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What is a Software License?

After covering intellectual property such as copyrights, trade secrets, trademarks, and patents (on Monitor.Us Blog), it is time to move on to more IT related topics, such as software licensing. In today’s world of computers and internet, it is important for practically anyone in the business world to have at least a simple understanding of software licensing and how it works. Software is needed for systems, computers and other machines to work properly in almost every part of the global economy. Software applications work in many parts of our day to day lives, from medical devices and programs to financial and even recreational programs.

“I have read and agree with terms and conditions”

Those who publish software, called “software developers,” need their product to be available for use to those in the market for which the software was created. For example, a software developer who has created applications for use in the medical field would want to make their product available for doctors, hospital, etc to use. But how can they make the software available and yet protect their product from being stolen? While they can make the code available, how can they ensure that the code is not used in ways which it was not meant to be? In order to provide users with the legal right to utilize the software, a developer will create a software license agreement.

What is a Software License?
According to wisegeek.com, software licensing is a type of contract that exists between a software publisher and the end user. Simplified, this means software licensing is an agreement between the person who created the software, and the person who uses it. The software license itself is created to protect the copyright of the software. It actually restricts how the user can utilize it. In most cases, anything such as duplication of the software (except as a back-up) or installing the software on more than one computer is restricted by a software license agreement. The user is also not allowed to change the software in any way, or edit it’s code. Provisions will usually be added to a software license agreement to prevent pirating of the software.

Often, a software license will be known as an “End User License Agreement” or EULA. On a small scale, you may recognize them as the agreements that you have to click whenever you download software to your computer, smart phone, etc. This is how most software license agreements are made, although some of them can be on paper as well. For the digital agreements, the user “signs” by simply clicking in acceptance. If the user does not agree to the terms of the software licensing agreement, then he or she simply does not click, and the installation of said software will be terminated. In many cases, the user will click in acceptance of the agreement without even reading it, as they can be quite lengthy. Even in cases where the user must pay a fee before installing the software, he or she is not purchasing the software but merely licensing it, or paying for the right to use it.

In most cases, the person or persons who created the software code will own the software code. If the developer of the software works for a specific company for which he or she creates software, then the company will own the software which was developed. It is the software developer or owner who has control over how the code can or cannot be used. In cases which which are not simple “click of the button” agreements, a paper agreement will be signed by both parties. This paper will normally include the terms and conditions which are similar to those in the “click to accept” user agreement. This is normally the preferred method of software licensing when specialized or customized software is involved.

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What is Covered by a Software License?
As explained by walkerandjoke.com, many issues can be addressed by a software license in regards to the use of the software. Issues such as how the software can be distributed or installed as well as where this can be done are often covered by the software license. Statements which explain that the developer will not be responsible for unforeseen circumstances such as loss of data, computer crashes, loss of income, etc are often covered in these agreements. Other specifics which can be covered by a software license include the following:

  • The length of time in which the software may be used

  • The conditions or systems under which the software can be used

  • Support which will be included for the software, such as updates, technical assistance, or upgrades

  • The price of using the software

  • Any warranty terms which may apply

  • How each party may or may not be liable for damages that could result from the use of the software

  • Who has the rights of ownership for the software and/or any products which are developed by its use

  • How and when disputes concerning the software will be handled

  • Any other issues which could be important concerning the specific software

There are many different types of software licensing, and they can cover different types of software. For freeware, the licensing is not usually very restrictive. Freeware is, just as it sounds, software which is available free of charge for users to download from the internet. In some cases, the user will have to view a series of ads before using the software. This type of freeware is called adware. Shareware may have a few more restrictions and requires that the user purchase the software if he or she wishes to use it past a certain, previously stated time period. Freeware does have a licensing agreement even though it if free. Although redistribution is normally allowed, altering or selling the software is not allowed. Volume licensing includes distributing the same license or activation of software to many companies at the same time. The only software licensing which comes with no restrictions is known as public domain software, which means that the public is actually considered the owner of the software. The various types of software licensing and what they cover will be included in the next article in this series. Be sure to look for more such articles in the next few weeks. You don’t want to miss this information!

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More Stories By Hovhannes Avoyan

Hovhannes Avoyan is the CEO of Monitis, Inc., a provider of on-demand systems management and monitoring software to 50,000 users spanning small businesses and Fortune 500 companies.

Prior to Monitis, he served as General Manager and Director of Development at prominent web portal Lycos Europe, where he grew the Lycos Armenia group from 30 people to over 200, making it the company's largest development center. Prior to Lycos, Avoyan was VP of Technology at Brience, Inc. (based in San Francisco and acquired by Syniverse), which delivered mobile internet content solutions to companies like Cisco, Ingram Micro, Washington Mutual, Wyndham Hotels , T-Mobile , and CNN. Prior to that, he served as the founder and CEO of CEDIT ltd., which was acquired by Brience. A 24 year veteran of the software industry, he also runs Sourcio cjsc, an IT consulting company and startup incubator specializing in web 2.0 products and open-source technologies.

Hovhannes is a senior lecturer at the American Univeristy of Armenia and has been a visiting lecturer at San Francisco State University. He is a graduate of Bertelsmann University.