Software license

Overview
A software license is a contract between a software publisher and a consumer who uses the software (end user). A software license grants an end user permission to use one or more copies of software in ways which would otherwise be prohibited by law. Such a license is required if the end user wishes to make use of a copy of the software, but where such a use would constitute copyright infringement of the software publisher's exclusive rights under copyright law. In effect, the software license acts as a promise from the software publisher to not sue the end user for engaging in activities that would normally be considered exclusive rights belonging to the software publisher.

Proprietary vs. Open Source
Software licenses generally fit into one of two distinct categories: proprietary licenses and open source licenses. The features that distinguish the two forms of licensing are significant in terms of the effect they have on the end user's rights.

Proprietary Software Licenses
The hallmark of proprietary software licenses is that the software publisher grants a license to use one or more copies of software, but that ownership of those copies remains with the software publisher (hence use of the term "proprietary"). One consequence of this feature of proprietary software licenses is that virtually all rights regarding the software are reserved by the software publisher. Only a very limited set of well-defined rights are conceded to the end user. As such, it is typical of proprietary software license to include many terms which specifically prohibit certain uses of the software, often including uses which would otherwise be allowed under copyright law.

The most significant effect of this form of licensing is that, if ownership of the software remains with the software publisher, then the end user must accept the software license. In other words, without acceptance of the license, the end user may not use the software at all.

One example of such a proprietary software license is the license for Microsoft Windows. As is usually the case with proprietary software licenses, this license contains an extensive list of activities which are prohibited, such as: reverse engineering, simultaneous use of the software by multiple users, and publication of benchmarks or performance tests.

Open Source Licenses
With open source licenses, in contrast to proprietary software licenses, ownership of a particular copy of the software does not remain with the software publisher. Instead, ownership of the copy is transferred to the end user. As a result, the end user is, by default, afforded all rights granted by copyright law to the copy owner. Note that "copy owner" is not the same as "copyright owner". While ownership in a particular copy is transferred, ownership of the copyright remains with the software publisher. Additionally, open source software licenses typically grant to the end user extra rights, which would otherwise be reserved by the software publisher.

A primary consequence of the open source form of licensing is that acceptance of open source licenses is essentially optional -- the end-user may use the software without accepting the license. However, if the end-user wishes to exercise any of the additional rights granted by an open source license (such as the right to redistribute the software), then the end-user must accept, and be bound by, the software license.

An example of an open source license is the GNU General Public License (GPL). This license is aimed at giving the end-user significant permission, such as permission to redistribute, reverse engineer, or otherwise modify the software. These permissions are not entirely free of obligations for the end-user, however. The end-user must comply with certain terms if the end-user wishes to exercise these extra permissions granted by the GPL. For instance, any modifications made and redistributed by the end-user must include the source code for those modifications.

Other characteristics
In addition to granting rights and imposing restrictions on the use of software, software licenses typically contain provisions which allocate liability and responsibility between the parties entering into the license agreement. In enterprise and commercial software transactions these terms (such as limitations of liability, warranties and warranty disclaimers, and indemnity if the software infringes intellectual property rights of others) are often negotiated by attorneys specialized in software licensing. The legal field has seen the growth of this specialized practice area due to unique legal issues with software licenses, and the desire of software companies to protect assets which, if licensed improperly, could diminish their value.

Software licenses and copyright law
In the United States, Section 117 of the Copyright Act gives the owner of a particular copy of software the explicit right to use the software with a computer, even if use of the software with a computer requires the making of incidental copies or adaptations (acts which could otherwise potentially constitute copyright infringement). As such, the owner of a copy of computer software is legally entitled to use that copy of software. Hence, if the end-user of software is the owner of the respective copy, then the end-user may legally use the software without a license from the software publisher.

Accordingly, proprietary software licenses attempt to give software publishers more control over the way their software is used by keeping ownership of each copy of software with the software publisher. By doing so, section 117 does not apply to the end-user and the software publisher may then compel the end-user to accept all of the terms of the license agreement, many of which may be more restrictive than copyright law alone.

Points of contention
When considered in the context of mass-produced software sold at retail, there are significant problems with the proprietary form of software licenses. In the United States, the Uniform Commercial Code (UCC) regulates most commercial transactions including the sale of goods. Retail sales of software have been repeatedly deemed by courts in the United States to be a normal sale of goods within the meaning of the UCC. Accordingly, as with the sale of all types of goods, ownership of a copy of software transfers to the buyer in a retail transaction. Consequently, the end-user of the software is the owner of the copy and, pursuant to section 117 of the Copyright Act, a license is not technically required in order for the end-user to use the software with a computer.

However, virtually all mass-produced software sold at retail includes a clickwrap license which the end-user is forced to accept before the software can be installed or otherwise used with a computer. Courts in the United States have found that an end-user of software who voluntarily accepts such a clickwrap license is legally bound to abide by the terms of the software license agreement, despite the fact that the end-user is the owner of the copy. Furthermore, contrary to the findings of numerous courts in the United States, proprietary licenses typically still assert that the software is specifically not sold.

The law is not clear on what an end-user's rights are when confronted by a clickwrap or other type of proprietary software license agreement on a copy of software owned by the end-user. Clearly the end-user will be bound by any agreements he/she voluntarily enters into. What is not clear is what, if any, rights the end-user retains if the terms of the license agreement are rejected. In terms of open source licenses, the end-user clearly retains the right to use the software if the license is rejected, since ownership of the software is not disputed. With proprietary licenses, where the software publisher claims to retain ownership of the software, this is an area of ongoing dispute.