Skip navigation.

Software > Buying & Owning Software

Making sense of software licensing

By TechSoup

If you are in charge of keeping track of your organisation's technology, you know that software presents you with a unique set of problems. Unlike hardware, software is hard to pin down. Software licenses tend to be written for a legal audience, and even to lawyers, they may not be particularly clear. However, understanding software licensing is crucial to managing technology within your organisation. This article in collaboration with TechSoup provides an overview of the common types of software license.

The Law's Involved: Copyrighted Software

Software isn't traditional property, but most software manufacturers consider their products intellectual property, just like books, movies, and music recordings - and most international law and U.K. copyright law agree.

For intellectual property, some uses are included in the purchase price; for other uses, you must obtain permission. As an example, purchasing a book gives you the right to use, sell, or give away the book. But if you want to reprint or copy a large part of the book, or incorporate it into a work of your own, you have to ask permission. This legal framework evolved over centuries, and includes court cases as well as legislation

License? But I didn't sign anything

Intellectual property owners can give others permission to use their property by licensing it to the users (usually in exchange for money). In the book example in the last paragraph, many of the uses are included in an implicit license granted to you when you purchased the book.

For software, the license is both printed on the box and considered to be in effect as soon as you open the box (the so-called "shrink-wrap" license) and / or shows up on one of the early screens when you install the program.

In either case, the license provides restrictions on appropriate use of the software. Generally restrictions are placed on how the software can be copied, modified, and distributed. As a result, there are an infinite number of different ways that software can be licensed, but there are some generally accepted classifications of copyrighted software.

Proprietary Software (e.g. Microsoft Office 2000, Adobe Acrobat)

In the context of information technology, proprietary describes a technology or product that is owned exclusively by a single company which carefully guards knowledge about the technology or product's inner workings. Most commercial software today is proprietary. Proprietary software generally costs money, and its distribution and modification are prohibited. There are two common types of licenses for proprietary software:

End User License Agreement (EULA)

The most common type of license, a EULA provides stipulations as to how a piece of software may be used within an organisation. Some software may be installed on multiple machines so long as only one is running at a time, while other software may only be loaded on one machine ever. In general you cannot have multiple copies of the software running at the same time under a EULA license. Most shrink-wrapped licenses are of this type.

Volume License Agreement

Generally Volume License Agreements provide a way for organisations to buy and manage multiple licenses. Software vendors may have various schemes depending on the type of organisation (e.g. educational, charity, corporation etc.).

For example Microsoft offers a range of programs for many of its software products (for more information on volume licensing programs for Microsoft products see Other companies such as Adobe, Macromedia, Corel have similar schemes for selected products.

This type of license agreement has its own requirements for eligibility (affiliation, installation, and usage restrictions) and its own obligations imposed on the organisation for enforcement of the rules. This area can get complicated so it's best to check with an authorised supplier. In the UK, several companies provide discounted software to charities under this kind of license agreement -- see our list of charity software suppliers for more information.

Volume License Agreements have largely replaced the similar Site License Agreements which grant schools, universities, and large organisations permission to copy and distribute a piece of software to members within the institutional community for a negotiated price. Again, each site license agreement has its own requirements for eligibility.

Freeware (e.g. Netscape Navigator)

Freeware, as the name suggests, does not cost any money. However, it is still copyrighted, and its modification and usage are limited. Because most freeware authors hope for as large an audience as possible for their software, distribution rules tend to be more relaxed than those for proprietary, but the authors still don't want you to modify their software.

No Money Down: Shareware (e.g. WinZip)

Many people confuse shareware with freeware. While shareware and freeware authors both allow and encourage distribution, the similarities end there. Shareware can basically be considered trial or demo software. You are allowed to use it for a time, but if you want to keep it, you are required to register and usually pay a licensing fee.

Relax - It's Free Software

When computing technology was in its infancy, the software audience was sufficiently small for most software to be distributed freely between colleagues and students. Software was distributed with its source code (the programming behind the application), and modifications were not only allowed, they were encouraged.

Of course, as we all know, things didn't stay free. People eventually realised they could make some money on software, and we were left with the market we have today. However, free software (not to be confused with freeware) is making a substantial comeback. Projects like Linux ( and GNU ( have been extremely successful and are gaining popularity and support. There is some terminology that is useful for understanding free software. 

Copylefted Software (e.g. Meadowbase From the Free Software Foundation):

"Copylefted software is free software whose distribution terms do not let redistributors add any additional restrictions when they redistribute or modify the software. This means that every copy of the software, even if it has been modified, must be free software.

Copyleft is a general concept; to actually copyleft a program, you need to use a specific set of distribution terms. There are many possible ways to write copyleft distribution terms." The GNU General Public License (GPL - is the classic example of copyleft licensing.

Open Source Software (e.g. Linux)

Open Source software is usually copylefted. It is always distributed with the source code for modification, and generally there are very few restrictions on usage and distribution. 

Public Domain Software

Some software is considered in the public domain - it isn't copyrighted and the authors / distributors have not provided copyleft terms. So, public domain software can be redistributed by anyone as proprietary software - for a profit.


Software licensing can be extremely confusing. Sometimes reading the fine print (as boring as it may be) is the only way to find out what you can and cannot do with your software. While the idea of free software proposes a reduction in the complexity most of us encounter now, there isn't a wide variety of free software currently available for the general non-technical audience. But it is becoming a more and more popular idea ...


About the author



Linux, Open Source Software, Proprietary software, Software, WinZip, WWW

Published: 8th January 2003 Reviewed: 5th July 2006

Copyright © 2003 Compumentor

Article published in collaboration with Techsoup.


Creative Commons License This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 2.5 License.

User comments and discussion

If you have useful information to add to this article please Add a comment. Comments will appear after they have been moderated.

Discuss this topic in the Knowledgebase forums. This is a useful place to share knowledge, experiences, and ask questions.

Please sign in or register to be able to post a comment or discussion.