Code ownershipContractsCustom softwareChoosing a vendor
Who owns the source code of custom software?
6 min read
Paying for custom software does not, on its own, make you the owner of its source code. In the US and the UK, code written by an outside contractor generally belongs to the contractor until a signed written agreement assigns it to you; code written by your own employees in the course of their job belongs to you as the employer. What you get is decided by the contract, so read that clause before you sign.
This article explains the general rules, what a solid contract spells out, and where LPR Studio stands. It is not legal advice: have any development contract reviewed by a lawyer in your jurisdiction.
The default rules: employees versus contractors
Software is protected by copyright, like a book. Whoever holds the copyright controls copying, modifying and distributing the code. The key question is who holds it at the start.
United States. Under 17 U.S.C. § 101, a "work made for hire" belongs to the employer or commissioning party. That covers "a work prepared by an employee within the scope of his or her employment". A work commissioned from an outside party only qualifies if it falls into one of nine listed categories (such as a contribution to a collective work, part of an audiovisual work, a translation or a compilation) and both parties sign a written agreement saying so. Standalone software is not in that list. For contractor-built software, the reliable route is a written assignment: under § 204(a), a transfer of copyright ownership is not valid unless it is in writing and signed by the owner or the owner's authorised agent.
United Kingdom. Under section 11(2) of the Copyright, Designs and Patents Act 1988, when a work is made by an employee in the course of employment, "his employer is the first owner of any copyright in the work subject to any agreement to the contrary". A contractor is not an employee. And section 90(3) states that "an assignment of copyright is not effective unless it is in writing signed by or on behalf of the assignor".
| Who writes the code | Who owns it by default | What transfers it to you |
|---|---|---|
| Your employee, as part of the job | You, the employer | The law, unless agreed otherwise |
| An agency, studio or freelancer | The contractor | A signed written assignment or a licence |
| An open source project | Its authors | Nothing: you use it under its licence |
Other countries follow their own rules. In France, for example, a transfer of author's rights must list each right and its scope, place and duration. If your vendor sits in another country, ask which law governs the contract.
Assignment or licence
A contract can give you rights in two ways.
- An assignment transfers ownership. You become the copyright holder, within whatever limits the contract sets, and you can have another team modify or reuse the code.
- A licence lets you use the software without owning it. It can be broad (unlimited use, modification allowed, access to the code) or narrow (internal use only, no source code). Every off-the-shelf product and every SaaS works this way.
Neither is better in itself. A broad licence with guaranteed access to the code if the vendor fails can protect you better than a vague assignment. What matters is whether the contract tells you clearly what you can do on the day you want to change vendors.
What you will never own, whatever the contract says
A modern application is not written entirely for you. It stacks three layers, and only the first can be handed over without conditions.
- Project-specific code: your screens, business rules and integrations. This is what the ownership discussion is really about.
- The vendor's reusable components: authentication modules, UI templates, deployment tooling used across projects. Vendors license these rather than assign them, otherwise they could never use them again. The contract should name them.
- Open source dependencies: frameworks and libraries that stay under their own licences. Some, such as the GPL family, add obligations if you distribute the software. Ask for the list of components and licences.
Questions to ask before you sign
- Which rights do I get (copy, modify, distribute), by assignment or licence?
- For which uses, which territories and how long?
- Which parts stay with the vendor, and on what terms can I keep using them?
- Do I get access to the code repository during the project, at the end, or never?
- Who holds the hosting accounts, domain names and data?
- What happens if the vendor closes down or stops maintaining the software?
The usual answer to the last question is software escrow: the code is deposited with an independent agent and released to you under agreed conditions. It is worth having whenever you license software without receiving its source.
If you are still choosing a vendor, our 12 questions to ask a software development company and agency, freelancer or no-code comparison cover the rest of the decision.
Three common situations
The contract says nothing about ownership. This is the riskiest case. Without a signed assignment, the copyright stays with the vendor, and you are left with, at best, an implied right to use the software whose scope can be argued. Having another team modify it becomes uncertain.
The contract says "the client owns everything". It sounds reassuring but is often too vague: it does not say which rights, for what use or for how long, and it ignores the vendor's reusable components and open source. Ask for a clause that spells these out.
The contract grants a licence. That is the normal model for SaaS and subscriptions. Then check what happens when the contract ends, how your data comes back to you and, for critical software, whether the code is held in escrow.
Where LPR Studio stands
Our answer depends on the model you choose, and we keep it deliberately cautious because it involves contractual commitments.
- The demonstration prototype remains LPR Studio's property: it is presented in a video call, not delivered.
- After that, rights depend on the model you choose and are defined case by case in the contract.
- With the subscription model, LPR Studio remains the publisher and operator of the application. That is what removes the upfront investment: you do not pay for development, only a monthly subscription.
- With a fixed price, the extent of the rights transferred to you is discussed when the price is set.
The three models are described on our offers page, and their cost over three years is compared in this article. Our stack is deliberately mainstream (React, Next.js, TypeScript): an application built on common, documented tools can be taken over by another team, which matters as much as the clause itself.
Where to start
Raise ownership in the first conversation, not at signature: it changes the model, and therefore the price. At LPR Studio, the visual prototype is free and presented in a video call within 5 working days, wherever you are. That is when we explain, for your project, what each model gives you.