Payment alone generally does not transfer a developer’s copyright in custom software. Ownership, license scope, and source-code access are separate questions—and each can be addressed in the development contract.
Founders often assume that because they paid for custom software, they own it. Copyright law does not work that way. The developer who wrote the code generally owns the copyright unless a specific legal mechanism transfers it, and a paid invoice is not one of those mechanisms. 1
Three distinct questions tend to get blurred together: who owns the copyright in the code, who may use or modify it and within what limits, and who is entitled to receive the files, documentation, and repository access. Possessing a copy of the source code does not itself establish copyright ownership, and acquiring the copyright does not automatically resolve every delivery or account-access obligation. 12
Work Made for Hire: Employees and Independent Contractors
Software created by an employee within the scope of employment is generally a work made for hire belonging to the employer, unless the parties agree otherwise in a signed writing. Whether someone is an “employee” for copyright purposes is determined under federal common-law agency principles—the Supreme Court’s decision in Community for Creative Non-Violence v. Reid—not under California’s employment classification tests. 34
For independent contractors, a “work for hire” label in the contract is not enough. The commissioned work must fall within one of the nine statutory categories and the parties must sign an agreement designating it as a work made for hire. Software is not independently listed among those categories, so most outside-developer arrangements cannot rely on the work-for-hire doctrine at all. 34
Written Assignments Under Section 204
The other path to ownership is an assignment. Under 17 U.S.C. § 204(a), a transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or that owner’s authorized agent. 2
An assignment is different from a promise merely to deliver a finished application. A contract can obligate a developer to hand over a working app without ever transferring the underlying copyright. Related questions deserve the same attention: whether subcontractors signed over their rights, whether the developer’s preexisting tools and libraries are included, and what third-party or open-source components carry their own license terms. 2
Gagnon: An Implied License, Not Ownership
When no written transfer exists, courts sometimes find an implied license. In Asset Marketing Systems, Inc. v. Gagnon, the Ninth Circuit upheld an implied, nonexclusive license allowing the customer to retain, use, and modify custom software it had commissioned. The result depended on the development relationship, delivery of the code, and objective evidence of permission; the consideration paid supported treating the license as irrevocable. 5
Gagnon should not be read as holding that payment alone always creates an unlimited license, and the court did not resolve copyright ownership in the customer’s favor. An implied license is a fact-dependent fallback, not a substitute for a written agreement. 5
License Scope Versus Source-Code Access
Permission to use software is not the same as permission to copy or modify it. S.O.S., Inc. v. Payday, Inc. illustrates that a license to operate software does not necessarily authorize copying or modification beyond the license’s scope—though it should not be read as categorically denying every licensee source-code rights or finally resolving all disputed access issues. 6
Access is a separate practical question. A business can hold a valid license yet lack the repository credentials, build documentation, or deployment access needed to maintain the product. Those delivery and access obligations live in the contract, not in copyright ownership itself. 26
Contract Terms That Prevent Disputes
A development agreement can address each of these questions directly:
- A present assignment of copyright and other intellectual-property rights.
- Permitted uses, modification rights, and any license-back to the developer.
- Source-code delivery, documentation, and repository control.
- Transition assistance if the relationship ends.
- Contributor and subcontractor assignments.
- Third-party and open-source license disclosures.
If a dispute is already forming, preserve the agreements, payment records, and communications, along with lawfully accessible repository records. A developer’s failure to deliver code may present a contract issue; it is not automatically copyright infringement. 2
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Discuss Your Matter
If your business is negotiating a development agreement or disputing software ownership or access, you may contact Mahrouyan Law. Read more about our startups and transactions practice, our intellectual-property practice, and our business-litigation practice.
Omeed Mahrouyan is the founder of Mahrouyan Law, P.C., a California firm handling business and commercial litigation, property and cargo damage claims, personal injury, landlord representation, startup transactions, and practical intellectual property matters. Clients work directly with him on strategy, drafting, and case decisions.
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