Short answer: Paying for software development does not transfer ownership to you. Under the Indian Copyright Act 1957, copyright in commissioned software vests in the developer or agency — not the client — unless there is a written assignment. If your contract does not contain an explicit assignment clause, you may hold only a licence to use the software, not ownership of the underlying intellectual property.
This is general information, not legal advice. Have a lawyer review any contract before you sign.
Why most founders get this wrong
The intuition is understandable: you paid the bill, so you own the product. This holds for physical goods. It does not hold for copyright. In India, the Copyright Act 1957 governs software as a literary work. Section 17 of the Act states that the author of a work is the first owner of copyright in it. For commissioned work — software built by an independent contractor or agency — the "author" is the developer, not the client, unless the parties have agreed otherwise in writing.
This is fundamentally different from the employment context. When a salaried employee writes software in the course of their employment under a contract of service, copyright typically vests in the employer. But an agency engagement is not a contract of service. It is a contract for service. That distinction carries significant legal weight.
The practical result: if you paid an agency ₹8 lakh to build a platform and the contract said nothing about IP, the agency likely retains copyright. You have an implied licence to use what was built, but you cannot sublicense it, modify it for resale, or assert ownership if the agency ever makes a competing product using the same codebase.
What assignment actually means — and what a licence does not give you
A licence grants you permission to use the software under defined conditions. It can be exclusive or non-exclusive, time-limited or perpetual. Even an exclusive licence does not make you the copyright owner. The licensor can still assert moral rights (the right to be identified as author, the right to object to derogatory treatment of the work), and the copyright can be assigned to a third party in a way that affects your licence if it is not properly registered.
An assignment transfers the copyright itself. After a valid written assignment, you are the owner. You can sublicense, modify, sell, or enforce the copyright as you see fit. The Copyright Act requires an assignment to be in writing and signed by the assignor or their authorised agent. Oral assignments are not valid.
For most business software — a CRM, a SaaS product, an internal tool — assignment is the right structure. You are not just buying permission to run the software; you are building an asset.
What your contract must actually say
A clause that says "all work product shall belong to the client" is a reasonable starting point but is often not precise enough to survive scrutiny. A well-drafted assignment clause should:
- Identify the work being assigned with specificity (the software, including all source code, documentation, and derivative works created under this agreement)
- State that copyright is assigned with effect from creation (not just at handover)
- Confirm the assignment is worldwide, irrevocable, and includes all present and future rights
- Address moral rights — the author can waive certain moral rights in writing under Indian law
- Cover pre-existing materials explicitly: if the agency uses libraries, frameworks, or proprietary code they developed before your engagement, those may be excluded from assignment and licensed to you separately
This last point matters more than founders realise. A modern web application might have 80% open-source dependencies and 15% agency-owned boilerplate. What you need assigned is the 5% that is genuinely specific to your product. Make sure the contract distinguishes these.
See our software development contract guide for a fuller breakdown of clauses to negotiate.
Employee-created software: a different rule
If your in-house developer writes the software as part of their employment, Section 17 of the Copyright Act gives copyright to the employer (you) automatically, provided the software was created in the course of employment. This is the "contract of service" exception. You still need to ensure the employment contract makes this explicit and that the developer has not introduced third-party code with incompatible licences.
Open-source components and licence contamination
Most commercial software uses open-source libraries. These are not "free to use however you like." They carry licences — MIT, Apache 2.0, GPL, LGPL — each with conditions. GPL-licensed code, for instance, requires derivative works to also be released under GPL. If an agency has built your product using GPL libraries and you intend to keep it proprietary, you have a problem that a contract clause cannot fix.
