Overview of a Software License Agreement

What is a Software License Agreement?

A Software License Agreement is the software owner’s express permission for another party to use the software within an agreed scope.

A Software License Agreement is a license and not an assignment; therefore, the copyright ownership in the software is not being transferred.

It sets out how the licensee can use the software and provides information about existing licenses that the software owner may have issued to other parties.

How does a Software License Agreement work?

A Software License Agreement works by providing a license key to the valid purchaser, also called a licensee. When a user buys the product, they will be provided with a license key which also has the details about the number of copies he/she can use from that license. Most of the software has either yearly subscriptions or one-time fees. In a yearly subscription, a user has to pay a fixed amount yearly in order to run the software however lifetime subscription is one-time activation, there is no need to buy or renew the software every year.

What is the difference between EULA and Software License Agreement?

EULA stands for End User License Agreement, basically an agreement between a company that provides ready to use applications where many users could be using the software on a daily basis whereas a Software License Agreement is used for business to business for a limited number of users.

Why is a Software License Agreement important?

Having an agreement for licensing software defines the fair use of the software. It gives a non-transferable right to the end-user to use the software. 3 main importance of this agreement are:

1.Protection from Software Abuse: After developing any software one of the main responsibilities of a software developer is to create an agreement that will protect the rights to use that software and also protects from abuses. If the software is not protected, then others can replicate the same design or add some modifications and can market or sell under their own brand name.

2.Help License the Software: a well-drafted Software License Agreement helps a developer or an agency to license the software and sell separate copies of that license. They can do so with a recurring yearly subscription or with a one-time purchase. Creating a license and selling software are two different things. Creating a license is useful when you want to sell many licenses of single software but selling a software means you’re selling the entire rights associated with that software.

3.Terminate License in Case of Misuse: after selling a software license to the customer, if a developer found any kind of misuse with the current subscription they can void or terminate the subscription with the use of fair use policy under the Software License Agreement.


A Software License Agreement is an agreement between an agency and its customers for the use of the software. With proper license or rights, an agency can re-distribute the software to their customer by safeguarding software fair use policy.

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