Software License Types Explained: Need to Know

IT firms face a serious problem when it comes to software license compliance. An organization is obliged by the terms of the software license, also known as the end-user license agreement, when they decide to purchase software licenses (EULA).

If a software provider has reason to believe that you are not abiding by the terms of your software license agreement, they may want to run a software audit.

In reality, according to survey findings made public by Gartner Research, 68% of corporate firms have been contacted by a vendor in the previous year with at least one request for a software audit. A failed vendor audit could result in expensive true-up fees, audit costs, and significant fines and penalties if you are excessively using proprietary software without paying the appropriate licensing fees.

In order to correctly read software licensing terms and conditions and maintain compliance, IT organizations must first have a solid understanding of the many types of software licenses.

To cut down on unnecessary IT spending, it’s also critical to be familiar with different software license types.

Over the course of four years, 3.6 million users at 129 businesses in the US and the UK provided information for a report on the cost of underutilized software. Researchers discovered that 37% of all installed software was not being used, costing an unnecessary $37 billion in IT spending and $259 per desktop.

Furthermore, as IT businesses expand their expenditure on software licenses, there is a greater chance of waste because the global market for software licensing is predicted to rise at a compound annual growth rate of 8.6 percent through 2023.

IT firms can control costs and cut waste even as they invest more than ever in software thanks to enhanced software asset management and a better grasp of the different forms of software licenses.

How Does Software Licensing Work?

A new software application that a software company releases is shielded by copyright under American intellectual property laws.

Software developers have the sole authority to decide how their applications are used and distributed because they are the sole owners of that copyright.

A software license is a contract that is enforceable by law between a software provider and a company or IT organization interested in using their software products. In particular, it specifies how the licensee may use the software, how usage fees will be calculated, and how much of the software the licensee may copy, change, or distribute. It also lays down rules, specifications, and recommendations for both parties.

What Types of Software Licenses Are Available?

Understanding the various forms of software licenses can enable you to negotiate software licensing agreements more wisely and keep your company in compliance with software contracts.

The most popular software licensing types that SaaS lawyerneed to be aware of are listed below to aid in your first research. Our collection is separated into two categories: proprietary software licenses, which require payment, and open source software licensing types, which are available for free.

Public Domain Software Licenses

How companies handle the availability of the source code is the primary differentiator between open source and proprietary software. The actual text documents holding the application’s code, written in the programmer’s chosen language, are referred to as “source code.”

A business or IT organization with access to the source code can quickly examine the application’s functions and make adjustments in accordance with their business requirements.

Software programs can be used, shared, and modified by end users under open source licensing. A legitimate open source program should adhere to the Open Source Definition, a list of ten broad characteristics for open source software.

Open source software licenses come in a wide variety of forms.

License: Public Domain

Software that has a copyright can be donated to the public domain by a programmer or business that makes copyrighted software.

There are virtually no constraints on how freely end users can share, alter, distribute, sell, and relicense software that is in the public domain.

The public domain also includes literary works like William Shakespeare’s plays and well-known novels like A Christmas Carol by Charles Dickens or The Time Machine by H.G. Wells. This allows anyone to sell their creations for a profit by reprinting, copying, recreating, or reinterpreting them.

The public owns the intellectual property connected to these works, just like with open source software.

Allowable License

Similar to a public SaaS lawyer, a permissive license may have some limitations on how the end user may distribute or alter the software.

Software developers gain from permissive license because it enables them to keep their intellectual property, exercise some control over how their software is used, encourage open-source development, and even give away their product for free.

Permissive software licenses come in a variety of sub-categories, each with its own set of rules regarding what modifications and distributions of the licensed program are permitted.

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