A serious agency will give you a dependency licence audit at handover. If yours did not, run one now. Tools like FOSSA, Snyk, and even a manual review of package.json or requirements.txt files can surface the exposure.
| Licence type | Can you keep your product proprietary? | Commercial use permitted? |
|---|---|---|
| MIT / BSD / Apache 2.0 | Yes, with attribution | Yes |
| LGPL | Usually yes, if dynamically linked | Yes |
| GPL v2/v3 | No — derivative works must be GPL | Yes, but source must be disclosed |
| AGPL | No — network use triggers copyleft | Yes, but source must be disclosed |
| Commercial / proprietary | Check licence terms | Varies |
What to do if your current contract is silent on IP
If you have already paid for software and the contract is silent on ownership, you have options — none of them free, but all better than ignoring the problem.
First, negotiate a retrospective assignment with the agency. Many agencies will sign one, particularly if the relationship is ongoing or they want a reference. This assignment should follow the requirements described above and should be dated clearly.
Second, if the agency is unwilling or unreachable, take legal advice on whether an implied licence covers your planned use, and whether you can argue the work was created in circumstances that give rise to ownership. This is fact-specific and requires a lawyer.
Third, consider a complete rebuild under a properly structured contract. This is expensive but it is sometimes the cleanest path if the original codebase is entangled, poorly documented, or built on proprietary agency tooling.
What ownership looks like at handover
When software is properly assigned and the engagement closes, you should receive:
- The complete source code repository, including full commit history
- All credentials: cloud accounts, domain registrars, DNS, third-party API keys
- CI/CD pipeline configuration and deployment scripts
- Documentation sufficient to operate and extend the system
- A written IP assignment deed, signed
At NexaEx, this is not optional — handover includes all of the above and the repository, pipeline, infrastructure and credentials transfer entirely to the client. No lock-in, no per-seat fees on tooling we introduced. See our software handover checklist for what a complete transfer looks like.
A quick reference: ownership scenarios
| Scenario | Who owns copyright by default? | How to change it |
|---|---|---|
| Agency/contractor builds software | Agency/contractor | Written assignment clause in contract |
| Salaried employee builds software | Employer (you) | Automatic under Section 17 — confirm in employment contract |
| You use open-source components | Licence holders (various) | Cannot be changed — comply with licence terms |
| You build on a third-party SaaS platform | Platform vendor (usually) | Check platform terms; you typically own your data, not the platform |
| Joint development with a partner | Both parties (joint authorship) | Agree ownership split and usage rights in writing |
The bottom line is straightforward: if a lawyer did not draft or review the IP clause in your software development contract, the ownership of what you paid to build may not be what you assume. A single afternoon with a lawyer reviewing and amending that clause is among the highest-ROI legal spends a product company can make.
Ready to work with an agency that transfers full ownership at handover, no arguments? Talk to NexaEx.
Frequently asked questions
Does paying for software development mean I own the copyright in India?
No. Under the Indian Copyright Act 1957, copyright in commissioned software vests in the developer or agency by default. Paying the invoice gives you a right to use the software — an implied licence — but not ownership of the intellectual property. To own the copyright, you need a written assignment clause in your contract that explicitly transfers copyright to you.
What is the difference between a software licence and a copyright assignment?
A licence gives you permission to use the software under specific conditions set by the copyright owner. An assignment transfers the copyright itself to you, making you the owner. After an assignment, you can modify, resell, sublicense, and enforce the software as your own asset. A licence — even an exclusive one — does not give you these rights, and the original author can still hold moral rights.
What must an IP assignment clause actually include to be valid?
Under the Copyright Act, an assignment must be in writing and signed by the assignor. A robust clause should identify the work specifically, state the assignment is worldwide and irrevocable, cover all present and future rights, address pre-existing materials owned by the agency, and include a waiver of moral rights. Vague language like all work product belongs to the client is a starting point but is often insufficient on its own.
What if my existing contract is silent on IP ownership?
Your first step is to negotiate a retrospective written assignment with the agency. Many will agree to one, especially if the relationship is active. If the agency is unwilling or unreachable, get legal advice on whether your implied licence covers your intended use, and whether a rebuild under a properly structured contract makes more sense. Do not assume silence means ownership — it almost certainly does not.