Ownership of software – Who actually owns the code?

As I code my own WordPress plugin, one question keeps popping up: Does this software really belong to me? In everyday terms, many people would immediately say: “Sure, you wrote it, so it’s your software.” But from a legal point of view, it’s not that simple. After all, software is not something you can touch and physically own. So: can you own software? And what does that mean in Germany and Europe – compared to the USA, where software often seems to be “borrowed” rather than bought? In this blog post, we take a closer look at these questions, dive into the legal intricacies and look at how the concept of ownership of software is treated in different legal systems. My WordPress plugin serves as a practical starting point: do plugins actually have to be GPL-licensed, and how can you earn money with GPL software if anyone can copy the code?

Ownership vs. intellectual property: What does it mean to “own” software?

In everyday language, we are quick to talk about owning software. “I bought a program, so now it’s mine.” Or: “This is my software, I developed it.” In legal terms, however, a distinction must be made between property in the traditional sense and intellectual property. In German law, property refers specifically to things, i.e. physical objects (Section 90 BGB). Digital content – which includes software – does not meet this criterion, as it is not physically tangible. Consequently, software cannot be “owned” in the sense of property law. Ownership can only exist in objects, possession requires a physical object and transfer of ownership is only possible for physical objects. Bits and bytes are not cars or land that you can simply own.

But what about the software that I develop or buy? This is where copyright comes into play. The term intellectual property – as vague as it sometimes is – usually refers to the rights of the intellectual creator of a work. In Germany (and the EU), computer programs are protected by copyright and are therefore considered personal intellectual creations. More precisely: software is expressly defined as a literary work in § 69a UrhG. This means that as soon as the software is programmed, it is automatically protected by copyright – without registration or formalities. The programmer is the author and has comprehensive moral and exploitation rights (e.g. right of reproduction, distribution, publication). In principle, this is similar to ownership: the author has an exclusive right to his work, others may not use it without permission – which is why many refer to software as intellectual property. However, it is important to note that legally this is not property in the sense of property law, but an intellectual property right (i.e. copyright).

For laypeople, this may seem like a bit of a buzzword, but for lawyers it is crucial: when you buy software, you generally do not acquire ownership of the software itself, but a license or right to use it. In other words, you don’t own the code, but you have the right to use it (and exactly to the extent provided for in the license agreement). Even if you buy software on DVD, you only own the DVD as an object, not the program stored on it. This also explains why software license agreements are so important in practice: They stipulate what the “licensee” (the buyer/user) may and may not do with the software. Basically, the license right replaces the classic property right.

Legal situation in Germany and Europe: Copyright law instead of property law

In Germany (and the EU), it is therefore primarily copyright law that protects software. The Copyright Act grants the developer all essential rights to the program code. Important: The author can only ever be a natural person, not a company. (In my case, I personally am the author of my WordPress plugin, even though I may be developing it for my law firm). If I employ developers as a company, they transfer the economic rights to use the software to the employer by law – but the programmer remains the author. This subtlety means that the copyright in the USA, for example, often lies with the company (keyword work for hire), while in Germany the person behind the code always remains the author and can only grant the company rights of use.

In terms of legal doctrine, software is therefore treated as an intangible asset in Germany. It is not possible to establish property rights in the sense of the BGB. Nevertheless, people like to speak of software property in the broader sense. For example, 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 is not protected: if someone implements the same program idea in their own code, this does not infringe copyright. This means that although the law gives us developers a powerful right to control the specific code, it does not give us a monopoly on the functionality behind it – in this respect, intellectual property differs from tangible property.

Europe vs. the USA – a small side note on patent law: Speaking of functionality, the innovative technical solutions behind software can be protected – if at all – by patents. However, software as such is generally not patentable in Europe, unless it is a computer-implemented invention of a technical nature. The US has traditionally been more generous with software and business method patents, which could be seen as a form of ownership of ideas. But that is only in passing – our focus remains on copyright ownership.

Software purchase and “digital property” in the EU

One interesting point is the so-called “purchase” of software. Many people assume this: Anyone who downloads and pays for software then “owns” their personal copy – much like a book or a car. However, this is not legally correct. Under German law, ownership of property (Section 903 BGB) is limited exclusively to physical objects. Software is not a tangible object, but an intangible asset. Anyone who “buys” software therefore does not acquire title to the software itself, but merely a license – i.e. the right to use the software to the agreed extent.

