Indian Institute of Information Technology - Allahabad


IIITA's E-Magazine




Software License: An Introduction

Part I


Vishnu Kesarwani

MS in Cyber Law and Information Security (2007-09)

Indian Institute of Information Technology, Allahabad


Moving towards the click world the concept of software piracy has shaken the IT world and has emerged the need of software licensing to protect the originality and the right of   owner.  This paper is an effort to bring forth the concept of what software licensing is and to develop an understanding to various types of software license.


A software license is a legally recognized agreement that governs the usage or redistribution of copyright protected software between the license issuer (software publisher) and the license receiver (end user). Sometimes it is also referred as the End User License Agreement (EULA). Through this some restrictions are placed on the end user in relation to the software. Restrictions can include installation of software more than the license given to user, duplication and modification of software, editing the code, reverse engineering etc.


This legal instrument can be on paper but it is most often imbedded in the software itself as part of the installation process. If the user does not agree to the terms and conditions of the software license, (S)he can click on “Disagree” or “No” button and come back from installation process.


Software License and Copyright


The copyright concerns with protecting the human intellect and provides an exclusive right to the owner of the work. Copyright provides the owner of software to reproduce the work, to issue copies of the work to public, to sell or give on hire the software, to do any derivative work, to modify the software and so on. Copyright owner can give these rights to any other person through assignment or license and can take any consideration from that person. The copyright holder can give the assignment or license for a certain period of time, or for a particular country, region or throughout the world. Through these copyright holder protects his right and makes profit and also provides benefit to the world through his work. Thus software license is one of the mean through which the owner’s right gets protection and copyright enhanced the boundary of such intellectual property.


Types of Software License


Every software contains a license agreement and license agreement contains various terms and conditions as per the legal requirements of the concerned country. But software license can be classified into following three categories:


1. Based on the mode of contract


We can categorize the software license based on its mode to enter into a contract. We can enter into a contract in two ways:


1.1 Negotiable


It is a traditional form of contract in which one party offers the other party for a contract to sell or buy software and other party accept this offer and communication it to the first party and thus, both parties make a free consent to enter into the contract for a valid consideration. In this mode of contract, both parties have the same possibility to negotiate for the terms and conditions and consideration of the contract. Thus, both parties come into a valid contract.


1.2 Non-negotiable


Non-negotiable contract is also known as Standard Form of Contract in which a dominant party sales their goods or services on a predefined terms and conditions and consideration. Software companies cannot negotiate to each end-user of their software. So, they launch their software for sell into the market on predefined terms and conditions and a consideration and the end-user bind to buy the software on the said terms and conditions and price. There are its two categories:


1.2.1 Shrink-wrap License


Shrink-wrap license is a software license in which license agreement in printed on or enclose within the software package and shrink-wrapped with a transparent plastic that is accessible when the customer purchases it. The terms of license agreement are printed on a paper included inside the plastic sealed box of the software package. When the end-user breaks the plastic seal which is tightly fits the software, it regards that (s)he has given his or her consent to the licensing terms and conditions.


The lawfulness of shrink-wrap license is unclear. In ProCD v. Zeidenberg, the court held that “shrink-wrap licenses are enforceable unless their terms are objectionable on grounds applicable to contracts in general (for example, if they violate a rule of positive law, or if they are unconscionable).” But this case does not solve many questions regarding shrink-wrap license. It is submitted that the court erred in three significant respects:

(a) It failed to make the requirement of notice as a precondition to enforce the contract;

(b) It didn’t to take into account the intangible nature of the subject matter of the case; and

(c) It may have given excessive control to the manufacturer of software.

In another case, Klocek v. Gateway, Inc., the court decided that shrink-wrap licenses are unenforceable. But in Brower v. Gateway 2000, Inc. the court found that a shrink-wrap contract formed when the plaintiffs retained the software form longer than the 30 day “approve or return” period. But certain contract terms relating to the arbitration provision at issue were not enforceable.



1.2.2 Click-wrap License


Click-wrap license is, basically, internet based agreement which requires the consent of the party by the way of clicking the button “I accept”, “I agree” or “OK” on the predefined terms and conditions. This can be found during installation of any software downloaded from the Internet.


The terms and conditions of license or service don’t always appear on the same window or webpage but these are always accessible to the end-user before acceptance, such as through scroll bar end-user can access the whole terms and condition during the installation of software or through clicking on the hyperlink dedicated to terms and conditions embedded in the webpage of the software. If the end-user wants to reject these, (s)he can click on “Cancel” button.


It is notable that though courts have held that click-wrap licenses are enforceable but every terms and conditions of click-wrap license is not enforceable. It must meet the enforceability criteria of contract law.


2. Based on the relationship between the parties


Another type of software license is based on the relationship between the parties. This type includes following licenses:


2.1 Developer-Publisher License Agreement


This license agreement has been done between the developer and publisher of the software. For this license, negotiation between them is very important. The terms and conditions of this license include clauses of royalty, geographical scope and further development of software.


2.2 Publisher-Distributor License Agreement


As above, this license agreement has been done between the publisher and distributor of the software. The terms and conditions include the clauses for distribution of the software in domestic country and foreign country or may also include a region. Mostly parties put this clause for maximizing the profit and market penetration. License may provide exclusive right to distributor regarding the software.


3. Based on freedom


This categorization grants the end-user freedom regarding the software that includes right to use, modify, redistribute, improve the software, right to do reverse engineering on the software and others rights also.


3.1 Proprietary Software License


Proprietary software is a type of software in which end-user has the right to use it only and has not been gotten source code of the software. So the end-user has no right to read, modify and redistribute its source code. Thus computer software remains one’s legal property and one has all rights regarding the software. Due to this reason, it can also be called as closed-source software. It usually can be distributed for a fee or at no cost. In proprietary software license, license issuer grants a license to end user to use one or more copies of software, but the ownership of those said copies remains with the copyright holder of that software. Consequently, all rights regarding the software are reserved to the copyright holder and only limited but well defined rights regarding the software are provided to the end-user.


(…to be continued in next issue)