Demystifying software licensing terminology

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Demystifying software licensing terminology

The world of software licensing is jargon heavy, but what do all of those phrases and terms actually mean? Find the answers here.

Published on 7th January 2025

Software licensing is like renting a car — you get the keys, but the car itself still belongs to the rental company. Sure, you can take it for a spin, impress your friends, and even crank up the AC to feel like a tech-savvy James Bond, but if you start repainting it or selling it on amazon, you’re in for a legal showdown.

Types of Licenses

In the world of software, licenses come in all shapes and sizes, much like socks. You’ve got your free-to-use open-source licenses (the cosy wool socks everyone shares at family events) and those restrictive proprietary licenses (the flashy socks you need to keep clean for those special events).

Proprietary Licenses

A proprietary license is a legal agreement that grants you the right to use a piece of software but keeps most of the control firmly in the hands of the software’s creator (the publisher). You don’t own the software — you’re just renting its functionality.

These are the VIP, members-only clubs of the software world. If software were a party, proprietary licenses would be the bouncers at the door, reminding you that, sure, you’re allowed inside, but only under strict 💃🏽conditions:

Restricted Use means you can’t peek behind the curtain, the source code is off-limits, Limited Sharing means you can’t bring all your friends along, and Updates and Support are on their terms, so you’ll have to wait for the host to serve the next course. Just remember, it’s their party, and you’re the lucky guest!

Open-Source Licenses

Encourage collaboration by providing access to the source code (e.g., GNU License, MIT License, GPL Licence, Apache License 2.0, BSD Licenses).

MIT License: The “Do Whatever You Want” License:

You can do almost anything with MIT-licensed code: make a billion-dollar app or use it to control your smart toaster. No strings attached, except a polite nod to the original author (give them credit).

GPL (General Public License): The “Share-Alike” License:

If you tweak GPL code and distribute it, your changes must also be open source. No hoarding your new features! It’s the Robin Hood of licenses. Share the code, but if you improve it, everyone else gets to benefit too.

Apache License 2.0: The “Corporate-Friendly” License:

You can use it in proprietary projects, but it comes with a “patent clause” to prevent lawsuits. Think of it as an insurance policy: no one can sue you for using this code unless they want to end up looking silly in court.

BSD Licenses: The “Just Don’t Blame Us” License:

Imagine a mechanic who fixes your car for free but makes you sign a waiver that says, “Use it however you want, but if it explodes, it’s on you.”.

Freeware Licenses

Freeware is software that’s free to use but not free to tinker with. Unlike open-source software, you get the finished product, but the recipe (a.k.a. the source code) stays locked up like grandma’s secret soup recipe.

Standard Freeware License (a.k.a. “Just Take It and Use It”):

You can use the software for personal or sometimes commercial purposes, but modifying, redistributing, or reverse-engineering it is strictly off-limits.

Freemium License (“The Tease”):

Imagine someone hands you a pizza but says, “You can eat the crust for free, but the toppings will cost you.

Trialware or Demo Software (“The Stopwatch License”):

It’s like getting a free pass to a fancy gym, but after a month, they lock you out unless you pay.

Adware (“Enjoy the Ads!”):

The software is free to use, but in exchange, you’re bombarded with ads. Sometimes the ads are tolerable, but other times they’re like un-skippable YouTube commercials.

Shareware Licenses

Shareware is software that’s free to use for a limited time or with limited functionality. They are like the software world’s equivalent of test-driving a car. They let you try out the goods before deciding if you want to fork over some cash. But, as with any test drive, there are often limits: speed caps, a time bomb, or the digital equivalent of a salesperson glaring over your shoulder.

Time-Limited Shareware:

You get full functionality for a set period (e.g., 7, 14, or 30 days). After that, the software either stops working or locks key features behind a paywall.

Feature-Limited Shareware:

Basic features are free, but premium features require payment. For example, a photo editor may let you crop photos for free but charge for advanced filters or high-resolution exports.

Shareware licenses gained popularity in the ’90s, distributed via floppy disks, CDs, or downloads. They made software more accessible to people who wanted to try before committing. Today, you’ll find shareware-like models in apps, games, and productivity tools.

Example applications include:

Games: Many offer limited levels or demo versions to hook players before asking for payment.
Utilities: Software like WinRAR famously offers a “trial” version… that somehow works forever (but won’t stop reminding you to pay).
Productivity Tools: Tools like text editors or task managers may let you create documents but require payment to save or print.

Subscription Licenses

Subscription licenses are the modern “pay-as-you-go” model for software. Instead of buying a product outright, you pay a recurring fee to use it.

Monthly or Annual Subscription:

You pay a monthly fee to access the software. Ideal for short-term projects or when you’re just testing the waters.

Tiered Subscription:

You choose from different levels of access, ranging from basic (minimal features) to premium (all the bells and whistles).

Per-User or Per-Team Subscription:

Companies pay based on the number of users (or seats) accessing the software. Great for team-based tools like Slack or Zoom.

Usage-Based Subscription (“Pay As You Go”):

You pay based on how much you use the software, like cloud storage services (AWS, Google Cloud). Great for businesses that have fluctuating needs.

The shift to subscription licenses reflects the “as-a-service” trend in the tech world: Software as a Service (SaaS). It’s convenient for users and provides companies with predictable revenue. Plus, let’s face it — who doesn’t love a steady stream of updates without extra charges?

Components of a Licensing Agreement

Licensing agreements are like legally binding user manuals for using someone else’s stuff. Whether it’s software, a patented invention, or a brand logo, a licensing agreement spells out the “who, what, where, when, and how” of the relationship between the owner (licensor) and the user (licensee).

License Grant

This section outlines what exactly the licensee is allowed to do with the licensed product or intellectual property. It’s the heart of the agreement — the part where the licensor says, “Here’s what I’m giving you.”

Examples include:

Exclusive License: Only you can use this, and no one else permission.
Non-Exclusive License: You can use this, and so can your competitors.
Territorial Limitations: You can only use this in Kenya.
Time Limitations: The license is valid for a certain period or year.

Usage Restrictions

This section sets boundaries on how the licensee can (and cannot) use the licensed material. It’s the legal equivalent of a parent saying, “You can stay out late, but no partying and definitely no speeding!”

Examples include:

Intellectual Property Protection

This section emphasizes that the licensor retains ownership of the intellectual property (IP) and protects it against unauthorized use, theft, or infringement. It’s like putting a “No Trespassing” sign on your digital lawn.

Examples include:

Benefits of a License Agreements

For the licensor, it ensures that their hard work and innovation are protected from unauthorized use, allowing them to monetize their creations.

For the end user, a proper license provides legal assurance and access to updates, support, and enhancements.

Just like renting a car, using software isn’t a free ride. You need permission (usually through payment) to take it for a spin. And just like you wouldn’t want to drive a rental car off-road without insurance, you wouldn’t want to use software without a proper license. Otherwise, you might find yourself in a legal fender-bender.