The Translator Contract: Per-Word Pricing, CAT Tool Memory Ownership, and IP Transfer

The translator who suspects they are being underpaid through CAT-tool discounts they never negotiated is usually right. Three clauses in the standard agency contract cooperate to turn a stated per-word rate into something less: the translation memory becomes the agency's property, the freelancer must delete it at engagement end, and an undisclosed discount schedule applies to every project run through the TM.

This post is the contract-reading framework. It walks through the three clauses using a real agency document (GTS Translation's published freelance contract) as the specimen, explains the legal position on TM ownership under EU and US copyright frames, and gives sample per-word and IP-transfer clause language that counters the standard agency template.

Why your per-word rate is not what you are actually being paid

A typical European agency contract names a per-word rate in the project order and then applies a CAT-tool discount schedule that the freelancer agreed to when they signed the master services agreement. The freelancer reads the rate in the PO while the agency applies the discount schedule from the master agreement they both signed; the actual pay is that rate multiplied through the discount table. Both signed; neither party has hidden anything.

The GTS Translation freelance agreement is a publicly available specimen of how this is structured in practice. The agreement states explicitly:

"100%, context matches and repetitions: 30% of the new word rate; 95-99%: 50% of new word rate; 75-94%: 70% of new word rate; 50-74%: no discount."

Source: GTS Translation, Translator Agreement (public-facing freelancer-onboarding contract)

A 100% TM match in this schedule pays the freelancer 30% of the new-word rate. A 95-99% fuzzy match pays 50%. A 75-94% pays 70%. Only segments below 75% fuzzy match pay the full rate.

This is a contract term, not a negotiation. The freelancer who signed the master agreement consented to the schedule. The freelancer who reads the PO and asks "what is the per-word rate" is asking a question the contract has already answered with five different answers depending on the match level.

Robert Gebhardt named the structural problem in an August 2020 LinkedIn analysis titled "CAT SCAM":

"Certain translation agencies are currently using CAT Tools in a way which, to be frank, should be illegal."

Source: Robert Gebhardt, "CAT SCAM" (LinkedIn, August 2020)

Gebhardt's argument runs: the freelancer pays for the CAT tool (the SDL Trados Studio Freelance license at $845 or Professional at $2,895 as named in his article); the tool builds the TM through the freelancer's work; the agency owns the TM under the master agreement; the agency captures the discount on subsequent projects without passing the same discount through to the end client. The freelancer funded both ends of the arbitrage.

The three contract clauses that create the IP trap

The GTS specimen contains three clauses that interact. Reading them together is how the trap works.

Clause 1: the agency owns the translation memory. Per the GTS agreement: "all translation memories (TM) created or updated during the course of assignments for GTS are the property of GTS." A translation memory built over three years of domain-specific work for a single client now belongs to the agency, not the freelancer who built it.

Clause 2: the freelancer must delete the TM at engagement end. Per GTS: "you agree to delete all texts and/or TMs related with translation jobs received from GTS within 30 days of completion of a project." The freelancer cannot carry the TM forward to other engagements, cannot use it as a portfolio sample, cannot use it as leverage when negotiating with the next agency in the same domain.

Clause 3: the discount schedule is fixed at the contract level. The 30%/50%/70% of new-word-rate schedule sits in the master agreement, not the PO. Every project the freelancer does through this agency applies it. The freelancer who pushes back on the discount for one project is pushing back on the master agreement, which the agency typically refuses to renegotiate after onboarding.

Each clause is defensible in isolation. Clause 1 protects the agency from a competitor capturing client-specific terminology. Clause 2 protects client confidentiality. Clause 3 is the agency's price model. The three together are the structural problem: the freelancer pays for the tool, builds the TM, gets paid less for the TM-leveraged work, and loses the asset at engagement end.

Who legally owns a translation memory

Default legal position favors the freelancer on the underlying translations and is ambiguous on the TM file itself. Per oneword.de's analysis of TM ownership under German copyright law:

"Some translation service providers retain ownership of TM files, binding their customers to them."

Source: oneword.de, "Ownership of translation memories"

The German Copyright Act (UrhG) framing on oneword.de runs: "translations and other adaptations of a work which are the adapter's own intellectual creations are protected as independent works." The translation is an independent copyrightable work; the freelancer is its author. The TM file is a database of those independent works, which means it has at least two copyright layers (the underlying translations and the database collection itself).

oneword.de's practical conclusion: "a translation service provider also does not have an automatic entitlement to the TM data." Without a contract clause assigning TM ownership, the agency has no default claim. The contract clause is the entire game.

