The Missing Link: Software IP in Contracts Between U.S. Companies and Brazilian Service Providers
Why an IP clause copied from a U.S. template can leave the client without what it thinks it bought — and how to close the chain of title under Brazilian law
A U.S. company recently asked me to review an international software-services contract. The services were provided by an experienced Brazilian developer who had set up a company — a Brazilian limited-liability company, a sociedade limitada (Ltda) — with his wife to render them. As usual, I received a contract drafted to U.S. standards, and my task was to review it under Brazilian law and adjust it only where local law required. The intellectual-property clause is a central piece of any technology contract, and it comes up again and again.
As is typical, the IP clause was built on a U.S. domestic template: a “work made for hire” provision combined with a broad assignment of rights. In the U.S. system, that is enough. Copyright there is treated as an almost entirely economic right, freely assignable. Under Brazilian law, however, that same clause — used without adaptation — leaves open a legal gap that can prove costly to the client.
This article addresses a specific and increasingly common setup: the client is a U.S. company; the contractor is a Brazilian company — typically a sociedade limitada (Ltda) with one or a few partners; and the software is actually written by an individual who is a partner of that Ltda, not its employee.
The Brazilian starting point: commissioned works
Unlike in the United States, Brazilian law protects software as copyright, not as a patent. The governing statute is Brazilian Law No. 9,609/1998 (the Software Law), whose Article 4 sets the rule for commissioned works: absent a stipulation to the contrary, the rights in software developed during a services contract belong exclusively to the contracting party.
At first glance, this is good news for the U.S. company. The law already assigns ownership to it by default, and the contract merely confirms what the statute presumes — the functional equivalent of U.S. work for hire. But that comfort is deceptive, for two reasons the next sections develop.
Authorship originates in the individual
Brazilian copyright law starts from a premise the U.S. system does not share: authorship of a work — software included — originates necessarily in the natural person who creates it. A company cannot be an author; at most, it can be a holder of economic rights assigned to it. This logic runs throughout Brazilian Law No. 9,610/1998 (the Copyright Law), which applies to software on a supplementary basis.
From this follows a two-link chain of title that the typical U.S. clause never sees:
First link — from the individual developer to his Ltda. Because it is the individual who creates the code, the rights originate in him. For the Ltda to be able to dispose of those rights, it must first have received them from the author.
Second link — from the Ltda to the U.S. company. This is the link the contract normally documents: the Ltda assigns to the client.
The problem lies where the two meet. The contract is signed by the Ltda, but the person who holds the originating rights is the individual partner. If the first link is not expressly documented, the U.S. company receives from its counterparty rights whose title the counterparty itself never showed it had acquired from the author. In a dispute, the developer could argue that he never personally assigned his rights — and, formally, he signed the contract as the Ltda's representative, not as the author.
Article 4 of the Software Law governs title in the relationship between the client and the contracting party, assigning the rights to the client. That makes the second link work — the Ltda to the U.S. company. But Article 4 says nothing about the internal link, between the Ltda and the individual partner who actually wrote the code. Because authorship, under Brazilian law, originates necessarily in the individual, that internal relationship is reached neither by the Article 4 presumption nor by the contract's standard text.
The fix: a direct assignment from the individual author
The safest way to close the gap is not to strengthen the contracting company's assignment language, but to bring the individual developer in to sign the IP assignment in his personal capacity, assigning his economic rights — to the fullest extent local law permits — directly to the U.S. company, alongside the assignment made by the Ltda.
This gives the client a direct chain of title, from the source in which the rights originate to whoever acquires them. One could, alternatively, consider a two-step chain: a contract between the contracting company and its technical partner, entered into before or together with the services contract. The direct solution, however, has concrete advantages: it removes reliance on a link outside the client's control; it gives the client a direct claim against the author, backed by an instrument he signed in the client's favor, should he later assert authorship; and it eases registration of the software. In addition, an internal assignment from the partner to his own company — so that the company can then pass the rights on to the client — would amount to a self-dealing contract, with the same individual on both sides. It is not void in itself, but it is more fragile and introduces an avoidable link. A direct assignment from the author to the client sidesteps that problem.
