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 the vendor).

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 defining/limiting:

  • 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 customer).
  • 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 the license.

Recommendations

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.

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