Thanks everyone for your detailed responses. Great discussion!
my understanding is that there was no prior discussion of code ownership, or even a contract -- only a brief, home-made copyright statement embedded in the source code after it was completed.
In a case like this it sounds like the copyright would default to the developer, but the client would have a long-term license to modify and extend for their own use, as long as there is no resale. Obviously my client should consult a lawyer if things get hairy, but this seems like a good starting point.
As for my own policy, I'm leaning towards Ken's suggestion of retaining all copyright over the code, but providing a perpetual license for the client to use, and copy/modify/extend without resale.
While it appears there's lots of room for debate here, this sounds like the safest way to me, and I suspect that the client will be satisfied as long as their license doesn't restrict their own ability to use and extend. This appears to sidesteps most the murky waters where things can get unpleasant.
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