A software license is a legal instrument (usually by way of contract law, with or without printed material) governing the use or redistribution of software. Under United States copyright law all software is copyright protected, except material in the public domain. A typical software license grants an end-user permission to use one or more copies of software in ways where such a use would otherwise potentially constitute copyright infringement of the software owner's exclusive rights under copyright law.
In addition to granting rights and imposing restrictions on the use of software, software licenses typically contain provisions which allocate liability and responsibility between the parties entering into the license agreement. In enterprise and commercial software transactions these terms, such as limitations of liability, warranties and warranty disclaimers, and indemnity if the software infringes intellectual property rights of others.
Software licenses can generally be fit into the following categories: proprietary licenses and free and open source. The significant feature that distinguishes them are the terms which the end-user's might further distribute or copy the software.
In the United States, Section 117 of the Copyright Act gives the owner of a particular copy of software the explicit right to use the software with a computer, even if use of the software with a computer requires the making of incidental copies or adaptations (acts which could otherwise potentially constitute copyright infringement). Therefore, the owner of a copy of computer software is legally entitled to use that copy of software. Hence, if the end-user of software is the owner of the respective copy, then the end-user may legally use the software without a license from the software publisher.
As many proprietary "licenses" only enumerate the rights that the user already has under 17 U.S.C. § 117, and yet proclaim to take rights away from the user, these contracts may lack consideration. Proprietary software licenses often proclaim to give software publishers more control over the way their software is used by keeping ownership of each copy of software with the software publisher. By doing so, Section 117 does not apply to the end-user and the software publisher may then compel the end-user to accept all of the terms of the license agreement, many of which may be more restrictive than copyright law alone. It should be noticed that the form of the relationship determines if it is a lease or a purchase, for example UMG v. Augusto or Vernor v. Autodesk, Inc.
The hallmark of proprietary software licenses is that the software publisher grants the use of one or more copies of software under the end-user license agreement (EULA), but ownership of those copies remains with the software publisher (hence use of the term "proprietary"). This feature of proprietary software licenses means that certain rights regarding the software are reserved by the software publisher. Therefore, it is typical of EULAs to include terms which define the uses of the software, such as the number of installations allowed or the terms of distribution.
The most significant effect of this form of licensing is that, if ownership of the software remains with the software publisher, then the end-user must accept the software license. In other words, without acceptance of the license, the end-user may not use the software at all. One example of such a proprietary software license is the license for Microsoft Windows. As is usually the case with proprietary software licenses, this license contains an extensive list of activities which are restricted, such as: reverse engineering, simultaneous use of the software by multiple users, and publication of benchmarks or performance tests.
The most common licensing models is per single user (named user, client, node) or per user in the appropriate volume discount level, while some manufacturers accumulate existing licenses. These open volume license programs are typically called Open License Program (OLP), Transactional License Program (TLP), Volume License Program (VLP) etc. and are contrary to the Contractual License Program (CLP), where the customer commits to purchase a certain amount of licenses over a fixed period (mostly two years). Licensing per concurrent/floating user also occurs, where all users in a network have access to the program, but only a specific number at the same time. Another license model is licensing per dongle which allows the owner of the dongle to use the program on any computer. Licensing per server, CPU or points, regardless the number of users, is common practice as well as Site or Company Licenses. Sometimes you can choose between perpetual (permanent) and annual license. For perpetual licenses one year of maintenance is often required, but maintenance (subscription) renewals are discounted. For annual licenses, there is no Renewal, a new license must be purchased after expiration. Licensing can be Host/Client (or Guest), Mailbox, IP-Address, Domain etc., depending on how the program is used. Additional users are inter alia licensed per Extension Pack (e.g. up to 99 user), which includes the Base Pack (e.g. 5 user). Some programs are modular, so you have to buy a base product before you can use other modules.
Software licensing also includes maintenance. This, usually with a term of one year, is either included or optional, but must often be bought with the software. The maintenance agreement (contract) contains Minor Updates (V.1.1 => 1.2), sometimes Major Updates (V.1.2 => 2.0) and is called e.g. Update Insurance, Upgrade Assurance. For a Major Update the customer has to buy an Upgrade, if not included in the maintenance. For a maintenance renewal some manufacturers charge a Reinstatement (Reinstallment) Fee retroactively per month, in case the current maintenance has expired. Maintenance normally doesn't include technical support. Here you differentiate between e-mail and tel. support, also availability (e.g. 5x8, 5 days a week, 8 hours a day) and reaction time (e.g. three hours) can play a role. This is commonly named Gold, Silver and Bronze Support. Support is also licensed per incident as Incident Pack (e.g. five support incidents per year).
Many manufacturers offer special conditions for schools and government agencies (EDU/GOV License). Migration from another product (Crossgrade), even from a different manufacturer (Competitive Upgrade) is offered.
Free and open-source licenses generally fall under two categories: Those with the aim to have minimal requirements about how the software can be redistributed (permissive licenses), and those that aim to preserve the freedoms that is given to the users by ensuring that all subsequent users receives those rights (copyleft Licenses).
An example of a copyleft free software license is the GNU General Public License (GPL). This license is aimed at giving all user unlimited freedom to use, study, and privately modify the software, and if the user adheres to the terms and conditions of GPL, freedom to redistribute the software or any modifications to it. For instance, any modifications made and redistributed by the end-user must include the source code for these, and the license of any derivative work must not put any additional restrictions beyond what GPL allows.
Examples of permissive free software licenses are the BSD license and the MIT license, which give unlimited permission to use, study, and privately modify the software, and includes only minimal requirements on redistribution. This gives a user the permission to take the code and use it as part of closed-source software or software released under a proprietary software license.
Free Software Foundation, the group that maintains The Free Software Definition, maintains a non-exhaustive list of free software licenses. The list distinguishes between free software licenses that are compatible or incompatible with the FSF license of choice, the GNU General Public License, which is a copyleft license. The list also contains licenses which the FSF considers non-free for various reasons, but which are sometimes mistaken as being free.
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