5 Types of Software Licenses to Know

Shilpa Prabhudesai

In this software-driven world, it is essential to understand the nature and implications of software licenses, irrespective of your role. Software licenses define how software is used, modified, or distributed. Software licenses outline users’ rights and responsibilities while protecting the creator’s intellectual property.

One of an IT manager’s key responsibilities is managing software licenses across the organization. Managing different software licenses is a daunting task, and mismanagement can lead to compliance issues, legal troubles, and unexpected costs.

In this article, we explore the five major types of software licenses. This guide will clarify the topic of whether you’re selecting a license for your open-source project or vetting third-party software for enterprise deployment.

What is a Software License?

A software license is a legally binding agreement that dictates how to use and share software.

A software license is a rulebook that governs software creators and users to ensure compliance with copyright laws and usage rights.

Every software has copyrights, and users should have permission to access the software. These software permissions prevent users from breaching software copyrights. The software license documents outline these precise permissions and establish clear guidelines for the software’s proper use.

A software license contains terms and conditions covering various aspects, including:

• Acceptable use,
• Limitations of liability,
• Warranties, and
• Disclaimers.

Like a comprehensive roadmap, a software license guides users and developers on what they can and cannot do with the software.

For example, the General Public License (GPL) is used for open-source software projects like WordPress. GPL allows users to use, modify, and distribute the software. It ensures that any changes made to the original software are also open-source. This means that if a new version of GPL-licensed software is created, it should be available under the same license terms.

Software licenses are often restrictive, limiting users’ access to and use of the software. They are also conditional, such as offering a specific feature for free and more advanced functions for a licensing fee.

Why are Software Licenses Important?

Software licenses are essential for several reasons as follows:

• Legal Protection: A software license outlines the terms and conditions under which the software can be used. It also defines the rights and responsibilities of the software creator and user. Software licenses protect the creator’s intellectual property rights by preventing unauthorized access, use, distribution, and modification.
• Warranty and Liability: The disclaimers of warranties and limitations of liability in the software license clarify that the software is provided “as is,” and the developer is not responsible in case its use causes any damages.
• Compliance and Accountability: Organizations and users comply with legal and ethical standards using a software license. Legal issues related to unauthorized use and distribution of software are taken care of, and accountability is established.
• Long-Term Cost Savings: Software licenses only have an initial cost of purchase. Otherwise, it often saves money in the long run by preventing issues such as legal consequences, security breach recovery, and software instability.
• Technical Support: Licensed software usually provides customer support or technical assistance that reduces downtime and eases troubleshooting, improving the software’s operational efficiency.

Software licenses benefit all parties that create and use the software. They provide creators with a clear legal recourse in case users don’t comply with the licensing agreements. Software licenses also define the extent to which a user can operate, access, and modify the source code.

Software Licensing Explained – How Do They Work?

A software license is a contract between the software developer or current provider and the user organization or users. A software license states the rights of the developer and user of the software and defines how the software can be used and how it will be paid for.

A software license also defines the terms and conditions (T&C) to which all users must agree when acquiring the software. The T&C helps with the fair use of software, limitations of liability, disclaimers, and warranties.

A software license also includes specifications like:

• How many times can the software be downloaded?
• What will the software cost?
• What level of access will users have to the software’s source code?

Software comes with a license, product key, and permit. The key identifies and verifies the specific version of the software and is used to activate the software on individual computers or a set of computers.

Recently, software licenses include a cloud-based subscription model in which a software as a service (SaaS) provider runs its software on its systems, and a predefined number of users are provided access through a web interface.

Types of Software Licenses

The ability of an organization to provide different types of software licensing models based on customer requirements gives it an advantage that will ultimately resonate with the customer.

Here are some of the most common software license types available:

1. Public Domain License

A public domain license implies the software is not owned by anyone and can be used by the public without restrictions. The creator of this software waives all rights, and it is free to use, distribute, modify, and even commercialize.

It is the most open form of license software may have. Software with a public domain license is often open source and allows users to adjust or build on top of the software’s code.

Key features of the public license are:

• There are no restrictions on software use, copying, modification, or distribution.
• It can be embedded in proprietary software.
• Public license does not require attribution (depending on specific implementations).

Pros

• This license provides maximum freedom for developers and users.
• It promotes innovation and rapid development.
• Public licenses are ideal for educational, academic, and nonprofit settings.

Cons

• There are no legal warranties or liabilities for the software.
• It has no obligation to contribute improvements.
• Public license can be appropriated into proprietary software without giving back to the community.

Common Examples of Public Licenses

• Unlicense
• Creative Commons Zero (CC0) (though more common in content than code)
• GIMP, an open-source graphics editing program

Best For: A public license is best for developers who do not care about recognition or commercial return and want their work to benefit the public freely.

2. Permissive License

Software with permissive licenses allows users to use, modify, and redistribute code with minimal restrictions. Permissive licenses often include basic requirements such as attribution and license inclusion in derivative works.

The license may have specific conditions for intellectual property protection. Users are required to retain copyright information about the licensed software in their distribution.

Some of the key features of a permissive license are:

• It allows commercial use and closed-source derivations.
• Permissive license requires attribution to the original author.
• It may include patent rights (e.g., Apache 2.0).

