Who Owns the Source Code When an Agency Builds Your App?

Here’s a scenario that catches founders out, constructed but entirely typical. Picture a company that pays an agency $80,000 for a booking platform and runs it for three years. Then it wants a different agency to take over. The original agency replies that the code belongs to them, the client only has a licence to use the running system, and no, they won’t hand over the repository. The client is sure they bought the software. Legally, they didn’t.

The law surprises people because it contradicts the instinct that whoever pays, owns. With copyright, that isn’t how it works.

United States: work for hire and the writing requirement

US copyright law starts with whoever creates the work. The main exception is a “work made for hire”, defined in 17 U.S.C. § 101. It covers two situations.

The first is a work prepared by an employee within the scope of employment. That makes code written by the agency’s own developers a work for hire, but for the agency, their employer. Not for you.

The second covers specially commissioned works, but only in nine listed categories: contributions to a collective work, parts of a motion picture or audiovisual work, translations, supplementary works, compilations, instructional texts, tests, answer material for tests, and atlases, and only if both parties sign a written agreement saying so. Software isn’t on the list. Stamping “work made for hire” on a development contract therefore often achieves less than clients think.

What works is an assignment. Under 17 U.S.C. § 204(a), a transfer of copyright ownership is only valid with a written instrument signed by the owner or its authorised agent. Good contracts include both: a work-for-hire statement where it applies and a fallback assignment of everything else.

United Kingdom: employer first, contractor keeps it

The Copyright, Designs and Patents Act 1988 follows a similar logic. Under section 11(2), where an employee makes a work in the course of employment, the employer is the first owner of the copyright, subject to any agreement to the contrary. An agency’s staff therefore create copyright for the agency.

An outside contractor keeps copyright unless it is assigned. Section 90(3) adds that an assignment of copyright isn’t effective unless it is in writing and signed by or on behalf of the assignor. Purchase orders or emails saying “you own everything” may not be enough.

Without an assignment, courts in both countries may imply a licence that lets you use what you paid for. Implied licences tend to be narrow, though. They rarely stretch to letting a competitor of the original agency modify the code.

Germany: usage rights, never the copyright

If your agency is German, expect a different structure. Copyright can’t be transferred at all under German law; you receive usage rights. Under section 69b of the German Copyright Act, the agency exercises the economic rights in programs its employees write. Under section 31(5), where the contract doesn’t spell out the rights, the shared purpose of the contract decides what you receive, and courts read that narrowly. Ordering a website for your business clearly lets you run it. Whether it also lets another agency rebuild it is open to argument.

The fix is the same everywhere: an express clause granting exclusive, unrestricted rights including the right to modify and sublicense.

Criterion	United States	United Kingdom	Germany
Who holds rights in code by agency staff	agency	agency	agency exercises them
Can the client receive full ownership?	yes, by signed assignment	yes, by signed assignment	no, only exclusive usage rights
What the client gets with no clause	implied licence, often narrow	implied licence, often narrow	rights the contract purpose requires
Right to hand code to another agency	unclear	unclear	unclear

Simplified overview. Governing law and the exact wording of your contract decide.

Ownership isn’t the same as having the code

Rights and access are separate problems. You can hold every right in the code and still have nothing but a login to a running server. For PHP or JavaScript sites the gap is small, because the code sits on the server anyway. For mobile apps and compiled backends it’s huge.

The practical answer is simple. Put the code in a repository that belongs to you from day one, on GitHub or GitLab, and give the agency write access. The handover question then never arises.

What an agency may reasonably keep

Agencies have legitimate interests too. Many build on their own libraries, modules or frameworks that go into every project. Handing those over exclusively to each client would destroy their business.

The fair compromise separates three layers:

• Custom code written just for you: owned by you, or exclusively licensed to you.
• The agency’s reusable components: a perpetual, irrevocable, royalty-free licence that includes modification by third parties, so another firm can work on it later.
• Open-source components: used under their own licences, listed with licence names in an annex.

Clients who demand exclusive ownership of everything usually pay more for it or get turned down. The three-layer split is workable for both sides.

A clause to start from

Treat this as a starting point for a conversation with the agency and your lawyer, not finished contract language:

The Agency assigns to the Client, with full title guarantee, all intellectual property rights in all deliverables created specifically for the Client under this Agreement, including source code, object code, documentation and design materials. Source code shall be committed continuously to a repository controlled by the Client. In respect of the Agency’s pre-existing materials incorporated in the deliverables, the Agency grants the Client a perpetual, irrevocable, worldwide, royalty-free licence to use, modify and sublicense them, including to third-party developers.

Add terms on open source and on the agency’s rights from its own subcontractors. When rights pass, for example only on full payment, is also negotiable and a reasonable request from the agency.

• Assignment of rights in custom code, signed in writing
• Right to have the code modified by other developers
• Licence terms for the agency's pre-existing components
• List of open-source components with licences
• Repository owned and administered by you
• Documentation scope and format
• Warranty that subcontractors have assigned their rights to the agency
• When ownership passes

When a licence is the sensible choice

Sometimes a licence is the right deal, for instance when the agency runs a platform for many clients and you rent a configured instance. You get a cheaper product with less control. Protect yourself differently in that case: source code escrow with release on insolvency or product discontinuation, and a contractual right to export your data in an open format.

What to do now

If you haven’t signed yet, add ownership to your proposal comparison; how to compare agency proposals shows where it fits. If the project is underway, check today where the code lives and who has admin rights. If you are about to change agencies, read switching agencies. Code and documentation should be in your hands by acceptance at the latest, as covered in software acceptance testing.

The same question applies to studios that build and run software for partners, such as OnlineBuilders and its software development work: which parts are custom to you, and which belong to the provider’s platform?

Your next step: ask your agency in writing which repository holds your code and who is its administrator. The answer tells you in one sentence how dependent you are.

Questions people ask

Is custom software a work made for hire?

Only if it was written by the agency's employees, and then it is the agency's work for hire, not yours. Commissioned work from an outside firm only qualifies in nine statutory categories, and software is not one of them. You need a written assignment instead.

Do I need the source code if the website is already running?

Yes, if you ever want someone else to maintain or extend it. Compiled apps and backends can't realistically be changed without source. Even for websites, you want the full repository with history, build scripts and documentation.

What about open-source libraries in my project?

No agency can give you exclusive rights in open-source components; their own licences apply. Ask for a list of components and licences. Copyleft licences such as the GPL can create obligations if you distribute the software.

What is source code escrow?

The code is deposited with a neutral third party and released to you under defined conditions, such as the agency's insolvency. It is mainly worth it when the agency keeps ownership and you only receive a licence.