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My understanding is essentially people have contracts that essentially assign ownership of the copyright at point of completion rather that at the point payment.

In the monteiro talk he says that a lot of companies have default contracts for contractors, and say things to the effect of "it's just our standard contract there's nothing to worry about", IIRC he gives examples of contemporary contracts that require delivery on floppy disks. But also they try to have terms that essentially say all the work belongs to them, and you will be paid on completion.

e.g. if you don't finish the work - or they claim you did not (by applying feature creep offensively, etc). Then because you didn't finish they don't owe you money.

The other approach is that they fail to pay, you can't use (for example) the DMCA to pull down their site, or bring copyright violation suit against them because the IP already belongs to them. All you can do is sue for owed money but you don't have the leverage of stopping them using your IP, because it's not your IP anymore.

That is my understanding from his talk anyway - IANAL, and also I haven't done contract work myself (that's what my wife used to do, and she had a default contract produced by her own lawyer)

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