Source code protection in B2B contracts

When exactly are code rights transferred?

Many entrepreneurs include a sentence in contracts with developers stating that rights pass upon payment of the invoice. This is a trap that creates a legal gap lasting up to 21 days each month. If a developer delivers a module on March 4th and you only pay the invoice on March 25th, your company is using the code without a legal title for those three weeks. At Alians Business Diplomacy, we saw a situation where a lack of protection in this short window blocked the payout of 145,000 PLN from a targeted grant because the auditor questioned the IP's cleanliness.

Instead of waiting for the transfer, a clause should be used regarding the transfer of economic copyrights upon the establishment of the work, i.e., de facto with every commit to the repository. Such a tight share structure in technological assets means that every line of text written becomes a company asset in real-time. It's worth remembering that in 2023, courts in Poland issued 47 rulings where the lack of a precise definition of the moment of transfer of rights worked to the disadvantage of the principal.

Also remember the written form under pain of nullity, which results from Art. 53 of the act. An email confirmation that 'it's all yours' has zero value in tough negotiations. If your subcontractor works from Kraków or Gliwice, make sure they sign a paper acceptance protocol for the works once a quarter, listing specific repositories and dates. This is a simple activity that takes 12 minutes and builds a foundation for a safe future sale of the company.

The lack of a precise clause on the transfer of rights is the simplest path to losing control over your own product.

Fields of exploitation – a list of 14 key points

Article 50 of the copyright act is not bedtime reading, but you must know it because money likes silence, and silence results from clear rules. It is not enough to write that you take over rights in all fields. You must list them one by one, otherwise, the clause is invalid. In B2B contracts for IT, it is crucial to include reproduction by any technique, entering into computer memory, and distribution in closed networks. In one project in Katowice, a client had to pay an extra 12,800 PLN because they forgot about the field regarding 'lending and renting' software in a SaaS model.

A common mistake is omitting the right to exercise derivative rights. This is about whether you can modify the code that someone wrote for you. Without express consent for modifications and adaptations, you are tied to one developer. If they disappear and you hire someone else to fix bugs, you are technically breaking the law. A tight structure of IP shares requires you to have the right to translate, adapt, change the layout, or any other changes to the computer program without asking the author for permission every time.

We also recommend writing down specific territories. Although the internet is global, copyright law can be local. A clause stating 'without territorial restrictions' is standard, but it's worth strengthening it with a list of specific countries where you plan to sell licenses over the next 3 years. We heard of a case where a developer tried to block an app's entry into the German market, claiming that their consent only covered the territory of Poland. This was an abuse, but the court battle lasted 8 months and cost a lot of nerves.

Consent for modifications and derivative rights

In the IT world, the game for control is about who has the right to refactor. If your contract lacks a clause allowing the disposal and use of code developments, a developer can demand additional remuneration for every new version of the system. We encountered a situation where a developer, 2 years after ending collaboration, sent a payment demand for 34,200 PLN because the company independently added a new payment module to his old code. This is a classic situation that can be avoided with one hard sentence in the contract.

It's also worth regulating the issue of moral rights. A programmer will always remain the author of the code – this cannot be transferred. However, one can and should oblige them not to exercise these rights against the company. This means they will not be able to demand, for example, that their name be placed in every line of code in a visible place for the end customer. At Alians Business Diplomacy, we advise that such a clause be combined with a contractual penalty for breaking the commitment, which effectively cools the enthusiasm for unjustified claims.

The situation becomes complicated when using Open Source libraries. Your B2B contract must impose an obligation on the subcontractor to report which code fragments are not their authorship. If a programmer 'borrows' 83 lines of code from a library with a restrictive GPL license, it may force your company to make the entire proprietary system public. This is a real threat to IP, which we eliminate by introducing a statement on the legal cleanliness of the delivered work in every sprint.

Derivative rights are the fuse that allows you to develop the product without asking the developer for permission for every change.

Jira and GitHub logs as evidence in court

Hard facts require evidence. In the event of a dispute, a court will not analyze your memory, but the dates and entries in the systems. A well-constructed contract should indicate that delivery of the work occurs via a push to a specified repository on GitHub or Bitbucket. Alians Business Diplomacy helps implement a procedure where every month a report is generated with a list of 15-20 key commits, which becomes an attachment to the invoice. This closes the door to claims that the developer 'hasn't handed something over yet'.

Sometimes developers work on their own private accounts and only 'rewrite' the code to the company server at the end of the project. This is a huge risk. The game for control is about ensuring that work from the first hour takes place on the company's infrastructure. If a developer disappears after 3 months, having all the code on their end, your negotiating position drops to zero. We saw a case from Chorzów where a company had to buy back its own code for 22,000 PLN because it did not have physical access to it, even though it had formally paid for it.

By the way, it's worth doing an audit of permissions in your systems once every six months. Often former collaborators retain access to the code for many months after the end of the contract. This is not only an IP problem but also a risk of company secret leaks. Statistics show that 12% of data security breach incidents in small IT companies result from unsevered access for former B2B subcontractors. Money likes silence, and silence is provided by order in permissions.

Settlements and rights transfer – how to combine them?

The remuneration system should be strictly linked to the transfer of rights. At Alians Business Diplomacy, we recommend breaking down the amount on the invoice into two parts: for the performance of works and for the transfer of economic copyrights. Such a split, e.g., 89.7% to 10%, clearly shows the intention of the parties and facilitates the accounting of intangible assets. In the case of a tax office inspection, such order in the papers saved one of our clients nearly 8,400 PLN in potential penalties for incorrect depreciation.

Beware of clauses about 'license until full payment'. This sounds safe for the developer, but for you, it is like a ticking time bomb. If you are late with a transfer by 3 days due to a bank error, you technically lose the right to use the software, which can stop all production. It's better to negotiate a clause where rights pass unconditionally, and the security for the developer is high contractual penalties for lack of timely payment. This is a more professional approach that builds trust in business diplomacy.

The rule is simple: the fewer understatements, the fewer problems when exiting an investment. Investors from VC funds we talk to in Katowice primarily look at the cleanliness of the IP table. If you have a mess there, your company's valuation can drop by 15-20% just due to legal risk. A tight structure of shares in code is not a cost, it's an investment in the market value of your software house. Remember that order in contracts is your strongest argument in tough negotiations.

Investors don't buy promises, they buy clean and documented rights to technology.