Software License: Meaning, Types and Clauses Covered Under It

Software License Meaning, Types and Clauses Covered Under It

A software license is a legally enforceable contract between the manufacturer and the end-user relating to software usage and delivery. The license stipulates the responsibilities of the end-user entering into the agreement and imposes limits on the use of software. The terms and conditions of the Software licensing typically incorporates “fair use of the software, the limitations of liability, warranties and disclaimers and protections if the software or its use infringes on the IPRs of others”. 

I. Types of a Software license

1. Proprietary software

It consists of software, licensed only under specific terms by the copyright holder. You may use the program but you are not authorized to alter the software or transfer the software to anyone. The software’s original source code is not accessible, which implies that you cannot see the actual code. It is thus, also known as closed-source software.[1]

Proprietary software can be further classified into three forms

  1. Original Equipment Manufacturers(OEM): The software comes attached to the hardware and is not transferable.
  2. Volume Licensing: This kind of license facilitates purchase of numerous licenses by a single Agreement.
  3. Full Packaged Product(FPP): It is ready to use license and is developed for mass market that are available for purchase at retail stores. This type of license is transferable but can be used on a single computer.

2. Open-source software[2]

In Open-source software the source code is open. This implies that users may glance at how the software was made by using programming languages. A typical open-source software licence grants users the ability to change and share the software.

3. Shareware[3]

This kind of software is “freely distributed to users on a trial basis”. There’s a time limitation inherent in the software and would be deactivated when the time period is finished. You have to pay for the software to use it after the time limit.

Some examples of freeware software are Adobe acrobat 8 professional, Winzip.

Shareware are of following kinds:

  1. Adware– Contains advertisements to generate profits for the developers
  2. Donationware – payment is voluntary
  3. Nagware – keeps reminding the users to buy the license or the software
  4. Freemium – free for non-premium uses but have to pay for premium features
  5. Demoware – demonstration version. It is additionally classified as: 1. Crippleware– several features are deactivated within a time limit. 2. Trialware – all features are accessible within time-limit

4. Freeware

This kind of software is “available free of cost”. It allows users to download and use freeware from the internet. This software “doesn’t provide any freedom of modifying, sharing and studying the program” like in open-source software. Freeware software is closed source. [4]

Some examples are Adobe PDF, yahoo messenger, Google Talk.

5. Bespoke Software License

Bespoke Software is customised software which is designed to satisfy specific needs of the user. This software is designed for specialized requirements of user and is not developed for mass use.

II. What Software License Agreements Cover[5]

The software license Agreements is divided into 4 main sections as follows:

  • General information

This section deals with the details such as date of enforceability of the Agreement, duration of the license Agreement, and the type of agreement.

  • Parties involved

This section defines parties to the contract. The details of parties such as full name and their address and other contact information are mentioned.

  • Terms of the agreement

This section describes terms and conditions of the software license Agreement.

  • Fine details

This section describes any particulars that aren’t enclosed in the previous sections of the license agreement.

III. The Software license clauses include the following provisions-

  • Grant of license- It stipulates for the licensor to grant a “non-exclusive, non-transferable, revocable license” to the licensee. It also states the liability of licensee in case of misuse of the software.
  • The scope of license- This provision marks out how the licensee will access the software i.e. the terms and conditions upon which grand of the license is conditioned.
  • Maintenance and support – This clause states that the Licensor shall from time to time provide maintenance and support to the Licensee.
  • Confidentiality clause- It shall be the duty of the licensee to maintain the confidentiality of the software licensed and shall not disclose any information related to the software with third-party. The licensee shall not exploit the Software for any purpose not explicitly authorized under the Agreement.
  • Software Updates- Licensee shall be entitled from time to time to receive updates and improvements
  • Indemnity clause- The provision specifies the condition where the licensee is obligated to indemnify the licensor. These conditions maybe-
    • contravene of terms of the Agreement
    • violation of applicable laws
    • misuse of the Service
    • Infringement of Licensor’s Privacy Policy.

The licensor is also obligated to indemnify the licensee and defend him in some sort of liability or damages that might result from disputes when a third party claims that the usage of the software by the licensee infringes the copyright of that third party in the software in question. The indemnification, nevertheless, is subject to the licensee’s fulfilment of certain provisions that must be explicitly mentioned.

  • Software Warranties- This clause provides limited warranties by the licensor about the quality of the software licensed. The software licensor usually guarantees the licensed software will comply substantially with the specification in the appropriate software documentation for a reasonable period defined as a “warranty period”. Software warranties are generally subject to limitations for software problems not triggered by device malfunctions or anything outside the jurisdiction of the licensor.
  • Payment clause- The provision explicitly addresses the payment of fees for the service offered by the licensor.
  • Transfers- This clause restricts the right of licensee to sell, rent, lease, or transfer or assign any of his rights or obligation to any third party under this agreement.
  • Intellectual Property Rights- The licensor shall include clauses in the Agreement to safeguard IPR. The agreement must grant the license to use the IP to the licensee according to certain conditions. All rights, including title, proprietary rights and IPRs, to the Service, its contents or any Documents given therein shall remain the sole property of the Licensor. The Licensee shall not use the Licensor’s IPRs without the Licensor’s prior, written consent. Any violation of this provision shall be considered as a material violation of this Agreement.
  • Permitted copying- This clause states the number of permitted copy the licensee can create in exceptional circumstances, like for the purpose of backup or when mandated by statutory legislation.
  • Permitted disclosure- The licensor specify certain circumstances under which the licensee can waive off the confidentiality requirement of the software license.
  • Miscellaneous clause – This clause wraps the lingering matters which aren’t cover-up in the aforementioned clauses and are important for a fair contract.

Authored by: Komal Chowbey & Saket Anand

  1. Komal Chowbey – BBA LLB, Faculty of Law, Banasthali Vidyapith.
  2. Saket Anand – BBA LLB, University Institute of Legal Studies, Chandigarh University.

[1] Software Licensing: Proprietary and Free and Open-Source Licenses, (18 July 2020 4:00 PM), Available Here

[2]Open Source, Freeware, and Shareware Software, (20 July 2020 10:00 AM), Available Here

[3] Ibid.

[4] Ibid.

[5] The Basics of Software License Agreements, (22 July 2020 8:00 PM), Available Here


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Author: Komal Chowbey and Saket Anand

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