Who Owns the Code? IP, Source Code and Handover Clauses Explained

When you commission custom software, you should own the source code and intellectual property on payment, have the code in a repository in your own account from day one, control the hosting and third-party accounts, and receive enough documentation for another team to take over. Without these, you depend on one vendor for every change, and switching becomes slow and expensive.

Many founders assume that paying for software means owning it. Legally and practically, that is not automatic.

The five things to own

1. Intellectual property

The contract should assign all rights in the custom work to your company on payment. Without an explicit assignment, the developer may retain rights and license the software to you.

2. Source code

You need the complete source code, not just the running application. It should live in a repository such as GitHub or GitLab under your organisation, with the vendor given access, not the other way round.

3. Accounts and infrastructure

Hosting, domains, databases, app store developer accounts, email services and payment gateways should be registered to your company. Vendors get user access. This prevents a system going dark in a dispute.

4. Data

Your business data belongs to you. The contract should require the vendor to export it in usable formats at any time and to delete their copies at the end of the engagement.

5. Documentation

Architecture notes, set-up instructions, environment variables (stored securely), and how to deploy. Without them, owning the code is of limited practical use.

Clauses to include

| Clause | What it should say | | --- | --- | | IP assignment | All custom work product is assigned to the client on payment | | Pre-existing IP | The vendor's reusable libraries are licensed to you perpetually, royalty-free, for use with the system | | Open-source | The vendor lists open-source components and their licences; no licence that forces you to publish your code without consent | | Source code access | Code committed to the client's repository throughout the project | | Accounts | Infrastructure accounts owned by the client | | Documentation | Delivered with each milestone and at handover | | Handover assistance | Reasonable support to transfer to another team, at agreed rates | | Confidentiality | Mutual, surviving termination | | Data protection | Compliance with the Digital Personal Data Protection Act |

Pre-existing code is normal

Good vendors reuse proven components for authentication, payments and admin panels. That saves you money. The key is that you receive a perpetual, irrevocable licence to use those components within your system, so you are never blocked from maintaining or moving it.

Open-source licences

Almost all modern software uses open-source libraries. Most permissive licences are fine for business use. Some licences have conditions about sharing modifications. Ask your vendor to list what they use and confirm there are no conflicts with your plans, such as selling the software as a product.

Escrow: when it is worth it

For packaged or licensed software where you do not receive the code, source code escrow places a copy with a third party, released to you if the vendor fails. For custom software you own, escrow is unnecessary if the code is already in your repository.

Checking ownership on an existing system

If you already have software built by someone else, check:

• Can you access the repository, and is it in your organisation's account?
• Who is the registered owner of the domain, hosting and app store accounts?
• Is there a contract with an IP assignment?
• Could a new developer deploy the system from the documentation?

If the answer to any is no, fix it before you need it. See technology leadership without a CTO for building a system register.

Frequently asked questions

Is it reasonable for a vendor to keep ownership?

For packaged products, yes, you license them. For custom work you have paid for, ownership should transfer to you.

Should we pay more for full ownership?

Reputable custom developers include it as standard. Be cautious if ownership is presented as an expensive extra.

What if the vendor goes out of business?

If you own the code, accounts and documentation, another team can take over. That is the point of these clauses.

Do these clauses slow down the project?

No. Setting up your repository and accounts at the start takes an hour and removes future risk.

Build software you own

At Turbo Bytes Consulting, clients own the code, IP and accounts for all custom software we build, from day one. Read fixed price vs time and materials for the commercial side of contracts.

Book a 30-minute scoping call to discuss your project and how it will be structured.