Nevertheless, there is an important peculiarity: German and European law recognize the principle of exhaustion (often referred to as the first sale doctrine ) in the area of copyrighted works. This means that if a software license (for an unlimited period and for a one-off payment) is placed on the market for the first time with the consent of the rights holder – whether on a data carrier or as a download – the author’s distribution right to this very copy is exhausted. The purchaser can then resell this copy without the rights holder being able to prevent this. 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: Used software licenses that were 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. This shows that While legally there is no “ownership” of software in the property law sense, from the point of view of usage practice, an ownership-like right to the license arises, which in particular includes the right to resell.

Example: If an Office license is purchased once and made permanent, it may also be resold at a later date. In Germany, this has even given rise to a market for used software licenses: Specialized dealers buy up volume licenses and resell them individually – a process that the courts expressly allow as long as the conditions of exhaustion are met.

This European understanding differs considerably from the practice in the USA, for example. There, software is usually only licensed, not sold, and manufacturers can largely prevent resale via the license agreement.

The EU has once again strengthened the right to purchase digital products, not least through the Digital Content Directive. Anyone who acquires digital content as a “purchase” now has many rights similar to those for the purchase of physical goods – such as warranty claims. Nevertheless, the fact remains that German law does not recognize true ownership of software in the traditional sense. What is often colloquially referred to as “ownership of software” is actually a license right that – under certain conditions – 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 basis remains copyright law in conjunction with the respective contractually granted rights of use.

A look at the USA: License instead of purchase – “You bought it, you own it?”

In the United States, the picture is somewhat different. There, software is often not seen as a sold good, but as a licensed service. The practice of many US software companies is that when installing the software, the user clicks away a license agreement (EULA) stating that the software is only licensed, not sold, and that it may not be passed on. These famous “magic words” – licensed, not sold – have a major legal effect: they are intended to ensure that the buyer does not become the owner of their copy of the software and therefore has no first sale rights.

An illustrative case is Vernor v. Autodesk. An eBay dealer wanted to resell used AutoCAD software. Autodesk argued that the software was only licensed, so the buyer could not resell it without permission. In fact, a US appeals court (9th Circuit) ruled in favor of the manufacturer in 2010: If the license agreement clearly states “you only get a non-transferable license” and severely restricts use/redistribution, then the user is a licensee and not the owner of the copy. In other words, a few clever clauses in the “small print” can degrade buyers to tenants who are denied the right to resell, for example. In the USA, this case law has severely restricted the old rule of thumb “You bought it, you own it”. For consumers, this means that those who purchase software often only have a right of use, not ownership – which companies use, among other things, to keep the used software market small.

This difference between the EU and the USA is remarkable. While in Germany I can claim that I am allowed to resell a software license, in the USA you risk a copyright lawsuit if you do something similar. The basic idea on the US side is: copyright first, consumer second – the copyright holder retains control for as long as possible. Here in Europe, there is a tendency to create a fair balance of interests: Anyone who uses legally acquired software should also be allowed to do what they want with it within certain limits (including resale).

Another difference: In the USA, companies can also be considered authors directly (keyword work made for hire), so that the copyright lies with the company from the outset. In Germany, on the other hand, the human creator as the author must always transfer the right of use first (except in the case of employee copyright, where it is transferred to the employer by law). And while German copyright is inalienably attached to the author (you cannot “sell” it completely, only grant rights of use), Anglo-Saxon systems also recognize complete transfers of copyright. As you can see: The concept of ownership of creative works has different facets depending on the legal system.

Open source and GPL: freedom instead of exclusive ownership

So while the traditional software industry often tries to treat code like property (in other words: mine, you can only use it if I allow you to), there has been a counter-movement for decades: Free Software and Open Source. Its protagonists – above all Richard Stallman of the GNU project – advocate the philosophy that sharing software is better than owning it. Stallman argued early on that the idea of software “owners” did more harm than good to society. His solution: programs should be placed under licenses that allow everyone to pass on, modify and use them – on the condition that all derived versions are also free. This is how the famous GPL (General Public License) was created, under which countless software projects are available – from the Linux operating system to WordPress.

