We address the issue of intellectual property (IP) rights in onshore and offshore software development outsourcing. IP assets are generally intangible in nature and are easily misappropriated by the contracting parties. The paper examines two IP protection mechanisms employed by firms: rights-sharing arrangements and restrictive covenants and using data from 153 software contracts across 14 countries we show how IP protection mechanisms are related to software customization, software modularity, pricing scheme, and to the strength of the overall IP legal protection environment in the vendor countries.