The license agreement between the software user and the software publisher is the

So How Should You Implement Software Licensing? Build It Or Buy It?

Develop In-house

There are two ways you as a software business can license your software product: by developing a licensing engine in-house or by using a specialist to take care of your licensing requirements.

If you’re a skilled developer, you might be tempted to develop your own licensing engine, after all you’d own it. And if you’re a very small business you might even manage with a spreadsheet of character strings combined with a delivery mechanism (like email) to give your customers access to your product.

But what about free trials, revoking access rights, upselling new features, transferring licenses between devices, tracking license usage data and all the other requirements of effective software licensing?

Building your own licensing solution may be manageable at first, but when you grow as a business this will become increasingly more difficult and you will be spending a lot of your time and money maintaining it. You may not even be happy with the end result, because your requirements may have changed as your products have evolved and you’ve grown as a business.

Software licensing solutions that require lots of ‘touch-points’ in a deployment don’t scale.

Click here to learn more about the drawbacks of developing your own licensing system.

Use a Specialist

The other option is to outsource software licensing to a specialist. This is usually a good option for software businesses that have found Product-Market fit and are looking to scale.

However, you shouldn’t assume that a 3rd party licensing solution will automatically help you achieve the flexibility that is essential in today’s fast-paced, data-driven digital environment.

Unfortunately, many software licensing specialists are still in the mindset of traditional key-based systems. If you’re not careful, you may find yourself in a situation where a 3rd party, key-based solution introduces as much friction and manual admin into your business as developing a licensing tool yourself.

Software licensing is a contract of agreement between the software publisher and the end user, sometimes referred to as the End User License Agreement, or EULA. Though licensing can be a paper agreement, it is most often imbedded in the software itself as part of the installation process. If the user does not agree to the software licensing terms, he or she can indicate so with a click. This aborts the installation process. In most cases, end users click in agreement whether they actually read the license or not.

Most courts have not agreed with some software publishers that argue that as soon as a user opens the software, he agrees to the licensing.

Most notably, software licensing protects the copyright by placing restrictions on the end user in relation to the product. Duplication for purposes other than backup, installation on more than one computer, editing the code, or changing the program in any way is usually forbidden. Software licenses might also restrict reverse engineering and bypassing controls intended to cut down on pirating.

Software licensing is commonly part of the installation process.

Aside from restrictive uses of the software, licensing functions as a kind of disclaimer. Most EULAs include statements to the effect that the publisher will not be held liable for any unforeseen circumstances that might arise as a consequence of using the software. This could refer to anything from a computer crash to loss of data, time or income.

Some publishers have held that once the shrinkwrap is broken on a retail product, the end user automatically accepts the license. Courts in various states have heard cases on this matter, as a user cannot read the EULA until the product has been opened when a paper agreement is not included. Once the shrinkwrap is opened, the item is not returnable. In effect, this forces agreement on the user. The outcome of such a legal case depends on the court in which it's heard, but most have found 'shrinkwrap software licensing' to be invalid. This is not to be misconstrued as definitive, as a minority of courts found otherwise.

Software licensing differs among types of software. Freeware licensing is less restrictive than retail or shareware, in that it allows unlimited copying and distribution while still forbidding any changes to the program. Public domain software is the one type of licensing that has no restrictions, as the software belongs to the public.

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