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Software Licensing
Industries
Organizations developing software products must carefully consider how to license their creations to partners, customers, and internal teams. Effective software license management is vital for a successful product launch.
This comprehensive guide covers essential aspects of software licensing management, with insights into how LicenseSpring, a modern license manager, supports hundreds of software and hardware products.
Software vendors develop products by writing and then usually compiling source code into a Software binary, which is then distributed. In nearly all cases, the vendor does not want to distribute the source code (their secret sauce). Instead, they will license their software for use by its intended audience. Specifically, software licensing governs the agreement between the vendor (owner of the software), and the user of the software, which specifies a few important details, namely:
Rights and limitations on how the the software title may be used
Rights to Modify the functionality of the software product.
Whether or not the licensee is allowed to distribute the software they have been granted a license for.
A very important part of the software license is determining who retains the IP rights of the product, and any derivative works
Vendors can be explicit in the software licenses they grant whether there are any warrantied, disclaimers, and liability.
Most software is expected to be maintained and updated from time to time, as is the licensing terms (at least for active projects).
Read our blog post to learn how to license your software.
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There are many reasons why an ISV, or the software department should carefully consider how they license their software and hardware products. Here are some of the main reasons:
It's not unheard of organizations failing to meet legal obligations or losing IP rights due to sloppy software license management. Failing to manage licenses correctly can lead to legal disputes, infringement claims, and penalties.
Setting up guard rails around software licenses that are issued can help ensure users are paying for the software they use according to their ToS.
By analyzing usage patterns (even as simple as counting the number of different software license models used) can help a business better understand what business model works best for them, and how to further grow profitability.
Straightforward, transparent licensing practices that adheres to or improves on industry norms can help build trust with existing and prospective customers.
Whether you decide to license your software using an open-source or closed source license, will depend on a few factors, but generally differ in the rights and freedoms providing the use, modification and distribution of software:
Open-source software grants users access to the software's source code, while commercial software typically does not.
Open source, although might be sponsored by an organization, is typically built by a community, which is usually not paid for their work. Commercial software has a controlled development process, usually limiting external contributions.
Open-source software is typically free to modify and redistribute provided credit is referenced. Commercial software licensing often places strict restrictions on modification and redistribution rights, or will have separate licenses for each use-case (end-user license vs an OEM software license as an example).
Although there are a lot more nuances between software licensing that is open sourced vs closed source, LicenseSpring focuses primarily with enabling software vendors to implement commercial software license models within the products they distribute.
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Here are some of the most common types of software licenses that ISVs employ when distributing software products:
A perpetual license is a type of software license that grants users the right to use a specific version of a software product indefinitely, without the need for ongoing subscription or renewal fees.
A time-limited license is a type of software license that grants users the right to use a software product for a specific duration or period.
Unlike perpetual licenses that provide indefinite usage rights, time-limited licenses have an expiration date or a predefined time period during which the software can be accessed and used.
LicenseSpring provides support for both start dates and end dates in managing software licenses. This allows for precise control over the validity period of a software license, dictating when it becomes active and when it expires.
Device node-locking restricts the use of software or digital content to specific devices, preventing unauthorized copying or sharing. License Node-Locking refers to binding the licenses a unique and persistent device identifier, ensuring that the software or content can only be used on authorized devices.
All non-floating licenses within LicenseSpring have fields "total activations" and "max activations", which are used to parametrize node-locking to licenses.
You may use our device fingerprinting solution, or override it with your unique identifier. You can learn more about what goes into generating a unique and a persistent computer ID here.
Also sometimes referred to as a network license or a concurrent license, floating license is a software licensing model that controls simultaneous usage of a license. This is common in certain industries or scenarios, such as Database access, where X users from a given company can access at the same time.
A trial license is one of the most common types of software licenses, as it grants the user the right to temporarily evaluate a software product before deciding on procuring a commercial software license.
These software licenses provide temporary access to the full functionality of the software, enabling users to explore its features and capabilities.
User-based software licensing is a licensing model where software licenses are assigned to a specific person, allowing a specific user to install and use the same software license on multiple devices they own or use. This is usually on contrast with License Keys, which are usually bound only to a device, or an instance.