On registration, a point that reinforces this: the INPI (the Instituto Nacional da Propriedade Industrial — Brazil's federal software-registration and industrial-property authority, whose competence over software registration derives from Decree No. 2,556/1998) formally distinguishes the figures of author and holder in a registration application, and accepts among its documentation the instruments assigning the authors' rights. A well-documented direct assignment from the individual author is therefore what lets the client register the software in its own name with a clean chain of title.
This has formal support in the INPI's own guidance. The e-Software User Manual, when addressing the identification of the author, is explicit: where the author is not the holder of the rights, “a contract between the company and the author is required,” and the manual points directly to Article 4 of the Software Law. In the same vein, among the documents that support the registration, the INPI provides that, where the holder differs from the author, title be demonstrated by an assignment of economic rights or by a contract (of employment, of services, or equivalent) evidencing the Article 4 link. The electronic form itself, moreover, distinguishes the author and holder fields, allowing them to be different people. In other words, the registration procedure presupposes that the client's title rests on the transfer of rights from the individual author — and not merely on the Ltda's signature.
The second obstacle: the author's moral rights
There is a second feature of Brazilian copyright law that the U.S. clause overlooks, because it has almost no equivalent in the United States: the author's moral rights. Alongside economic rights — which are economic and assignable — the Brazilian author holds moral rights that are personal, inalienable, and non-waivable, under Article 27 of Law No. 9,610/1998. Among them: the right to be recognized as the author and the right to object to alterations of the work.
Decisively for the IP clause, the law provides that, in an assignment of copyright, moral rights do not transmit — so states Article 49, item I, of the same law. In other words, a clause purporting to assign “all right, title, and interest” in the work — the standard U.S. formula — simply does not reach moral rights in Brazil. They remain with the author, by force of law, whatever the contract says.
In practice, this rarely prevents the commercial exploitation of the software: what matters economically are the economic rights, and those are assignable. But it leaves a door open — the author could, in theory, invoke his moral rights to claim authorship credit or to object to modifications of the work.
Because moral rights cannot be assigned, the correct mechanism is not to pretend to transfer them, but to obtain from the author a waiver of their exercise, to the fullest extent the law permits, with express consent for the client to modify, adapt, and use the work without attribution. It is not an assignment — which would be void — but an undertaking not to exercise, which prevents those inalienable rights from later being used to obstruct the client's use of the software.
What a well-built clause addresses
The adjustment that closes the gap is simple to draft and cheap to implement — which makes it all the easier to neglect. It is not enough for the client to obtain the contracting company's assignment; the individual developer, as author, must assign his economic rights directly to the client and waive the exercise of his moral rights to the fullest extent Brazilian law permits. With that, the client gains a chain of title that begins at the right source — the individual in whom the rights originate — and an instrument capable of supporting, later, a registration of the software in its own name before the INPI.
The cost of this clause is one extra signature and a few paragraphs. The cost of not having it shows up later, and always at the worst moment: in an authorship claim by the developer, in a registration that cannot be completed for lack of the author's assignment, or in an investment due diligence that finds the chain of title broken — precisely when the company most needs to show that it owns its own code.
There is one further reason that reinforces all of this. Although the contract elects U.S. law, and although Brazil's own conflict-of-laws rule often points to the law of the country where the offeror resides (Article 9 and § 2 of the LINDB — Decree-Law 4,657/42) — often U.S. law itself — Brazilian courts commonly apply Brazilian law to international contracts adjudicated in Brazil, whether because the conflict rule is objective and not chosen by the parties, or by invoking public order and national sovereignty (Article 17 of the LINDB). The choice of a foreign law is therefore more fragile in Brazil than in the United States — and the title to software created in Brazil is exactly the kind of matter in which Brazilian law tends to prevail.
The contract may be governed by U.S. law, but the code is born under Brazilian law — and it is Brazilian law that may end up deciding whether the client truly owns it. Closing this clause costs one signature. Leaving it open can cost the asset itself.
This article is for general information and does not constitute legal advice or create an attorney–client relationship. Statutory references link to the official texts cited above; readers should verify currency, as legislation is amended over time. © Marcio Santos. All rights reserved.