Understanding the Basics of a Software Licence Agreement

software license agreement

Software licence agreement 101

Whether you are using software personal use or as an organisation in a business setting, you are bound by the relevant software licence agreement. Whilst both individuals and companies should do their utmost to ensure that they do not break this agreement, the punishment for doing so tends to be much stricter for businesses. Although staying within the terms of the agreement may initially sound like an easy task, many organisations do fail to do so. Often such breaches are unintentional, yet can still result in large fines. Here we provide an overview of what a software licence agreement is and discuss how easy it can be to mistakenly break them.


In reality a software licence agreement is a contract between software providers and the end user; be they an individual or organisation. The agreement details how the product can be used by the end user, setting out the length of the contract and whether it authorised for just personal use or in a commercial setting.

A regular misunderstanding

Even after decades of utilising PCs in both work and home settings, many people still believe that when they pay for software it physically becomes their property. This is incorrect, and although you may own a disk that contains the software; the program does not belong to you. What you do actually own is the intellectual property right to utilise the software in accordance with the terms of your software licence agreement.

Confusion leads to breach

The fact that business fail to properly understand that they only own the intellectual rights to the software means that they believe that they have a right to do what they want with the software. As a result they will install the software on many different PCs. Whilst their agreement may allow for multiple installations; there will be a maximum limit, which is often broken. In order to increase that limit a new agreement must be entered, which of course costs more money. This kind of error tends to happen during company expansion, when new offices or branches are opened. It is to some extent understandable that such details can be overlooked at what is an already busy period. However, there is no excuse for breaking your agreement and the company will still be fined.

Considering the benefits

It is important for any individual and certainly any organisation to understand their relevant software licence agreements. In addition to staying within the law and avoiding a possible fine, the end user also has access to any updates that are made to the software and customer support if required.

Seeking support

For smaller business it should be reasonably easy to manage your software and stay within the relative agreements. However, for larger organisations it can be much more difficult as different staff members have access to many different pieces of software. Job roles can also change on a regular basis, meaning new software being added and removed from PCs on an ongoing basis. In order to stay on top of their software licensing, many larger organisations hire a specialist management company to fulfill the role.

About the Author: As an owner of two UK based companies, Bernard Marks is an advocate of utilising IT to streamline his businesses wherever possible. This entails use of various pieces of software in numerous locations. In order to stay within each relevant software licence agreement Bernard enlists the help of Trustmarque Solutions.


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