Fig.: WordPress relies on the GPL license – even plugins and themes should bear this “GPL stamp”.

WordPress is an excellent example of the GPL philosophy. The blog and CMS platform was placed under GPL from the outset. This means that anyone can use, copy, modify and redistribute WordPress free of charge. This freedom is also “inherited” by derivatives: the official position of the WordPress makers (especially co-founder Matt Mullenweg) is that plugins and themes are to be regarded as derivative works of WordPress and must therefore also have a GPL license. WordPress.org states: If you don’t agree with this, it’s better to use a different system – they point out directly that the blog software Serendipity (with a BSD license) would be an alternative. In other words: In the WordPress community, ownership of code is deliberately softened – whatever code runs on the WP platform is supposed to be common property.

From a legal point of view, it is interesting that there are hardly any court rulings on whether a WordPress plugin must necessarily be GPL. Theoretically, a plugin developer could argue that their code is not a derivative work because it uses abstract interfaces, for example. The GPL issue for plug-ins is therefore not settled in a court of law. But in practice, if you want to offer your plugin in the official repository, there is no way around a GPL-compatible license. Automattic, the company behind WordPress.com, and the community pay strict attention to this rule. One famous case was the conflict surrounding the Thesis theme in 2010: its developer initially refused to place his (commercial) WordPress theme under GPL. A public exchange of blows with Mullenweg ensued – in the end, the developer relented and the theme was licensed GPL-compatible. The message is clear: proprietary licensing policies have no place in the WordPress world.

For me as a plugin developer, this means: Yes, practically all WordPress plugins should be GPL-compatible, if only to be compliant with the platform. The PHP code components of a plugin are generally considered to be derived from WordPress and must therefore be GPL. (By the way: HTML/JS/CSS or images in themes/plugins could be licensed separately – a “split license” model is often used here, where non-code elements are licensed differently. But that’s going too far). Anyway: I imagine that I publish my plugin under GPL. Then anyone can copy it, use it, modify it – even resell it if they like, because the GPL allows that. Does this mean that I give away my “property” and no longer have any of it?

Earning money with GPL software – paradox or opportunity?

The question of all questions for developers of free software is: Is it actually possible to earn money with it? After all, any user can use or pass on my GPL code without payment. How am I supposed to make a living as a developer if my product seems to be in the public domain?

Practice shows: Yes, it works. And often better than you might think. WordPress itself is a shining example: despite (or perhaps because of) the GPL, WordPress has become the dominant web platform – and Automattic, the company behind many WP services, has become worth hundreds of millions with services such as WordPress.com, WooCommerce and VIP hosting. Matt Mullenweg personally has built up an estimated fortune of around 400 million US dollars thanks to his stake in Automattic. His success is not based on the fact that he sold WordPress – that would be against the GPL – but on the fact that he monetizes services and additional offers related to the free software. Many companies in the open source world do something similar: Red Hat earns money from support contracts for Linux, database providers earn money from hosted solutions, etc. It is therefore quite possible to earn freely with free software according to the motto: Support, service, convenience.

Specifically in the WordPress plugin market, it looks like this: Many plugins are released under GPL, but sold as “premium plugins”. How does that fit together? Well, when I buy a plugin, I actually pay for the added value around it, not for the code itself. Typical sources of income are:

