For software manufacturers and the companies that utilize licensed software, software licensing is often a very complex matter with such a wide range of licenses perpetual, term and SaaS licenses are the most common structures in commercial use for licenses. However, within each of those commercial license structures there is a nearly infinite variety of purposes, scope, preconditions, restrictions and qualifications that may be stipulated in the license. The general concept behind any license is to grant a party a certain set of rights, such as a right to use the technology, but something less than ownership. While roughly 40 percent of programs around the world remain unlicensed, the topic has not become any less complicated. Software companies have to make sure that they are properly compensated for the solutions they offer and they can also make significant savings by effectively managing their license. Although licensing an innovation is important, forming a successful management strategy is equally important.

A Brief Overview on Software Licensing

Since software creation is considered creative work like music, movies, and books, it is shielded by copyright law under Title 17 of the US Code. One of the key exclusive rights that belongs to the copyright owner is the exclusive right to make derivatives of that work. Can the Licensee make changes to the software, are they permitted to make copies of the software and if so for what purpose?. The software license sets out the terms and conditions for the use and/or transfer of the software.

Critical components of the license are rights and restrictions permitted by the license, which may include the place of use for the software, the system or network that software is authorized to run on, for who’s use that software may be used (i.e., is it an internal license for the licensee’s internal use? or could they operate the software for others as a service bureau). If you are adding another’s product to your product you would be looking form an OEM Agreement, if you are looking to reseller another product you would want a Reseller License Agreement, if your software includes third party software or Open-Source software you need to make special arrangements to address those issues in your End User License Agreement (EULA) license. Some of the terms that drive those different licenses are legal, while others are more business-oriented considerations. So, in addition to the scope of the licenses authorized  the software license should clearly identify what software that license applies to, attest to the Licensor’s legal right to grant the license, state the warranty provisions, and acceptance conditions and remedies applicable to the warranty or acceptance terms.  That should be defined in the parties’ license agreement. For the most part, licensees are granted non-exclusive rights to use the program for a limited number of users where the sharing or copying of the protected software is prohibited. It should be noted that different forms of license are available, such as freeware, commercial software, free software, and shareware licenses.

The Role of Software Throughout the Years

When the first mainframe computers began to emerge in the ‘60s, the most important aspect of these devices was their hardware. In these times, software was either just a by-product or was self-programmed. In the last few decades, however, the roles have completely reversed. Today, computers are significantly smaller, yet they are far more powerful. Much of their functionality is implemented by the tiniest application, such as apps. In comparison to previous years, software today runs on as many systems as possible.

Software Licensing Can Help Cut Expenditures

Across the nation, nearly every business is supported by software one way or another. As previously mentioned, however, many companies use unlicensed software and this is in great part due to the complexity of the matter and the lack of knowledge and understanding of software licensing.

As a result of the lack of licensing, software publishers must endure significant losses in their sales. Consequently, software licensing is not just a topical matter for companies that produce software. This issue pertains to the companies that use software in their day-to-day business as well. While software management utilizing software asset management has become increasingly professionalized, it seems that the awareness of the software as a commodity has not become anchored. Most IT managers have issues in properly operating commercial software assets as well as software licenses, and this is a great disadvantage. For this reason, one could argue that the better software solutions and licensing models are understood, the more effectively they can be used. In most cases, this can save costs, since many companies end up paying for unnecessary licenses or because the scope of content in their licenses far exceeds their company’s needs.

Optimizing Software Licensing

Software licenses are far more than just licenses. A well-formulated license can set the tone for the functioning of the partnership between the licensor and licensee. The administration and management of the license are key to the success of the license. As a frame of reference, under the older perpetual software license structure many software publishers would charge 20% of the license fee for the annual support and update contract. The thought was that Software by its nature undergoes significant ongoing revisions and updates. Now that SaaS has become the favored software license structure those economics are now less visible, but the truth remain software is not constant and it is typically subject to significant ongoing refinement and revisions.

When it comes to establishing a sustainable yet functioning license management, the following aspects should be considered:

1. Getting Organized

Licenses should be collected in one central place. Software asset management and modern license management involve every area of a company, such as customer support, sales and marketing, and even production. Every area of the company uses a wide range of software that may involve a variety of different licenses. To facilitate the effectiveness of licensing management, every user should be given a role based on his or her access to the system.

2. Automation

When licenses are used in one area, an automated process should be developed. This could allow to-dos, like audit reporting, license renewals, and so forth. The purpose of automation is a simplification in management. With an effective software asset management system in place, alerts, functions, and messages can be easily automated.

3. Self-Management is Key

In many cases, the more access end-users have, the need for license management and technical support decreases. For instance, certain tasks can be delegated to different employees and other software users. Technically, this will accomplish two things simultaneously: the software company can increase user-friendliness as well as reduce the number of customer queries.

Software Licensing Can Be Simplified With Support of the Right Technology Licensing Attorney

Software licensing is incredibly varied and it can be very complex as well. When a company creates a software product, manufacturers often face the question of which licensing approach is best for them. With many options to choose from, establishing a well-functioning licensing agreement can be a challenge. Unfortunately, without the right approach, companies can accrue significant economic losses. With the right software asset management tools and relevant workflows, however, software manufacturing companies can save significantly on their costs.

If your company develops products or services and your intellectual property continues to grow, you can face an increased amount of business threats. In order to safeguard your investments, you will need the support of a skilled intellectual property attorney. For many years, Attorney John P. O’Brien has protected client interests in software licensing and he can provide the proficient representation your company needs.

Attorney O’Brien is highly skilled at addressing the many unique challenges that arise in the electronic sphere. With forward-thinking strategy, skilled negotiation, and many years of experience in litigation, Attorney John P. O’Brien can readily grasp complex technological innovations along with applicable laws. By working closely with his clients, Attorney O’Brien aims to better understand the business’ approach and their intended goals. With his strategic approach, your company can develop an effective way to compete in the marketplace. To schedule a complimentary consultation with Attorney John P. O’Brien, consider calling (732) 219-6641 today.