Ownership of Software – Who Actually Owns the Code?
As I develop my own WordPress plugin, a persistent question arises: Does this software really belong to me? In everyday terms, many would instinctively answer, “Certainly, you wrote it, so it’s your software.” However, from a legal perspective, the answer isn't so straightforward. Software isn't a tangible object one can physically possess.
This raises fundamental questions: Can you own software? And what does this imply in Germany and Europe, especially when compared to the USA, where software often seems “borrowed” rather than bought? In this blog post, we delve into these complexities. We'll explore the legal intricacies and examine how the concept of ownership of software is treated across different legal systems.
My WordPress plugin serves as a practical starting point: Do plugins actually require GPL-licensing? And how is it possible to generate income from GPL software if anyone can freely copy the code?
Software Ownership: Distinguishing Property from Intellectual Property
In common parlance, we frequently speak of owning software. Phrases like “I bought a program, so now it’s mine” or “This is my software, I developed it” are typical. Legally, however, a critical distinction must be made between property in the traditional sense and intellectual property. According to German law, property refers specifically to physical objects, as defined in Section 90 BGB.
Digital content, including software, does not meet this criterion because it lacks physical tangibility. Consequently, software cannot be “owned” in the strict sense of property law. Ownership and possession are concepts inherently tied to physical objects and their transfer. Bits and bytes are not comparable to cars or land that one can simply own.
So, what about the software that I develop or purchase? This is where copyright law comes into play. The term intellectual property, while sometimes vague, typically refers to the rights of the intellectual creator of a work. In Germany and throughout the EU, computer programs are protected by copyright and are considered personal intellectual creations. More precisely, software is explicitly defined as a literary work in § 69a UrhG.
This means that as soon as software is programmed, it automatically receives copyright protection, without any formal registration. The programmer is recognized as the author, possessing comprehensive moral and exploitation rights, such as rights of reproduction, distribution, and publication. This structure often mirrors traditional ownership: the author holds an exclusive right to their work, and others may not use it without permission.
This is why many refer to software as intellectual property. Nevertheless, it is crucial to understand that, legally, this is not property in the sense of property law, but rather an intellectual property right, specifically copyright.
For non-legal professionals, this distinction might seem like semantics, but for lawyers, it is fundamental. When you buy software, you generally do not acquire ownership of the software itself. Instead, you obtain a license or a right to use it. You do not own the code, but you have the right to use it, precisely to the extent stipulated in the license agreement. Even purchasing software on a DVD only grants you ownership of the physical DVD, not the program stored on it.
This highlights why software license agreements are so vital in practice: They define what the “licensee” (buyer or user) may and may not do with the software. Essentially, the license right substitutes the classic property right.
Legal Situation in Germany and Europe: Copyright Law as the Primary Protection
In Germany and the EU, copyright law primarily protects software. The Copyright Act grants the developer all essential rights to the program code. It's important to note that the author can only ever be a natural person, not a company. For instance, I am personally the author of my WordPress plugin, even if I develop it for my law firm.
If a company employs developers, the economic rights to use the software are legally transferred to the employer. However, the programmer always remains the author. This nuanced distinction means that, in the USA, copyright often resides with the company (known as “work for hire”), whereas in Germany, the human creator always remains the author and can only grant rights of use to a company.
According to legal doctrine, software is treated as an intangible asset in Germany. It is not possible to establish property rights in the sense of the BGB. Nevertheless, the term “software property” is often used in a broader sense. Source code, program designs, and even intermediate development steps are covered by the Copyright Act and are considered the intellectual property of the developer.
However, the underlying idea or function of software is not protected. If someone implements the same program idea using their own code, this does not constitute copyright infringement. This means the law provides developers with a powerful right to control their specific code, but not a monopoly on the functionality behind it. In this respect, intellectual property differs from tangible property.
Software Purchase and "Digital Property" in the EU
An interesting point concerns the “purchase” of software. Many people mistakenly assume that anyone who downloads and pays for software then “owns” their personal copy, much like a book or a car. Legally, this is incorrect. Under German law, ownership (Section 903 BGB) is limited exclusively to physical objects. Software is not a tangible object, but an intangible asset.
