A software license gives a customer permission to use the
licensed software and do other things that might otherwise be an
infringement of the software vendor's rights. Customers should
understand the scope of the software license and take reasonable
precautions to minimize the risk of software misuse.
Kinds of Licenses
There are various kinds of software licenses. Most licenses are
"non-exclusive" (the vendor and other licensees can also
use the licensed rights), but licenses can be "sole" (the
customer is the only licensee, but the vendor can use the licensed
rights as well) or "exclusive" (the customer can use the
licensed rights to the exclusion of all other persons, including
Scope of License
A software license, which is usually comprised of a license
grant and various restrictions and requirements, defines the scope
of the customer's permissible use of the licensed software. A
software vendor can adjust the scope of the license (and
corresponding fee) to reflect a customer's intended use of the
software. This can be beneficial to customers because each customer
is required to pay only for its own intended use of the software.
The scope of a software license can be adjusted by
who is authorized to use the software. For
example, a software license may limit the total number of
individual users of the software, require that each user be
identified, limit the maximum number of simultaneous users, or
impose other requirements (e.g., a user must be employed by the
what software may be used under the license.
For example, a software license may be limited to a specific
version of the software or specific parts of a software suite.
where the software may be installed or used.
For example, a software license may limit software installation or
use to specific locations or geographic territories.
when the software may be used. For example,
licenses are either time-limited or perpetual, and are usually
subject to termination in specified situations.
why the software may be used. For example,
software licenses commonly provide that the software may be used
for the customer's "internal business purposes only"
and prohibit use of the software to provide services to other
companies, which may preclude use of the software by the
customer's related companies.
how the software may be used. For example,
software licenses may limit the number of software installations,
require the software be installed on designated computers, or
prohibit software modifications. Software vendors can sometimes use
technology (e.g., time-limited or user-specific license keys) to
prevent use of software beyond the scope of the software license.
For many license restrictions and requirements, however, vendors
rely on customers' honesty and vigilance and the vendors'
contractual audit rights.
Use of licensed software beyond the scope of the software
license is usually a breach of the software license agreement and
may constitute infringement of the vendor's rights in the
software. This can result in serious adverse consequences to the
customer, including liability for damages and early termination of
When negotiating a software license agreement - even if the
agreement is a take-it-or-leave-it proposition - customers should
ensure that the software license allows them to use the software as
required for their current and reasonably anticipated future needs.
Customers should also take reasonable precautions (including
educating workers and conducting internal audits) to minimize the
risk of inadvertent software misuse.
On March 11, 2009, the Office of the Superintendent of Financial
Institutions of Canada (OSFI) released a revised version of Guideline B-10, Outsourcing of Business Activities, Functions and Processes.
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