The academic framing on this question runs through Ross Smith's 2009 ACL Anthology paper "Copyright Issues in Translation Memory Ownership", which catalogs the database-right and derivative-work analyses across jurisdictions. The doctrinal range is wide; the contractual practice is narrow. Agencies write "we own the TM" into the master agreement; freelancers sign it; the default legal position never gets tested in court.

Per Cynthia Farber's March 2014 piece on TheTranslationCompany.com, the four standard legal documents in the freelancer-agency relationship are: a translation services agreement, a translation job contract, a confidentiality agreement, and a separate copyright-ownership document. The copyright agreement is where TM ownership and IP transfer get decided. Most agency master agreements bundle the copyright clause into the services agreement, which is why freelancers sign it without separately considering its scope.

What a per-word contract clause should actually say

The fix is at the contract-drafting level, not the per-project negotiation level. Three components for a per-word rate clause that locks the stated rate against unilateral discount substitution.

Component 1: the base per-word rate is stated as a specific figure in the contract body. Not in a side agreement, not in a PO, not in a discount schedule appendix. The contract says "freelancer's rate is $0.18 per source word for English-to-Spanish technical translation" or whatever the figure is. The PO references the contract rate; the PO does not establish the rate.

Component 2: a written-consent-required clause prevents the agency from applying any TM-related discount without separate signed authorization for each project. Sample language: "no fuzzy-match discount, repetition discount, translation-memory discount, or other rate adjustment of any kind shall apply to freelancer's per-word rate unless agreed in writing on a per-project basis by both parties prior to project commencement."

Component 3: an aggregate discount cap protects against death-by-a-thousand-cuts. Sample language: "in no event shall freelancer's aggregate compensation for any project fall below seventy percent (70%) of the base per-word rate multiplied by the source-word count of the project."

These three clauses together restore the stated rate to its stated value. The agency that refuses all three is signaling that the discount system is their business model; the freelancer who signs anyway is agreeing to the model. The agency that accepts at least the written-consent-required clause is signaling that the relationship has room to negotiate per-project terms.

IP transfer and work-for-hire: the language to strike or limit

Standard agency contracts include broad IP transfer language assigning all rights in the freelancer's work product to the agency or end client. This is the work-for-hire frame under US copyright law and its equivalents in other jurisdictions. The clause typically reads: "freelancer hereby assigns all right, title, and interest in and to the translation, including all copyrights, to the agency."

Three negotiation moves.

Move 1: convert assignment to license. Replace "freelancer assigns" with "freelancer grants the agency a perpetual, royalty-free, worldwide license to use, modify, and distribute the translation for the purposes of the engagement." The agency gets functional rights; the freelancer retains underlying authorship.

Move 2: carve out moral rights and attribution. Add: "notwithstanding the foregoing, freelancer retains moral rights in the translation including the right of attribution where commercially reasonable, and the right to identify the translation as their own work in portfolio materials." This is enforceable in many EU jurisdictions and is a meaningful negotiating point even in US-law contracts.

Move 3: explicit TM-retention right. Add: "freelancer retains the right to a copy of the translation memory built during the engagement for purposes of professional development, portfolio reference, and quality assurance, subject to the agency's confidentiality terms regarding client identity and source content." The freelancer keeps the TM as a personal asset; client confidentiality is preserved through redaction.

The graphic designer contract source-files licensing post walks through the parallel licensing-versus-assignment framework in the design-deliverable context. The freelancer analogue is structurally identical: license what the agency needs, retain what the freelancer built.

Building your contract from scratch

The standard agency contract is built around the agency's interests. The freelancer-side contract should be built around the freelancer's interests, then negotiated against the agency template at engagement start. The clauses above are the load-bearing pieces; the freelance contract essentials post covers the standard scope, payment, and termination clauses that sit around them.

For a working freelancer engagement letter that combines a locked per-word rate clause, a TM-retention right, and a license-not-assignment IP frame, the FreelanceDesk contract builder generates the document with freelancer-specific fields built in: source and target languages, base per-word rate, written-consent toggle for CAT-tool discounts, aggregate discount cap, and TM-retention default.

The translator invoice per-word per-project post covers the downstream invoicing side once the contract rate is locked: how to itemize the rate, when to break out fuzzy-match line items, and how to flag a discount that was applied without the consent the contract requires.

References

• GTS Translation Translator Agreement (specimen)
• "CAT SCAM" — Robert Gebhardt (LinkedIn, August 2020)
• Ownership of Translation Memories — oneword.de
• Useful Legal Agreements for Translators — TheTranslationCompany (March 2014)
• Copyright Issues in Translation Memory Ownership — Ross Smith, ACL Anthology (2009)
• ATA Code of Ethics — American Translators Association