What is a software license?

A software license allows a person or business (the licensee) to use software developed by another party (the licensor). The license itself is a legally binding document that allows the licensee to use the software without violating the intellectual property rights of the licensor. It is similar to a product or service agreement in that it sets out the rights and obligations of both parties with regard to the software. The parties should have an opportunity to negotiate their rights before entering into the agreement. A software license is not the same as an end-user agreement that you would see on websites or apps where the user must accept the terms before using the software. It is also not the same as development software, which involves a customization process for the end user’s specific needs. Keep in mind that a software license agreement also differs from a technology services contract in that a technology services contract sets up an ongoing services agreement between an IT contractor and its client, but does not involve licensing and downloading specific software to a computer or other device.

Who is a licensor? Who is a licensee?

In a software license agreement, there are usually two parties: the licensor and the licensee. The licensee is the individual or entity in the relationship that receives the license, and the licensor is the person or entity that provides the license. The licensor is often a creator or inventor whereas the licensee can be a variety of individuals or entities, including end users, manufacturers, other businesses, etc. As a software license agreement can be extremely flexible, it is often a good option for a variety of relationships and circumstances.

How is a license different from ownership?

When you own something outright, the manufacturer or designer often has little control over what you do with the product post-sale. In most circumstances, you can manipulate the product however you want and even reproduce it and sell it. Consider an example of a physical product. If you bought a chair, you could copy how the chair was made and create another one for your home. You could also paint the chair or change certain features of it. You could even resell it if you wanted to do so. In contrast, having a license only allows you to use the product. You often cannot change it, copy it, or resell it unless you have specific permission to do so. In our chair example, you could use the chair, but you may not be able to do anything else with it. You could not sell it to someone else or change it in any way. You will usually see licenses in the context of software or design and specifications. In the software context, the license will usually restrict users from altering, copying, or selling it to another person. Software developers use licenses, as opposed to an outright transfer, to help decrease potential problems associated with over-sharing that can reduce demand and limit profits. A license will describe how a product can be used. That is, copying or distributing may be allowed according to the software license agreement, but it must be specifically stated to be permitted.

What is “open source” software?

Not every type of software will include a restrictive license. “Open source” software is any software that can be accessed, changed, used, and shared without charge. Open source software is the same as “free software.” There is no need to obtain an individual license because the developers of the software have chosen to share it with the world without restrictions. Nonetheless, open source software still technically has a license; it is simply not very restrictive. Open source software can be developed by anyone and must meet 10 specific criteria for it to be labelled “open source.” Free redistribution The program must include the source code Derivative work must be permitted (modification and alterations to the original software) Restrictions on distribution of the source code is allowed if the software is modified, but only if patch files can be distributed as well No discrimination against any group or person No discrimination against any particular field Rights associated with the license must apply to everyone that receives a redistribution of the software The license cannot be specific to a product The license cannot restrict the use of other software The license must not be predicated on any style of interface or individual technology Open source software allows developers the ability to learn and continue developing their own software by collaborating with others. Software sometimes starts out as open source in its early phases of development. Open source software can be used for commercial purposes, and there is no way to restrict the utilization of the software. Developers also cannot control who uses the software and for what purpose, which is often a concern for those who may be using the software for illegal or unethical reasons.

How can I limit the licensee’s use of my software?

The best way to limit or restrict someone’s use of your software is to have them enter into a software license agreement with you. The agreement should set out how the licensee can and cannot use the software. It should also set out what will happen if the agreement is violated. Negotiation is a powerful tool in the context of software licensing. Software licensing agreements may also contain the following additional provisions: Restrictions on remedies if the software is defective or does not comply with specific requirements Limitations on liability (damage caps) if losses occur Liability exclusions Limitations on warranties Alternative dispute resolution options Information on copyright and ownership protections The governing law if a conflict arises Like any contract, you and the other party can include provisions that will work for your unique situation. You can be creative about limitations regarding the use and sale of your software. Just be sure that your creativity does not morph into making the agreement unreasonable or impractical.

Software License Agreement

For any business that gives its users access to its software, a software license agreement is absolutely essential to protect your rights.

For each new user permitted to use your software, you should have a software license agreement in place to lay out the user’s specific terms of use. Create a comprehensive software license agreement for any software product using our simple template.

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Gather Information

As you complete your software license agreement, you will need to provide certain relevant information. This includes the permitted uses of the software, the software delivery method, installation and testing details, and the fees involved.

Answer Key Questions

Use the information you collected to complete the software license agreement. We make this easy by guiding you each step of the way and helping you to customize your document to match your specific needs. The questions and information we present to you dynamically change depending on your answers and the state selected.

Review and Sign

It is always important to read your document thoroughly to ensure it matches your needs and is free of errors and omissions. After completing the questionnaire, you can make textual changes to your document by downloading it in Microsoft Word. If no changes are needed, you can simply download the PDF version and sign. This agreement allows the parties to sign and deliver copies electronically. Therefore, it is not necessary for both parties to sign a single printed copy of the agreement.

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