Therefore, anyone who “buys” software does not acquire title to the software itself. Instead, they acquire a license, which is the right to use the software to the agreed extent. This applies equally to other digital products.
Nevertheless, an important peculiarity exists: German and European law recognize the principle of exhaustion, often referred to as the first sale doctrine, in the area of copyrighted works. If a software license (for an unlimited period and with a one-off payment) is placed on the market for the first time with the rights holder’s consent, whether on a data carrier or as a download, the author’s distribution right to that specific copy is exhausted. The purchaser can then resell this copy without the rights holder being able to prevent it.
The decisive factor here is not ownership of the software itself, but the acquired right to use the specific copy. The European Court of Justice ruled in the UsedSoft judgment in 2012 that used software licenses purchased via download may also be resold. The prerequisite is that the software is completely deleted from the original purchaser’s system and is no longer used.
While legally there is no “ownership” of software in the property law sense, from a practical usage perspective, an ownership-like right to the license arises, which notably includes the right to resell.
Consider this example:
- If an Office license is purchased once and granted permanently, it may also be resold at a later date.
- In Germany, this has led to a market for used software licenses. Specialized dealers acquire volume licenses and resell them individually.
- Courts expressly permit this process, provided the conditions of exhaustion are met.
This European understanding significantly differs from practices in the USA. There, software is usually only licensed, not sold. Manufacturers can largely prevent resale through the license agreement. The EU has further strengthened the right to purchase digital products, notably through the Digital Content Directive. Anyone who acquires digital content as a “purchase” now has many rights similar to those for physical goods, such as warranty claims.
Despite these developments, the fact remains that German law does not recognize true ownership of software in the traditional sense. What is colloquially referred to as “ownership of software” is actually a license right. Under specific conditions, this right is endowed with ownership-like powers, such as the right to resell. A comprehensive “data ownership” or “software ownership” as an absolute right does not yet exist. The foundation remains copyright law in conjunction with the respective contractually granted rights of use.
A Look at the USA: License Instead of Purchase
In the United States, the situation differs somewhat. Software is often not considered a sold good but rather a licensed service. Many US software companies implement license agreements (EULAs) during installation, requiring users to click through them. These agreements typically state that the software is only licensed, not sold, and cannot be transferred.
These crucial “magic words” – licensed, not sold – have significant legal implications. They aim to ensure that the buyer does not become the owner of their software copy and therefore possesses no first sale rights.
An illustrative case is Vernor v. Autodesk. An eBay dealer attempted to resell used AutoCAD software. Autodesk argued that the software was merely licensed, meaning the buyer could not resell it without permission. In 2010, a US appeals court (9th Circuit) ruled in favor of the manufacturer. The court determined that if the license agreement clearly states “you only get a non-transferable license” and severely restricts use or redistribution, the user is a licensee, not the owner of the copy.
In essence, a few carefully crafted clauses in the “small print” can effectively reduce buyers to tenants, denying them the right to resell, for example. This US case law has significantly curtailed the old adage, “You bought it, you own it.” For consumers, this implies that purchasing software often grants only a right of use, not ownership. Companies leverage this, among other reasons, to limit the used software market.
This difference between the EU and the USA is notable. While in Germany, I can assert my right to resell a software license, in the USA, doing something similar could lead to a copyright lawsuit. The fundamental principle on the US side prioritizes copyright holder control: copyright first, consumer second. Here in Europe, there's a tendency to create a fair balance of interests. Anyone who legally acquires software should be permitted to use it within certain limits, including resale.
Another distinction lies in authorship. In the USA, companies can be directly considered authors (“work made for hire”), meaning copyright rests with the company from the outset. Conversely, in Germany, the human creator must first transfer the right of use. This is generally true, except in cases of employee copyright, where it is transferred to the employer by law. While German copyright is inalienably attached to the author (it cannot be completely “sold,” only rights of use can be granted), Anglo-Saxon systems recognize complete transfers of copyright. Clearly, the concept of ownership of creative works presents different facets depending on the legal system.
