Dogs, Dog Tails and IP

Assume that you are a seller of software. You’ve got multiple clients.

One client wants you to develop some additional modules that meet their specific requirements. How should you handle the IP of those additional modules?

If you’re the buyer, you might think – well, I’m paying for the development, therefore I should own what’s developed. There’s a bit of a non-sequitur there (see below) but more fundamentally, what does that ownership give you? You now own the tail, but not the dog. How useful is that?

The non-sequitur is the thinking that, because you pay for something, you own the IP. That’s not the case when you buy a book, or when you (used to) buy a DVD, or when you pay for a film on Netflix. There is no self-evident correlation between the price you pay and the rights you get in return.

If you’re the seller, then you should have two price points for any new modules that you – at a client’s request – develop.

The first (lower) price means that you retain ownership of the modules you’ve developed, and the client gets a licence to use the modules.

The second (higher) price means that the client gets ownership of the modules (because the extra money the client pays gets them the ownership rights).

Other factors affecting that second (higher) price are:

From the seller’s perspective: do you get a licence back for those modules, so you can use them with other clients?

From the buyer’s perspective: is the seller locked out, not only from using the new modules, but also from developing an equivalent set of modules for other clients?

If you’re the buyer, the latter might make sense. Owning the modules doesn’t give you anything much, but making sure that your spend doesn’t serve to advantage your competitors is a meaningful benefit.

17th March 2026