Software Licensing

Software is usually sold by license. This is different from most physical purchases, and more resembles a contract agreement than a normal sales transaction.

Intellectual Property

Software is intellectual propertythe same as music, movies, TV shows, and writing., which means that it is information which is owned. Intellectual property is considered different because it can be stolen by copying it, without removing the original. If you steal a book, the original owner will not have it in the possession any more. If you pirate software, the original owner still has his or her copy.

In order to protext the owners of intellectual property, licenses are considered necessary so as to carefully define the legal obligations on both sides. However, it can also have restrictions you may not have expected.

For example, when you buy a physical object--say, a peach--you become the owner of that peach. You can do anything you want with it. You can eat it, give it away, slice it up and share it with your friends, or use the pit to grow your own peach tree. You can do any of these things anywhere you like. This is normal and natural.

When you buy intellectual property, like computer software, however, you are not considered the owner. Instead, you are just using the software with the permission of the copyright holder. You usually do not have the right to do anything you want with it.


With software, common license terms include restrictions on installation (you may only install the application on a certain number of computers, usually just one, even if you own two computers), copying (you may or may not be allowed to make a backup copy of the original disc, and are most often prohibited from selling copies), and even resale (many software licenses forbid the resale of the software to a third party, meaning you can never sell or sometimes even give the software to another person).

All fo this is spelled out in the EULA (End User License Agreement). You may not recognize that name, but you have probably agreed to many, many EULAs. When you download software and install it, a screen will pop up which shows a long, legal contract; you must click on a button that is marked "I Agree" before you can continue. That is the EULA. Most people never read these, but they are considered legal contracts for which you are responsible. Although it is rare for anyone to pay a penalty for breaking such an agreement, they do sometimes have an effect on people.

In 2005, a man in Washington State bought several copies of software called AutoCAD, a 2-D and 3-D design application. Since the software was erased from the computers of the previous owner, and because the man who bought them had the original packaging and valid serial numbers, he believed he was the owner and could do whatever he liked. The man then tried to sell the software on eBay. Autodesk, the company that made the software, disagreed. They pointed out that the EULA forbade resale, and demanded that eBay remove the item from sale. eBay did so, and the man who had bought the software sued. A recent high court ruling decided in favor of the EULA terms.

Originally, EULAs were drafted for corporate use, where a company would buy a thousand copies of a program. Instead of making a thousand install disks and instruction books, the software maker gave just a few, and created a license agreement that told the purchaser how many machines they could install copies onto, and how the software could be used.

However, EULAs are begiing to be applied to all sorts of media today, including music, movies, and books--usually when they are sold digitally, but even sometimes when they are bought physically in stores. Take, for example, the EULA that Sony BMG included on at least some of their music CDs, which caused many customers to protest. Some of the terms if you copy the music onto your computer:

  • You can only install the music on a PC you own.
  • You can only listen to the music in the country of purchase; if you move to a new country, you must delete it.
  • You must install Sony's music management software onto your computer, which is the same kind of software used by some hackers to remote-control computers.
  • You may never transfer the music to another computer, even if it is with the sale of the original CD.
  • If you lose possession of the original CD--even if it is stolen or you declare bankruptcy--you must erase the music from your computer.
  • You may not use the music in any "derivitave" works, such as using it as background music on a video you are making.

Different Kinds of Licenses

There are a variety of different kinds of software according to the ownership and license terms. Here is a basic list:

