Licensing and the Stages of Legally Purchasing Software

Licensed software, and the legal purchase of it, has unique legal contract obligations. Generally, the consumer owns any product they purchase. Although the seller may maintain certain responsibilities after the time of purchase, the consumer still owns the rights to do with it what they wish. One prime example would be the purchase of a car.

However, the contract obligations for legal software, or software that has been licensed and legally purchased, is an entirely different story. While almost everyone is familiar with the term “end-user agreement”, since they agree to one just about every time they download software from the Internet, they're less familiar with the specifics of the particular legal contract they just signed, and what it means to actually own software. (http://en.wikipedia.org/wiki/EULA) 

Of course, the contract issues related to ownership of software aren't just of concern to the end-user. All parties involved in the distribution of software including developers, distributors, and so on are responsible (http://contractedge.com/copyrightownership.html) When it comes to a legal battle, any party involved in the life-cycle of software may end up on the wrong side of a dispute when not fully aware of the legal issues involved.

Thus, it's imperative to be familiar with issues of purchasing software legally, be aware of what constitutes a legal contract in the distribution of such software, and know what kinds of contracts are suitable to various stages of the life of a particular version of software. This preventative method will result in less worry and more security. After all, that's what a good contract ought to be about.

When speaking of software and contracts, one is essentially discussing licensing. A license is the essential contract pertaining to the selling and/or distribution of software to the end-user. Without a license, a user is fundamentally in possession of illegal goods. (http://contractedge.com/copyrightownership.html) 

Fundamentals of a License

Some software differs from other consumer products due to the fact that ownership of the product is never transferred.  When software is purchased from a company, the consumer is not buying the ownership of the software, but is instead purchasing the licensing that allows them to use that particular software. This is the heart of a legal contract when it comes to the legal purchase of software. However, there are circumstances when software is developed specifically for a company by an outside developer. That software then becomes their property, and a less customized version of the software may be owned by the developer. Understanding this concept will help in comprehending further issues related to licensing.

Licensing in effect is a tool used for manipulating the extent to which users pay for the initial product, continue to pay for use of the product, pay for various services related to the product, and to avoid paying someone else for a replacement product. Influence over all licensing options can often make or break particular software developers and distributors.

While many legal contracts for software may remain stable for long periods of time software consistently changes. Licensing arrangements are extremely flexible, and may alter at diverse stages throughout the lifetime of the software.

The First Stage – The Rise 

The first stage of the life-cycle of software that can be purchased legally by a consumer essentially involves its initial introduction into the market place. This is where licensing becomes important — not only as a tool of legal ownership, but also as a tool of profitability. (http://www.safenet-inc.com/library/8/BestPracticesLMWP.pdf) 

At the beginning of the  software’s life-cycle, the most important aspect of marketing the product is convincing enough users that the software is something they need. Thus, building a licensing strategy along with the marketing goal is of utmost importance. Consequently, the kind of licensing fitting for older software is divergent compared to licensing for software that’s just been designed. (http://www.safenet-inc.com/library/8/BestPracticesLMWP.pdf)

Gaining the attention of the user is vital for new software, as consumer choice plays a life-sized role when  software is first introduced into the market. The software company is able to get a foot into the door by allowing the user an opinion as to the kind of licensing desired. Then the company is able to create more limiting forms of licensing later on. (http://blog.gurock.com/articles/selecting-the-right-license-strategy-for-your-software/)

Utilizing licensing strategies in tandem with marketing strategies can lead to success in the world of software. This is in essence what legal contracts are about in the software world, and therefore, is a key component of licensing.

Once a software product has been introduced into the marketplace, users begin to learn it, gain an impression of its capabilities, and are then ready to build a more lasting relationship with the software company or distributor. Thus, the licensing strategy should reflect this aspect of the growth stage in the life of the software. While capturing user interest is central in the first stage, growing their interest in the product is part of the next stage. (http://blog.gurock.com/articles/selecting-the-right-license-strategy-for-your-software/) 

The Second Stage – Maturity

Legal contract licensing at this stage should be focused on ideas such as non-perpetual licensing. With non-perpetual licensing the user must renew their licensing periodically based on their initial interest and demand for the product. Adjusting price comes into play at this stage, while adapting to volume licensing can maximize the length of relationship with the customer, and the profitability that comes with it. (http://www.safenet-inc.com/library/8/BestPracticesLMWP.pdf) 

It's at the maturity stage of legal software where most of the crucial licensing issues occur, especially when it comes to maximizing a long-term and profitable relationship with the end-user. This stage determines the ultimate difference between a successful software product, and one that fails to maintain market share.

Non-perpetual licensing agreements become a requirement at this stage.  Users are not only now interested with the software, but desire to keep using it for the anticipated future.  Here is when licensing such as maintenance and enterprise distribution can be introduced and utilized to yield even more of a profit. Having legal contract licensing that maximizes all of these issues for a distributor is the essence of success in the industry. (http://blog.gurock.com/articles/selecting-the-right-license-strategy-for-your-software/)

Stage Three – Decline

Finally, once software has passed its maturity stage, and is ready for some degree of decline, it's important to develop licensing strategies for legal software that preserve the maturity stage for as long as possible. Creating various innovative products to fit with the original software is one way many companies will extend the life of their product. Such things as supporting rights, courses, and backup licensing are all methods of generating income during the decline. Companies are advised to be careful at this juncture when changing licensing arrangements, as users may attempt to find a new product. (http://www.safenet-inc.com/library/8/BestPracticesLMWP.pdf)

Today’s technological age requires the comprehension of all these legal contract issues. The sale of legal software can net a great profit simply due to the nature of its license arrangement. However, it’s important to utilize strategy with software development and distribution.