Software Licencing: What Should You Really Know? (Part 1)

by Scott Lewis

Part 1 of 3

I have written about software licensing many times in the past and I continue to work with companies that simply don’t understand the software rules and the cost associated with violating these rules. Software companies are making it much harder to utilize illegally purchased software or use the software in a manner that is not in compliance with the EULA (end user licensing agreement). Some of the things we are going to discuss in this article are simple software licensing basics, including the Business Software Alliance, or the software police, and some of the different software models including SPLA (service provider licensing agreement), which is important to anyone using the cloud.

Software basics start with a simple statement that surprisingly most people don’t understand, and that is in most cases with commercially released software you don’t actually own the software. When you purchase the software you are actually purchasing a license to use the software, and that license is valid as long as you use it in a manner that is in compliance with the end user licensing agreement. There have been many court cases on this subject and the U.S. Court of Appeals ruled in the case of Verner v. Autodesk that people could not resell copies of Autodesk even if it had never been loaded in the past, because it is stated within the EULA that Autodesk reserved the right and did not allow for reselling of their product by a third party, so some of these rules can be very difficult and complex to understand.

How do you know if someone is illegally selling you software? In the case of Verner v. Autodesk the judges laid out a couple of points. “We hold today that a software user is a licensee rather than an owner of a copy where the copyright owner (1) specifies that the user is granted a license (2) significantly restricts the user’s ability to transfer the software; and (3) imposes notable use restrictions.” The Verner v. Autodesk case is one of hundreds that have been litigated over the years, and the one thing that seems to be consistent is that when you purchase a license, and you agree to the terms when the software is loading, you are entering into an enforceable contract agreement between yourself and the software company. Now that you know you are entering into a legally binding agreement, it is important that you read the terms or EULA when you are loading software if your intention is to use that software for something that might be in conflict with the agreement.

Other limitations that might be contained within the terms or EULA that could impact you if you are not aware that these items are limited or prohibited by your agreement. For example, where you can install the licensing could be restricted, and you can’t load an OEM (original equipment manufacturer) copy of the software in a cloud environment. Another example would be you can’t use an educational version of the software in a for profit company. Both of these scenarios would be considered out of compliance by the software manufacturers and prohibited by the agreement or EULA. Another example could be copying, modifying or redistributing of the software. In most cases software manufacturers do allow a single copy of the software to be made for disaster recovery purposes, however, copying the software for use on another computer would be considered out of compliance. Another example would be to decompile the software so the source code is viewable or to attempt to change the source code. Software companies go to great cost and effort to protect their intellectual property rights, and as similar to many other industries protection of that intellectual property is the key to their future financial success. If someone were to decompile the software and steal the intellectual property of the owner that would be considered a crime first and foremost, which is punishable with fines and jail time, but in most cases it is strictly prohibited by the agreement and the EULA.

One of the biggest debates in the technology software arena is the use of open source or free software. In a world full of security risks, identity theft, stolen data and the technology black market, I am always concerned about using a free piece of software on a corporate network. It doesn’t mean that the free utility is bad or doesn’t meet a specific goal or objective, but from a business perspective you have to ask what is the quality and value of free. How often does your business work for free? And if you are working for free should you have a realistic expectation that the quality and vetting of the product or service is of a level that is going to meet your standards? Then there is always the bottom line, which tells you that nothing in this world is truly free. You’re going to pay somewhere, somehow, and in the world of software you going to pay through continued software development. You might even put your business in what I call IT jail.  IT jail is where the business is afraid of change, because only one person holds the knowledge of how things work so there is fear of what happens if this person leaves. I know it sounds silly and is almost to the point of disbelief, but in my 35 plus years of being in the technology business I have seen it countless times.

There are some advantages to utilizing open source programs that should be evaluated when determining the methodology of how you are going to utilize your overall enterprise software package to grow and expand your business. One is that acquisition of the software is going to be free, which on the surface does lower your cost of acquisition. Secondly, due to it being open source, it is continuously being modified and upgraded due to the volume of developers that may choose to implement and use the core software. Open source software doesn’t have the traditional limitations as most commercial software. The advantage to this is that the software becomes very flexible and will interface too many other types of systems. One of the strongest points is that open source software is very adaptable to changing business requirements.

Scott Lewis is the President and CEO of Winning Technologies Group of Companies.  Scott has more than 30 years of experience in the technology industry and is a nationally recognized speaker and author on technology subjects. Scott has worked with large and small businesses to empower them to use technology to improve work processes, increase productivity, and reduce costs. Scott has designed thousands of systems for large, medium and small companies. Winning Technologies goal is to work with companies on the selection, implementation, management and support of technology resources. Learn more about Winning Technologies at www.winningtech.com or call 877-379-8279