User-based software licensing is a licensing model where software licenses are assigned to a specific person, allowing a specific user to install and use the same software license on multiple devices they own or use. This is usually on contrast with License Keys, which are usually bound only to a device, or an instance.
The per-use or consumption license model is a software licensing model where users are charged based on the actual usage or consumption of the software or digital service.
Instead of purchasing a fixed license for a specific period or number of users or devices, the cost is determined by the amount of resources consumed or the extent of usage.
Subscription licensing is a software licensing model where users pay a recurring fee, typically on a monthly or annual basis, to access and use the software.
Instead of a one-time purchase, users maintain an ongoing subscription to continue using the software and receive updates and technical support.
LicenseSpring makes a clear distinction between a time-limited license and a subscription license. (tl;dr, it has to do with where the source of truth lies).
A site license is a type of software license that grants permission to an organization or institution to use a software product across multiple computers or devices within a specific location or site.
Instead of licensing the software on a per-user or per-device basis, a site license provides a broader authorization for all eligible users within a designated site.
License features refer to specific functionalities or capabilities that are included or restricted based on the terms of a software license.
The activation feature is a straightforward functionality present in a license. It can be either enabled or disabled, indicating whether the license supports activation or not.
Consumption feature licensing enables metered usage of a specific feature within an application. This licensing model proves useful when the vendor intends to restrict the number of times a particular function is executed or a specific report is generated.
LicenseSpring was built to help implement and enforce all common commercial types of software licenses, regardless of the development environment (You can find a list of the supported SDKs in our documentation). 
All of the Software licensing models mentioned above can easily be used to monetize your product.
Here is how you can get started:
First, submit a request to open an account. We will review your request and contact you for next steps.
If you are approved, We will send an invite to a demo account of the Vendor Platform.
A typical vendor will need to perform 3 steps to start to manage their software licenses effectively.
Define your product, and configure the software license policies within the LicenseSpring platform
Add our SDK into your codebase, or make calls directly to our webhooks. This allows your product to activate, deactivate, and check the status of a license within your applications at the appropriate time.
Integrate with third-party e-commerce and fulfillment platforms, or use our Management API to programmatically create customers/orders/licenses. Please visit our documentation for more information and a complete guide on getting started with us.
Within LicenseSpring, you can create a base product, and define all the different components that can be unlocked depending on which entitlements have been granted for a given license.
There are 2 main types of product features that can be licensed with LicenseSpring: Activation Licenses, and Consumption Licenses, where the vendor is looking to meter the usage of a specific component. Our customers who find it the most helpful are often software developers and publishers with modular applications, apps with many different plugins and extensions, or even games with DLC and microtransactions. You can even set expiry periods for features, if you only wanted customers to evaluate an upgraded product, for instance. As of the time of this writing, we also added Metadata to individual features. That means a vendor can push custom JSON for any given feature, for any given license.
Finally, LicenseSpring also added in 2023 the ability to float individual licenses. For example, a Vendor can now configure a license to allow only a subset of users or node-locked devices to use specific features.
On our platform, a License key only serves for Authorization, and does not contain any particular data on the entitlements. As such, a license can be reconfigured, even after it is in use. For example, The Vendor can change the number of maximum activations for a license, and add or remove features. A License can be reset, disabled, or re-enabled at any time (unless it was deleted).
One main Caveat: once a license is created, the type of a license cannot be changed (for example from perpetual to consumption-based).
LicenseSpring is NOT an anti-piracy service (at least not at the time of this writing). We focused on making it easy for vendors to implement and manage commercial software licensing models within the products they distribute. With that being said, the LicenseSpring service includes several capabilities that can be used to help detect as well as prevent unauthorized usage of a license.
First of all, every license is node-locked by default, meaning that it can only be used on a defined number of computers. Once the maximum activations is reached for a given license, it cannot be activated on another machine until it has been previously deactivated. The vendor can also elect to add a limit on the number of device transfers allowed. That way, even if a license key made its way to an unauthorized user and there were available activations, they would not be able to use that given license key. Preventing device transfers comes in especially handy for offline license activations. At a very minimum, if a vendor notices a given license having a high transfer count, it could indicate unauthorized usage of that license and could trigger corrective actions, such as an audit. When a license is activated, a fingerprint of the computer is used to uniquely identify it. If the same license key is shared, it will use up an activation for each new device, until the maximum number of activations has been reached.