Pros

• License flexibility encourages widespread adoption.
• It is compatible with proprietary and open-source models.
• Permissive license maintains a balance between user freedom and creator recognition.

Cons

• This license does not require contributions back to the original project.
• Companies can build on the code and keep improvements private.

Common Examples of Permissive License

• MIT License
• Apache License 2.0
• BSD License (2-clause, 3-clause)

Best For: A permissive license is suitable for developers who want to promote broad adoption, allow integration with proprietary software, and receive credit for their work.

3. Copyleft License

A copyleft license is a type of open-source license. With this license, derivative works are distributed under the same license terms as the original. As a result, a recursive loop is created where all improvements are free and open.

Here are the key features of the copyleft license:

• Strong copyleft licenses (e.g., GPL) mandate full disclosure of source code in derivatives.
• The license requires license continuity in all redistributed versions.
• AGPL, a type of copyleft license, extends requirements to network use (SaaS).

Pros

• Copyleft license ensures software freedom across generations.
• It encourages community contribution and improvement.
• The license prevents proprietary hijacking of open-source projects.

Cons

• The copyleft license is incompatible with many commercial software licenses.
• It may discourage adoption in commercial environments.
• Copyleft license poses legal complexity for corporate compliance teams.

Common Examples of Copyleft License

• GNU General Public License (GPL) v2/v3
• Affero General Public License (AGPL)
• Mozilla Public License (MPL) (though slightly more permissive)

Best For: The copyleft license suits developers and organizations committed to the free software philosophy and open collaboration.

4. Proprietary (Commercial) License

Also called commercial licenses, proprietary software licenses are restrictive licenses that the software creator grants to end users, typically through an End-User License Agreement (EULA). Proprietary licenses prohibit redistribution and reverse engineering and often impose limitations on installation and use, usually requiring payment.

Proprietary licenses reserve all rights of a developer or publisher upon the release of the software and protect the developer’s interests more than any other license type.

The key features of the proprietary license are as follows:

• A proprietary license is granted, not the software ownership.
• The software’s source code is not made available under a proprietary license.
• Its usage is often tied to specific machines, users, or timeframes.

Pros

• A proprietary license creates a continuous revenue stream for software developers.
• It usually includes customer support, regular updates, and maintenance.
• The license can be tailored to specific industries with niche functionality.

Cons

• Proprietary licenses have expensive license fees and renewal costs.
• Its lack of transparency and control for the user makes it less sought after.
• There is a vendor lock-in risk associated with this license.

Common Examples of Proprietary Licenses

• Microsoft Windows
• Adobe Creative Suite
• AutoCAD

Best For: Proprietary licenses are standard in enterprise software, consumer applications, and high-performance tools where development, security, and support are tightly controlled.

5. GNU Lesser General Public License (LGPL)

The GNU Lesser General Public License (LGPL) is a software license released by the Free Software Foundation. It is an offshoot of the GNU General Public License (GPL) that allows developers to use open-source libraries within their software without releasing the source code they used to create their components.

LGPL is a more permissive form of the GPL that allows linking to proprietary software.

Key features of the LGPL are as follows:

• The LGPL allows more freedom in how the library is used with other software.
• It ensures that any modifications to the library remain free and open-source.
• It helps maintain the proprietary status of the application through the use of dynamic linking, separating the application and the library.
• Users have the freedom to study, run, share, and modify the library itself.

Pros

• The LGPL allows linking with proprietary software, thus making it suitable for commercial projects that are not fully open-source.
• Only modifications to the library itself need to be licensed under LGPL.
• It balances the freedom offered by the GPL and the flexibility needed for commercial adoption.
• The LGPL provides patent grants, protecting users from potential patent infringement lawsuits when using the library.

Cons

• The LGPL uses complex terminology specific to certain programming concepts (header files and linking), which ordinary users may not understand.
• The LGPL is not compatible with the GPLv2.
• It requires users to release changes to the LGPL-licensed library if modified.
• It is sometimes perceived as a “weaker” copyleft license, and may be assumed to dilute the principles of free software.

Common Examples of LGPL

• Qt Framework
• GNU C Library
• ImageJ
• 7-Zip

Best For: The LGPL is best suited for software libraries intended for use by a wide range of programs, including free and proprietary software.

Best Practices for Developers

Here are some of the best practices developers should follow related to software licensing:

1. Understand Your Goals: Evaluate what you are trying to do. Are you trying to gain adoption, ensure freedom, or monetize your code? This should be done so that your licensing choices align with your objectives.
2. Don’t Mix Incompatible Licenses: Check if some licenses, like GPL and Apache 2.0, are incompatible when combined in one project.
3. Always Include a LICENSE File: Open-source projects should always have it to avoid legal ambiguity.
4. Use SPDX License Identifiers: Use standard identifiers like MIT, GPL, etc., for clarity and automation.
5. Consult Legal Advice for Commercial Projects: If your software is going commercial or integrating with third-party tools, get your licenses legally reviewed.

Conclusion

Every developer should have knowledge of software licensing. It is a foundation for how software is used, distributed, and monetized. Licenses offer a unique balance between freedom and control. Knowing the difference between various licenses makes it easier to control your software usage and distribution.

By understanding the five types of licenses discussed in this article, developers and organizations can make informed decisions that align with their technical, ethical, and business objectives while respecting creators’ and users’ rights.