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What is Software Licensing?

By R. Kayne
Updated May 17, 2024
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Software licensing is a contract of agreement between the software publisher and the end user, sometimes referred to as the End User License Agreement, or EULA. Though licensing can be a paper agreement, it is most often imbedded in the software itself as part of the installation process. If the user does not agree to the software licensing terms, he or she can indicate so with a click. This aborts the installation process. In most cases, end users click in agreement whether they actually read the license or not.

Most notably, software licensing protects the copyright by placing restrictions on the end user in relation to the product. Duplication for purposes other than backup, installation on more than one computer, editing the code, or changing the program in any way is usually forbidden. Software licenses might also restrict reverse engineering and bypassing controls intended to cut down on pirating.

Aside from restrictive uses of the software, licensing functions as a kind of disclaimer. Most EULAs include statements to the effect that the publisher will not be held liable for any unforeseen circumstances that might arise as a consequence of using the software. This could refer to anything from a computer crash to loss of data, time or income.

Some publishers have held that once the shrinkwrap is broken on a retail product, the end user automatically accepts the license. Courts in various states have heard cases on this matter, as a user cannot read the EULA until the product has been opened when a paper agreement is not included. Once the shrinkwrap is opened, the item is not returnable. In effect, this forces agreement on the user. The outcome of such a legal case depends on the court in which it's heard, but most have found 'shrinkwrap software licensing' to be invalid. This is not to be misconstrued as definitive, as a minority of courts found otherwise.

Software licensing differs among types of software. Freeware licensing is less restrictive than retail or shareware, in that it allows unlimited copying and distribution while still forbidding any changes to the program. Public domain software is the one type of licensing that has no restrictions, as the software belongs to the public.

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Discussion Comments
By anon212823 — On Sep 08, 2011

Very nice post but volume licensing has been utterly missed here, it plays an important part in corporate world. Please include an article on it as well. --

Sanchit K.

By GraniteChief — On Oct 06, 2010

The other big struggle that Apple is facing with software licensing that dkarnowski failed to mention is the battle with crackers and the current operating system running on Apple's iPhones and iPod Touches.

With the mobile platform ever increasing in popularity the pressure to open up the software for outside tinkering has flared up. It is often the case that as soon as Apple releases an update to their mobile OS that crackers will have a software hack available on the internet within a day or two.

This back and forth is actually good for the market I believe. While I do not support software piracy I do think that these crackers keep the software developers on their toes and almost create more stable and secure software because of the outside challenge.

The advantage of course to running a cracked mobile operating system is that it allows third party software to use functions of the phone not typically allowed or heavily controlled by Apple. In it's efforts to maximize profit and exert control over users, Apple has inspired people to run programs that they don't want running on their phones.

Functions such as using voice over internet protocol applications while only connected via cell towers for data reception is especially looked down upon because of the effect that it has on the carrier's network. To me this comes off as an excuse to not have to invest in the infrastructure that they should.

Jailbreaking an iPhone will defeat this block and allow for voice conversations to be carried over a data signal instead.

By dkarnowski — On Oct 06, 2010

There are some very classic examples of software protection breaches that have come recently to market. @FrogFriend described one of the biggest with Adobe in a constant battle to keep pirates at bay with their Creative Suite software.

Many people should realize that there is also a different type of software licensing process that exists not just for end user applications but also in the operating systems that they use to run those programs.

Microsoft and Apple have famously fought against software piracy and the hacking of their operating systems. Microsoft has face the brunt of this as the market share leader but with Apple taking a significant portion in the past few years they are increasingly seeing their operating systems come under fire from code crackers.

When Apple switched to Intel based CPU's for their computers they opened up a whole new issue of having to protect the operating system from abuse and modification. Since then there are large groups of programmers and crackers on the internet that are working toward the ability to run OS X, Apple's current OS, on generic PC hardware. This mix of hardware and software is difficult as Apply has specifically licensed their software for use on their computer hardware only.

By doing so Apple has attempted to create a monopoly on the hardware that is available for their license. This has failed as groups have now successfully started to run OS X on custom and production line computer systems from manufacturers other then Apple.

By FrogFriend — On Oct 06, 2010

The best protection that I have ever seen a company use for their software licensing is exactly what @anon87823 mentions. Product activation is usually done at the time of installation for a program and requires either an internet connection or the ability to call into a support center with a telephone so you can access activation codes.

This way of intervening has been somewhat successful but as the software giant Adobe has found, even internet activation has been cracked. Illicit serial key generators are available for download from the internet and various peer to peer networking sites that will create a custom activation code from the serial numbers provided at an installation.

I imagine that at some point in time a software company will develop a method or technology that allows for the protection of their software licensing. Until this pirates will continue to drive my cost of doing business up just as JoseJames mentions.

Even then, there will be a group that comes along and discovers how to defeat the protections.

By youbiKan — On Oct 06, 2010

@JoseJames, I agree with you on your analysis of how software costs will go up as more people pirate the sometimes costly computer applications.

My only concern is that young individuals who are trying to break into a market that requires expensive software will face a corporate imposed hurdle that will be difficult to overcome.

This is of course no excuse or reason to steal your required software licensing but it does make me wish that there was tighter ways of controlling the piracy and software industry.

As the author mentions, there are many ways that companies can secure their digital wares but nothing to date has been able to be fool proof and capable of defeating crackers.

Perhaps the closest thing that i have see is the physical protection that certain software companies will use in the form of a USB key. The device looks similar to a USB memory stick or drive and actually functions in a similar matter but instead of acting as a storage device it simply lets the software that you are attempting to run that it can be accessed.

This dependence on a physical item is a very innovative approach to the age old tradition of piracy and a technological breakthrough for the digital industry. Unfortunately I have a feeling that soon even these devices will be worked around or cracked.

By JoseJames — On Oct 06, 2010

Let's face it, today we live in a world where software licenses are a costly and very often ignored realm of piracy. This unethical and illegal black market of profit loss is leading to a more and more costly software expense for legitimate business and individuals.

Much like the way hospitals will cover the cost of unpaid bills by jacking up the price of basic services and products, software companies will continue to raise the cost of their software as long as people are stealing it.

This is to ensure that they are able to continue with their business and make the products still available.

This means you, as a legal software user and purchaser of the necessary software licensing requirements, will have a profit line loss because of these higher business expenses.

By turning in know software pirates you are in effect able to reduce your software costs in the long term and the act should not be regarded as a tattle-tale debacle.

By anon87823 — On Jun 01, 2010

Another common approach is product activation.

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