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Software Licensing Facts To Know

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software licensing

A software license is a document that provides legally binding guidelines for the use and distribution of software. Software licensing typically provide end users with the right to one or more copies of the software without violating copyrights.

Examples of software licenses

  • Single user – The software is licensed for a single user and often a single computer.
  • Multi-user – This license allows you to install a program onto multiple computers used by multiple users. Typically this may be a set number of users. For example, a five user multi-user license allows up to five people to use the program.
  • Site license – A program can be installed on an unlimited amount of computers, as long as they’re at the location of the site license. Site licenses are usually for schools and businesses.

Software Licensing Types To Know About:

GNU/GPL General Public License:

The GPL License is a General Public License and the most widely used type of free software license on the market today.

The derived works from this type of licensing can only be distributed if it is done so under the same license terms as the original.

MIT Software Licensing:

The MIT Software Licensing gets its name from the fact that it was created at the Massachusetts Institute of Technology. It is known as a permissive free software license. Which means the user is able to reuse the software if all of the copies of the licensed software come with a copy of the original terms of the MIT License.

copyright (C) <year> <copyright holders>

Permission is heareby granted, free of charge, to any person obtaining a copy of this software and associated documentation files.

Creative Commons Software Licensing:

The term “Creative Commons” software licensing comes from the name of a non-profit org whose headquarters are located in Mountain View California, US. The Creative Commons organization is dedicated to expanding the range of creative works which are available for other users to build upon legally and then share. They have actually released several different copy-right licenses which are known as the Creative Commons licenses, which are all available to the public free of charge.

Instead of “all rights reserved” license, it is “some rights reserved”

Key Points About Software Licensing:

  • Know what “free” means. In the context of software licensing, free doesn’t refer to price. It means free in the sense of “free speech” and refers to the rights and restrictions imposed on using software.
  • Free or open-source software has fewer restrictions. Glossing over a lot of nuances, if a program is released under a free software license or an open-source license, you generally don’t have to ask anyone’s permission to use it. You can also copy and redistribute the software to your heart’s content.
  • Proprietary software has more restrictions. If the software is proprietary or closed-source, there will usually be significant restrictions in the license that limit the ways you can use the software.
  • Read the End User License Agreement (EULA). It’s always a good idea to review these agreements, but it’s especially important to do so for one-off or small software purchases from less well-known companies. The EULA spells out what you can and can’t do with software. It covers everything from how many copies you can install to what the software company can do with your data and what additional software the company can install on your computer.
  • Pay attention to how long the license lasts. A perpetual license doesn’t expire. Once you purchase it, you have rights to use the software for as long as you like. A term license expires after a specified period of time (often one year) and must be periodically renewed.
  • Look into volume licenses or site licenses whenever possible. These arrangements offer lower prices and often make administration tasks easier.
  • You may get secondary or home use rights. You may be able to install copies of the software on more than one computer, with certain restrictions. For example, you may be able to install a copy of the software on a home or portable computer, as long as it is not used at the same time as the software is used on your primary computer. Some Adobe products include home use rights, as do some Microsoft Office products (see Office Suites for Home Use). The specific rights, if any, will be spelled out in the EULA.
  • Keep your documentation. You should document the product name and version number. Keep all installation disks, original manuals, and other documentation. Where applicable, also document the product serial number (or SKU), proof of purchase, and license key.

Other commonly used terms include:

  • Freeware — Free proprietary software, usually small downloadable utilities. You don’t have the right to view the source code, and you may not have the right to copy and redistribute the software.
  • Shareware (also known as trialware or demoware) — Trial software that you can use free of charge for a limited time (usually 30 or 60 days). After that, you’re expected to pay to continue using it.
  • Not for Resale (NFR) — Versions of software that are usually distributed for testing, preview, or donation purposes. They may include different features than the regular retail product. NFR versions usually don’t include the same technical support options as the retail product.

Licensing Models:

Software Licensing Models

End User License Agreement:

The most commonly used type of license is the End User License Agreement (EULA) – this is used for all of the paid-for software used on personal computers and is likely to be the model adopted by small businesses and new start-ups. Every new copy of a piece of software which is installed has its own unique license code, regardless of whether or not it has previously been installed.

In the home and small business setting this is normally fine. It does not require your customers to do any additional registration and means that they literally buy a new copy each time they want a new copy of the software. It is worthwhile noting that with 99% of software, once they either have the installation file or the CD/DVD you will just need to supply them with a new software license key for each installation.

This model is also applicable in a larger business context – where a unique purchase is being made. For example: if a member of staff needs to use Adobe Photoshop as a part of their work, but it is only them who needs it, then the customer only needs to purchase a EULA.

A registered copy of a EULA license can only be installed on one machine at a time, and it may be that if your customers want to upgrade or change their main computer they will need to contact the manufacturer directly to re-register the software. They will also need to make a new purchase each time you want to install the software on an additional computer. Once they have placed their order with you, you can then send them a new software license key.


A Pay-Per-Use license is just that, how much your customers pay is dependent on their usage of the software. This can make some of the more expensive software affordable to smaller businesses. The cost measurement varies between manufacturers and can be dependent on a number of factors such as hours of use, program specific metrics and CPU usage. This can often suit businesses whose need for software fluctuates over time. This means that when the software is not being used, they are not paying as much for the license. This helps to save your customers money and means that they are not paying for software which they are not using.

The only drawback of a Pay-Per-Use is that it can become very expensive if the software is being heavily used, and it may be that your customers would benefit more from purchasing a full software license.

Sharing License

The Sharing License (also known as Duplicate Grouping) is where the license specifies a set number of uses of the same piece of software for a single user – the business. This is helpful for businesses that need to steadily grow their computer usage but do not yet need to purchase a Site License. The precise terms of a shared license vary between manufacturers and it is worthwhile getting to know the differences between shared licenses for all of the software which you supply. It is worth remembering that some Shared Licenses also come with the option to expand the license coverage after purchase – where customers can pay to expand the number of permitted uses of the software.

Site License

If you are supplying a medium to large business, and they want to install the same piece of software on many or all of their machines, then you will be best off purchasing a site license. Site Licenses can often seem expensive at first purchase, however, when you consider that many site license packages allow for installation on an unlimited number of machines – provided they are for the same business customer, their value significantly increases.

It is because of this flexibility of use that the site license becomes significantly cheaper over time than buying a new EULA for each computer, or using a Pay-Per-Use license. As attractive as the ability to run an unlimited number of copies of the same piece of software can be, Site Licenses are only worthwhile if their bulk cost comes to less than the cost of just using a Pay-Per-Use. If your customers are regularly purchasing new computers; have a specific piece of software which they want installed on each and every one and want to streamline the set up process– they will see huge  benefits from buying a site license.

To find out about our licensing service go here, or you can read this article Software Licensing for business.