts — because ownership disputes of this kind are decided on documents, not on who paid first.
The same review should cover liability and limitation clauses in the underlying contract; a comparable clause failure is set out in The customer refuses a limitation of liability technology contract.
Who decides
There is no regulator for this question. Ownership is settled either by agreement between the subsidiary and the parent, or, if that fails, by the court or arbitral forum named in the contract between the subsidiary and the developer. Evidence is the assignment or licence text, the invoices proving payment, and any correspondence describing what was meant to be transferred. Absent a written assignment, the developer's original rights and the default position under the applicable framework govern the outcome.
If your situation differs
- If the developer's contract already contains a full assignment to the subsidiary, the only missing step is the transfer from subsidiary to parent — a shorter, single-document fix.
- If the subsidiary only holds a licence, check whether that licence permits sub-licensing to affiliates. Many standard licences do not, and a fresh negotiation with the developer becomes necessary.
- If the parent is already selling or distributing a product built on the disputed code or data, the exposure is live, not theoretical. The paperwork should close before the next sale, not after.
Sources and limits
This page does not determine which national law governs the assignment formalities between the subsidiary and the parent. That depends on where each entity is incorporated and on the governing law clause in the underlying contract, neither of which is registered here. It does not resolve a pre-existing dispute with the original developer over payment or scope, and it does not price a retroactive licence between group companies.
Where the exposure extends to enforcement against a counterparty, the relevant starting points sit in a different layer: Asset in Ireland in practice covers what a factual check on holdings can establish.
The same layer also covers claims against a non-paying party once ownership is settled: Debtor in Ireland step by step sets out what that check can and cannot show.
Verified on 3 June 2025. Sources: Directive 2009/24/EC; Directive 96/9/EC. No national assignment-formality rule is registered for this situation; any statement about specific formalities depends on the law actually governing the underlying contract.
Related situations
The same drafting gap appears with different wording elsewhere in this practice: What to do first in this situation explained walks through the mirror case, where the contract says nothing beyond "work for hire" and an assignment is assumed rather than written.
FAQ
What is the first step when a subsidiary paid for work the parent uses?
Pull the contract between the subsidiary and the developer and check whether it assigns rights or only licenses them. Everything else follows from that answer.
Which deadline is already running?
No fixed number is registered for this situation. The limitation period for a claim by the developer against the subsidiary, or by the subsidiary against the parent, runs under whichever national law governs the relevant contract, typically from the date payment fell due or the date unauthorised use began. Identify that governing law before assuming there is time to spare.
Who decides, and on what evidence?
The parties settle it by agreement, or a court or arbitral forum named in the underlying contract decides on the assignment text, the invoices, and the correspondence describing what was meant to transfer.
Next step
If the paperwork behind a subsidiary's payment does not clearly reach the parent's use, the file should be checked before the next contract renewal, not after a dispute starts. I can review the assignment chain with you and confirm what, if anything, still needs signing.