Understanding Intellectual Property in Software Development

What Clients Need to Know, What Developers Protect, and How the ACCC Views Fair Agreements

In recent years, more businesses have begun investing in custom apps, automations, and digital platforms to streamline operations and create competitive advantages. However, as custom development becomes more common, so do misunderstandings around intellectual property (IP): who owns what, what “ownership” actually means, and what is commercially reasonable within the software industry.

This article provides a practical explanation for clients to help avoid confusion or unrealistic expectations, while also ensuring both parties are protected and aligned from the beginning.

1. What Intellectual Property (IP) Actually Is

Intellectual property refers to the intangible assets created through skill, expertise, and creative or technical effort. In the context of software development, IP typically includes:

• The codebase

• System architecture

• Technical frameworks

• Reusable modules or components

• Integration logic

• Automation workflows

• Design patterns

• Development methodologies

  
  

These items represent the developer’s technical expertise, experience, and years of accumulated refinement. They are not created from scratch for each client; rather, they form the foundation that enables developers to build solutions efficiently, reliably, and affordably.

What is not developer IP?

Clients retain ownership of:

• Their business processes

• Their formulas and operational methods

• Their workflows

• Their brand assets, text, media, and data

• Anything the client supplied to the developer

  
  

These items are always the client’s property and are never reused across unrelated projects.

2. What Clients Often Misunderstand About IP Ownership

A common misconception is:

“If I paid for the app, I should own all of the underlying IP.”

In reality, payment covers:

• delivery of a working solution tailored to your business

• configuration to your processes

• the custom user interface

• the unique data structures that belong to you

  
  

It does not include a buy-out of:

• the core framework,

• the reusable tools the developer built across many years,

• or the right to prevent the developer from servicing other clients in the same industry.

  
  

Buying out full IP is possible, but it is considered a premium, high-value transaction, often costing hundreds of thousands of dollars or more, because it prevents the developer from using their own tools and knowledge in future projects.

Most clients do not actually need this level of ownership, nor is it standard.

3. How IP Works in the Software Industry

Across the entire tech industry, including:

• SaaS,

• mobile app development,

• custom integrations,

• agency-built systems,

• low-code and no-code solutions,

the structure is consistent:

• Clients own their data, branding, workflows, and anything they provided.

• Developers own the technical foundation and tools used to build the solution.

  
  

This ensures developers can continue working, improving their craft, and supporting multiple clients without creating a legal conflict every time a project ends.

It also ensures clients can operate freely without worrying about their private information being reused.

4. What Developers Often Find Insulting or Unreasonable

While most clients are reasonable, certain demands reveal misunderstandings about how the industry works. Developers commonly find the following assumptions offensive or unrealistic:

“You must transfer all your code, frameworks, and methods to us.”

This is equivalent to asking a builder to hand over all their tools, blueprints, and trade secrets because they built you one house.

“You must agree to never work with anyone in our industry again.”

This is asking a professional to limit their entire future earning capacity without compensation.

“Because the app includes our workflow, the entire system now belongs to us.”

Your workflow is yours.The technical system that enables it is not.

“We paid a few thousand dollars, so we own everything.”

Full IP buyouts are major commercial transactions. Small project fees do not justify exclusive rights over a developer’s entire technical foundation.

These expectations misunderstand how software is built and how the industry remains viable.

5. Why Developers Protect Their IP

Developers must retain ownership of their frameworks, logic, and components because:

• They reuse them as building blocks for other clients.

• They represent years of accumulated experience.

• They keep development cost-effective for you.

• They ensure they can continue operating as a business.

• They protect the developer from losing their ability to work altogether.

  
  

Without this protection, every project would require:

• exponentially higher costs,

• lengthy negotiations,

• and exclusive rights agreements that make no sense commercially.

  
  

Protecting IP is not about withholding value from clients.It is about maintaining viability and integrity in the profession.

6. ACCC Rules and Regulations You Should Be Aware Of

Under the Australian Consumer Law (ACL), certain contract terms are considered unfair if they:

1. Create a significant imbalance between parties.

2. Are not reasonably necessary to protect legitimate interests.

3. Would cause financial or operational detriment to the other party.

   
   

Many “ownership” or “exclusivity” demands breach these principles.

Examples of unfair or unenforceable terms include:

• Forcing a developer to hand over all underlying IP without compensation.

• Imposing industry-wide non-compete clauses.

• Withholding payment until an unfair agreement is signed.

• Demanding exclusivity that prevents the developer from earning income elsewhere.

• Requiring surrender of tools, methods, or frameworks created over many years.

  
  

The ACCC also classifies coercive conduct, including withholding payment to force agreement to unfair terms, as unconscionable conduct, which is unlawful.

Clients and developers are expected to negotiate fairly, transparently, and proportionately.

7. What a Healthy, Fair Client–Developer Relationship Looks Like

A constructive partnership is built on:

• mutual respect

• clear boundaries

• fair compensation

• realistic expectations

• understanding of standard industry practices

  
  

Clients should:

• focus on owning their data and unique business logic

• ensure the app is used, marketed, and promoted for success

• avoid unrealistic assumptions about technical ownership

  
  

Developers should:

• deliver solutions that genuinely serve the client

• uphold confidentiality of client processes

• support clients with ongoing improvements

• be transparent about what is and isn’t included in the agreement

  
  

8. Final Thoughts

Custom-built software is a collaborative effort.Clients bring their business expertise, and developers bring their technical expertise.When both parties understand their respective IP rights, the relationship is smoother, more productive, and far more successful.

Clear communication, fair expectations, and alignment with established industry standards ensure that everyone benefits and the technology can grow sustainably.