• Updates & security updates: Anyone who buys a license key receives automatic updates. Sure, you could find the code somewhere for free – but you wouldn’t get convenient one-click updates directly in the dashboard. And when WordPress rolls out a core update, you want to be sure that the plugin remains compatible. The paying users finance this continuous maintenance.
• Support & services: Purchase users are entitled to support. If something doesn’t work or you have a question, the developer (or his team) will help. Users of “stolen” or freely available copies are left out in the cold – support is only available for paying customers. Especially in the business environment, companies are happy to pay to have a contact person.
• Additional features via external services: Some plugins offer basic functions locally, but have extended features that require a server or service from the provider (e.g. a statistics plugin that offers complex evaluations on a web platform). These services can often only be used with a valid license. This means that even if the code is GPL, a black copy is useless because the premium features are verified on the server side. Examples include API access, cloud services or content subscriptions in the plugin.
• Freemium models: There is often a slimmed-down free version (GPL) and a Pro version with an extended range of functions. Formally, both are usually GPL, but the Pro version is only released for a fee. Although a customer may also pass on the Pro version (GPL remains GPL), the majority of users do not do this, if only for reasons of convenience and fairness. The developers rely to a certain extent on the honesty of the community – and are surprisingly often vindicated. Many WordPress users want legitimate licenses, be it for moral reasons or because they know that this is the only way to ensure the continued existence of the project.
• No desire for hurdles: Even tech-savvy people often prefer to access plugins directly from the provider rather than searching on dodgy sites for “nullted” plugins that may contain malware. GPL freedom means that someone could make the plugin available for free somewhere – but the average user doesn’t bother. They prefer to buy officially and get certainty, updates and support in return.

As you can see: Free license does not automatically mean free zero yield. It just shifts the business model. As a developer, I no longer sell the piece of software itself (which can be freely copied), but added value – be it updates, convenience or simply time savings. This works so well in practice that it has become an entire industry. WordPress theme stores, plugin marketplaces, SaaS extensions for open source tools – everywhere you pay for the trappings, while the core remains free.

Conclusion: Who owns the software?

From a legal perspective, software in the German/European understanding initially belongs to the author – not as a thing, however, but as a bundle of rights (intellectual property). The user of software does not “own” it in the material sense, but depending on the contractual model, is sometimes granted rights similar to ownership (particularly in the case of perpetual purchase rights, which even allow the user to resell the software). In the USA, such user rights are more reserved – software often remains under the control of the manufacturer as a mere license.

Philosophically, the open source movement turns traditional ownership thinking on its head: here, exclusive ownership claims are deliberately dispensed with in favor of open use for all. The amazing thing is that this model does not have to be to the financial disadvantage of the developers, as WordPress and countless other examples show. You can share software and still be successful with it – ownership of software is therefore not a must in order to create value.

For my own WordPress plugin, I will take away from this research in any case: All signs point to GPL. Yes, at first it feels like I’m releasing my “baby” into the wild, where anyone can do whatever they want with it. But ultimately, as the author, I retain certain rights and, above all, authorship (nobody is allowed to separate my name from the code). And maybe I’ll decide to offer my plugin on two tracks: a free basic version and additional services for a fee. Either way – I don’t have ownership of my code in the traditional sense, but I do have freedom, creativity and the chance to be part of something bigger. And that is also a form of enrichment – in both an idealistic and (hopefully) monetary sense.

Sources: The information and quotes in this article come from current legal articles, blog articles and judgments, including on the copyright protection of software, German property law and its handling of digital goods, from an interview on the resale of used software in the EU, from the license terms of the WordPress community and from US sources on the “first sale” problem with software licenses. This comparative legal analysis shows: The question “Who owns software?” cannot be answered trivially with “the owner” – it depends on which legal system you ask and whether you are prepared to consider alternative models such as open source. Software may not be a thing, but its importance and value is not least due to the rights we give it. With this in mind: Happy coding – and may your rights to your code always be protected, whether as property or not!

Author: Marian Härtel

Marian Härtel ist Rechtsanwalt und Fachanwalt für IT-Recht mit einer über 25-jährigen Erfahrung als Unternehmer und Berater in den Bereichen Games, E-Sport, Blockchain, SaaS und Künstliche Intelligenz. Seine Beratungsschwerpunkte umfassen neben dem IT-Recht insbesondere das Urheberrecht, Medienrecht sowie Wettbewerbsrecht. Er betreut schwerpunktmäßig Start-ups, Agenturen und Influencer, die er in strategischen Fragen, komplexen Vertragsangelegenheiten sowie bei Investitionsprojekten begleitet. Dabei zeichnet sich seine Beratung durch einen interdisziplinären Ansatz aus, der juristische Expertise und langjährige unternehmerische Erfahrung miteinander verbindet. Ziel seiner Tätigkeit ist stets, Mandanten praxisorientierte Lösungen anzubieten und rechtlich fundierte Unterstützung bei der Umsetzung innovativer Geschäftsmodelle zu gewährleisten.