What is a Software License?| 5 Major Types

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To make full use of the skills, software creators must know what is a software license. It will be economically beneficial for them. Not only this, just like unique and significant invention or creation, the software ought to come under Intellectual Property laws. Hence, Software License is the key.

It is well known that Software is a set of programs or commands. It instructs a computer to perform tasks. Protection of the rights of a creator is important. It can happen using a software license. 


A software license creates a legal bond between the developer of the software program and its user. It outlines the terms and conditions or responsibilities attached to the usage or the distribution of the software. Most importantly, it is essential for the protection of rights. As a result, it also helps in the growth of this sector.

To enumerate, there are 5 major types of software licenses. It is essential to ponder upon some important aspects like:

  1. Permission to user to view the source code 
  2. Whether they have access to alter, copy and redistribute the program 
  3. If the program is installable 
  4. Number of times a program can be installed


To begin with, Software License agreements protect the time, energy, and resources of a software creator.

There are other reasons as well for one to get a software license:  

  1. Users abuse the program: Nothing can stop the consumer from attempting to replicate other software for their profit without a signed licensing agreement. Users try to copy software specifically to save money. This is achieved by installing it on many computers. Likewise, they could sell it for profit. As a result, the creator may lose out on potential profits.
  2. It allows the creator to license a piece of software without selling it: They can charge clients without losing the rights to the product. Although, it puts some restrictions on its use but there is more control over its usage. It also opens up the opportunity to earn more money.  
  3. Fewer responsibilities and obligations: This is a critical aspect. One has to keep the liabilities to a minimum. It aids as a defense for the firm. It allows them to revoke licenses at their choice. This part of the agreement allows them to cancel or suspend it at any time and for any reason. It lets them maintain complete control over the software. 


  • It encourages expansion of markets and also greater adoption 

A software company offers a platform with optional extensions and features. These features and extensions may impose additional charges. The vendor can charge for extra features only as they are using a usage-based licensing agreement. Users are more likely to discover new processes. It will not only save time but also money, if they have full access to the application. Users will only pay a small fee to explore with advanced capabilities. This rule applies to free trial programs as well. In other words, users gain access to its full version

  • It facilitates a faster and easier sales cycle

Generally, buyers face perceived risks. These include significant upfront investment, implementation challenges, concerns about user acceptance, and a need for extra diligence. Many of these anxieties and objections increase by pay-as-you-go options. But if problems with acceptance develop, the client organization faces fewer risks. 

  • It improves Customer Control and also helps in Increasing transparency

Firstly, clients can monitor and analyze the impact, productivity, and revenues of the product. Secondly, customers do not have to pay for shelf wear. Most importantly, the cost of the product is calculated based on its usage. It allows the developers to offer features like subscription-based licensing.


For locally installed and on-premise apps, one must match the flexibility provided by subscription-based pricing. Furthermore, buyers must demand payment per-use. It is based on specified kinds of transactions beyond a given threshold.

The software is a copyrighted work that the creator owns. Considering that copyright law is uniform across nations, one need not worry about residing in a foreign country.

With no license statements or agreements, the default copyright status is roughly this:

  1. The creator owns full rights to the work
  2. No one can do anything with it (minor exceptions do exist).
  3. If one wishes to give people legal access to the software, include a license agreement or, more precisely, an offer to enter into a contract that allows them to play your game. 


Analyzing pros and cons of different software firms can help in taking better decision of choosing a licensing agreement. It keeps the company compliant with software contracts. 

These fall into two categories: 

  1. Free and open-source software licenses 

2. Proprietary software licenses(paid)


Source code contain the code of the application. Programmer writes it in his preferred language.

A business or IT organization can readily analyze the functions of an application. It can modify it based on their business needs if they have access to the source code. 


End-users can use, distribute, and modify software applications. A programmer or company generating a copyrighted software has a right to donate it to the public domain. End users can freely share, modify, distribute, commercialize, and relicense software in the public domain with almost no limitations. 


Permissive License is similar to a public domain license and it might impose limitations on modification or distribution of the software. Permissive licensing has the advantage of allowing software makers to keep their intellectual property. They have some control over the usage of their program. Permissive software licenses come in many flavors. Each have its own rules and restrictions.


The attribute of proprietary software licensing is that under the end-user license agreement (EULA), the software publisher authorizes the use of one or more copies of the software. It retains the ownership of those copies. This aspect of proprietary software licensing means that the software publisher has some rights to the product. EULAs define the software’s usage.


In few cases, a software can be used indefinitely after paying some fee. It is usually limited to a single version of the software. In most cases, the one-time perpetual licensing charge does not include future software patches or fixes. In other cases, the software is provided for a fixed period of time. 


A floating license allows a creator to assign a set number of licenses to an application. For this reason, these can be distributed across a group of individuals.

As an illustration, a company bought ten floating licenses even though it had a requirement for 30. They may seek it from the ten-license floating pool.

A floating license operates on a first-come, first-served basis. Thus, it is indeed an excellent solution for user to spread among a group of people. 

In this article, we learned about what is a Software License. Consequentially, we discussed its benefits and major types besides other things. In conclusion, licensing software for the creators is quite essential and always a win-win situation. It doesn’t only give them the recognition they deserve but also boosts the profit.  

Click here if you want to know the difference between open-source and proprietary license.

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