Open Source and GPL: Freedom Instead of Exclusive Ownership
While the traditional software industry often attempts to treat code as proprietary, a counter-movement has been gaining momentum for decades: Free Software and Open Source. Its proponents, most notably Richard Stallman of the GNU project, advocate for the philosophy that sharing software is more beneficial than owning it. Stallman argued early on that the idea of software “owners” caused more harm than good to society.
His solution involved placing programs under licenses that permit everyone to share, modify, and use them, provided that all derived versions also remain free. This led to the creation of the famous GPL (General Public License), under which countless software projects are available, from the Linux operating system to WordPress.
WordPress exemplifies the GPL philosophy. The blog and CMS platform adopted the GPL from its inception. This means anyone can use, copy, modify, and redistribute WordPress freely. This freedom is also “inherited” by derivatives: the official stance of the WordPress creators, particularly co-founder Matt Mullenweg, is that plugins and themes are derivative works of WordPress and must therefore also carry a GPL license.
WordPress.org explicitly states: “If you don’t agree with this, it’s better to use a different system.” They even point to the blog software Serendipity (with a BSD license) as an alternative. In essence, the WordPress community deliberately softens the concept of software ownership, treating any code running on the WP platform as common property.
From a legal standpoint, it’s noteworthy that there are scarcely any court rulings definitively stating whether a WordPress plugin must be GPL. Theoretically, a plugin developer could argue their code is not a derivative work if it primarily uses abstract interfaces. The GPL issue for plugins is thus not settled in a court of law. However, in practice, if you wish to offer your plugin in the official repository, a GPL-compatible license is a prerequisite.
Automattic, the company behind WordPress.com, and the community strictly enforce this rule. A well-known incident was the conflict surrounding the Thesis theme in 2010. Its developer initially refused to license his commercial WordPress theme under GPL. A public dispute with Mullenweg ensued, ultimately leading the developer to relent and license the theme as GPL-compatible. The message is clear: proprietary licensing policies have no place in the WordPress ecosystem.
For me, as a plugin developer, this implies that practically all WordPress plugins should be GPL-compatible, if only to comply with the platform's ecosystem. The PHP code components of a plugin are generally considered derived from WordPress and must therefore be GPL. (Incidentally, HTML, JavaScript, CSS, or images in themes and plugins could be licensed separately. A “split license” model is often used here, where non-code elements are licensed differently, but this is a deeper topic.)
Assuming I publish my plugin under GPL, anyone can copy, use, or modify it, and even resell it, as permitted by the GPL. Does this mean I am giving away my “property” and no longer retain any claim to it?
Earning Money with GPL Software: Paradox or Opportunity?
The perennial question for developers of free software is: Is it actually possible to earn money with it? After all, any user can utilize or distribute my GPL code without payment. How can I, as a developer, make a living if my product appears to be in the public domain?
Experience demonstrates that it is indeed possible, and often more successful than one might imagine. WordPress itself is a prime example: despite, or perhaps because of, the GPL, it has become the dominant web platform. Automattic, the company behind numerous WP services, has achieved a valuation of hundreds of millions of dollars with offerings like WordPress.com, WooCommerce, and VIP hosting. Matt Mullenweg, personally, has amassed an estimated fortune of approximately 400 million US dollars through his stake in Automattic.
His success isn't based on selling WordPress itself, which would violate the GPL. Instead, he monetizes services and additional offerings related to the free software. Many companies in the open-source world employ similar strategies: Red Hat generates revenue from support contracts for Linux, while database providers earn from hosted solutions. Thus, it is entirely feasible to profit from free software by focusing on support, service, and convenience.