Commercial (Retail) The user pays money for the software and receives a licensed copy.
Bundled Software The user receives the software free when some other software or hardware is purchased. If the software comes with a new computer, it is called OEM; otherwise, it is simply "bundled."To "bundle" something is to wrap it up; the idea is that 'free' software is wrapped together in the same package as something that you pay for.
Demo This is a version of commercial software which is limited in some way, usually a trial period, such as 15 days, after which the software stops functioning. The idea is to give the user a chance to experience the software fully for enough time to make a decision about buying it.
Crippleware This is similar to a Demo version, except that instead of a trial period with full functionality, the software is disabled in some way. For example, saving documents is not allowed, or if you save a document, then there is a "watermark"A watermark is a large, partly transparent word or phrase which covers much of a page, making it unusable for most purposes. across it. If it is game software, then only a few levels of the game are available.
Shareware This is software which is freely distributed, and users can try for free, but the user is expected to pay if they decide they like it and use it regularly. The payment system used to be on the honor system, but currently most "shareware" has copy protection, and will only work in limited ways--making it much more similar to Demo software or Crippleware.
Adware This is software given free of charge, but the software constantly downloads and displays advertisements.
Nagware This is software similar to shareware; it is distributed freely, and can be used without paying, but payment is expected. However, in the case of nagware, reminders to pay pop up often until a serial number proving payment is entered. (In English, to "nag" is to annoyingly pester someone, especially repeated reminders to carry out some kind of obligation.)
Donationware This is software distributed for free, usually fully functional and with no limitations or nagging. The user is asked to voluntarily send a minimum amount of money to a charity of the author's choice.
Postcardware • Beerware This is software distributed for free without any limitations; the user is asked to voluntarily send a postcard or a beer gift certificate to the author of the software, if they like the program and use it.
Freeware This is software distributed for free without any limitations, but the software is still owned by the author. Users are not allowed to re-sell the program, or to modify it in any way without the permission of the author.
Abandonware This is software which used to be commercially sold, but the company that made it is now out of business, and the software is no longer maintained or protected. It is not clearly free to the public, but is generally distributed freely.
Open Source Open-source software is made available to the public for free, with the original program source code included. Anyone can redistribute or even sell the software; more importantly, anyone may modify the software. The software is still (usually) owned by a person or organization, and certain restrictions and obligations remain in place. The idea of open source is to encourage anyone to improve the software, as a way of developing without cost, and making better and better software available to the public. Two famous examples of open-source software are Firefox and Linux. Countless thousands of programmers contribute millions of hours improving software like this.
Public Domain This is software which is not owned by anyone. Anyone can do anything they want to it, without limitation.

Purchasing Software

Software may be purchased in a number of ways. The classic way is to go to a "brick-and-mortar"a conventional store which customers can physically walk into, such as Yodobashi Camera or Labi store and purchase the software in a box. The same box may be purchased by mail order, usually ordered online from a web page--but the box is physically sent to the purchaser, who gets a CD or DVD along with an instruction manual. More and more popular are direct downloads: you simply download the software over the Internet, and purchase a serial code online. This allows the purchaser to instantly begin using the product.

Other forms of purchase are also available; software may be purchased in a low-priced bundle which contains many small commercial and/or shareware items. One might subscribe to a service which allows for online use or even download of software, for a monthly fee.

The iPhone model of the "App Store" has created a new form of purchase, where one must use a specific OS or environment to gain access to software, called "apps." This environment is usually protected to a certain degree, making software more difficult to pirate, and allowing developers to sell the software for a lower price. So far, this system is only available on smaller mobile devices, but many consider it inevitable that the system will eventually be applied to laptop and desktop computers--or that mobile computers will eventually become powerful enough to replace laptops and desktops.

Where Are You? Who Are You?

Sometimes purchasing software can be different depending on where you are. Most software is sold regionally, and stores will not be allowed to ship the software between countries. This allows for software companies to target the price of their software specifically for each country.

For example, most media in Japan is more expensive than it is elsewhere; a $15 music CD in America might cost twice as much in Japan; movie DVDs similarly sell for about double the American price of $20 or less. In the same way, most software in Japan is more expensive than it is in the U.S.; for example, Microsoft Office Professional costs $411 (¥35,000) at in the U.S., but is priced at ¥48,200 ($562) at Some versions are not even available in Japan at all; in the U.S., the "Home & Student" version of MS Office (Word, PowerPoint, Excel, OneNote) is sold for just $122 (¥10,500); this package is not sold in Japan, where the cheapest "academic" Office package sells for ¥23,000 ($268).

As a result, it is often more expensive to buy software in Japan. Apple software is often a surprising exception; while Mac goods are often higher-priced, especially in Japan, Apple has a feature called "localization," which allows software companies to include multiple languages inside an application. In such a case, software you buy in any country will automatically switch to your native language when it is used on Mac OS X with your native language set as default.

Even within the U.S., one may also find variations from state to state and from business to business. While most prices in japan are controlled andtherefore the same from store to store, in the U.S. one can often find a little more variation. Additionally, there is the issue of sales tax. While Japan's "consumption tax" is a standard 5% everywhere in the country, American sales tax differs from state to state, ranging between 0% and 10%. More notably, there is no sales tax on purchases between states. If you live in California, for example, and purchase something from an online shop from any other state (the shop must not have a physical presence in your state), then you pay no sales tax at all--and depending on the purchase, the shipping fees may be low or even free.

Finally, software is often sold at an especially low price for education, on the idea that if young people start using software in school, they will become used to it and purchase it at full price in the future. Sometimes one may purchase "academic" versions of software--usually exactly the same as the full version, or close enough--for less than half the original price. Usually, proof of being a student is required.