Specifically within the WordPress plugin market, many plugins are released under GPL but sold as “premium plugins.” How does this reconcile? When one purchases a plugin, they are effectively paying for the added value surrounding the code, not the code itself. Typical income streams include:
- Updates & Security Updates: A license key grants access to automatic updates. While the code might be found freely elsewhere, it wouldn't offer convenient one-click updates directly from the dashboard. When WordPress releases a core update, users rely on plugins remaining compatible. Paying users fund this continuous maintenance.
- Support & Services: Purchasers are entitled to support. If an issue arises or a question needs answering, the developer or their team assists. Users of “stolen” or freely available copies do not receive support, which is exclusively for paying customers. Businesses, in particular, willingly pay for a reliable point of contact.
- Additional Features via External Services: Some plugins offer basic local functionality but incorporate extended features that require a provider's server or service. An example is a statistics plugin that provides complex analytics on a web platform. These services are often accessible only with a valid license. This means that even if the code is GPL, an illicit copy is useless because premium features are server-side verified. Examples include API access, cloud services, or content subscriptions integrated within the plugin.
- Freemium Models: Often, a basic free version (GPL) is available alongside a Pro version offering an extended feature set. Both are usually formally GPL, but the Pro version is released for a fee. Although a customer could theoretically redistribute the Pro version (GPL remains GPL), most users do not, due to convenience and a sense of fairness. Developers rely to a certain extent on the honesty of the community, and surprisingly often, this trust is vindicated. Many WordPress users desire legitimate licenses, whether for ethical reasons or because they understand it ensures the project's continued existence.
- Avoiding Hurdles: Even tech-savvy individuals often prefer acquiring plugins directly from the provider rather than searching dubious sites for “nullted” plugins, which may contain malware. GPL freedom means someone could make the plugin freely available, but the average user finds this inconvenient. They prefer to buy officially, gaining certainty, updates, and support in return.
As illustrated, a free license does not automatically equate to zero revenue. It merely shifts the business model. As a developer, I no longer sell the software itself, which can be freely copied, but rather the added value – whether through updates, convenience, or time savings. This approach is so successful in practice that it has spawned an entire industry. WordPress theme stores, plugin marketplaces, SaaS extensions for open-source tools – in all these sectors, users pay for the peripherals while the core remains free.
Conclusion: Who Owns the Software?
From a legal perspective, in the German and European understanding, software initially belongs to the author. However, this is not as a physical thing, but rather as a bundle of rights, constituting intellectual property. A software user does not “own” it in the material sense.
Depending on the contractual model, users may be granted rights similar to ownership, especially with perpetual purchase rights that even permit resale of the software. In the USA, such user rights are more restricted; software often remains under the manufacturer’s control as a mere license. This highlights the importance of precise contract design.
Philosophically, the open-source movement overturns traditional ownership concepts. It deliberately foregoes exclusive ownership claims in favor of open use for all. Remarkably, as shown by WordPress and countless other examples, this model does not necessarily disadvantage developers financially. You can share software and still achieve success. Therefore, traditional ownership of software is not a prerequisite for creating value.
For my own WordPress plugin, this research confirms a clear direction: all signs point to GPL. Initially, it feels like releasing my “baby” into the wild, where anyone can do what they wish with it. Ultimately, however, as the author, I retain certain rights and, crucially, authorship (no one can separate my name from the code).
Perhaps I'll decide to offer my plugin on two tracks: a free basic version and additional services for a fee. Either way, I do not possess traditional ownership of my code. Instead, I gain freedom, creativity, and the opportunity to be part of something larger. This, too, is a form of enrichment, both idealistically and, hopefully, monetarily.
Sources: The information and quotes in this article draw from current legal articles, blog posts, and judgments. These include discussions on the copyright protection of software, German property law and its treatment of digital goods, an interview on the resale of used software in the EU, the license terms of the WordPress community, and US sources on the “first sale” problem with software licenses. This comparative legal analysis demonstrates that the question “Who owns software?” cannot be trivially answered with “the owner.” The answer depends on the legal system in question and one's willingness to consider alternative models like open source. Software may not be a thing, but its importance and value derive significantly from the rights we assign to it. With this in mind: Happy coding, and may your rights to your code always be protected, whether as property or not!