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Software licensing is one way you can distribute your software and make a profit. This area is essential for ensuring you receive proper credit and compensation for your work in the way you want. If you are a developer or someone else is involved in your business’ software distribution, there can be a lot to consider for your software licensing. Therefore, this article will explain whether you can create your own software licence in New Zealand.

How Does Software Licensing Work?

Your business can own the software it develops as an asset, in the form of intellectual property. As intellectual property, your software is intangible property that people may buy and use, which you can then profit from. As the owner of the developed software, you can set the terms that cover how people access your software and what they may pay you for it. Accordingly, you can do this with a software licence. 

For example, when you purchase the rights to use Microsoft Office on your work computers, you pay for the licence to use the software that Microsoft developed.

A software licence protects your code and means you can limit what people can do with it, such as its:

  • use;
  • access;
  • reproduction;
  • distribution; and
  • modification. 

If someone does not comply with the terms of your licence, then you may have grounds for legal action and compensation.

Closed vs Open Source Software Licensing

Different kinds of software licences range in what they let other users do with the relevant software. They tend to fall into two categories, depending on the specific terms of the licence itself, which may include elements from both. These are:

  • open-source; and
  • closed-source.

Open-source software is generally free code that anyone can use and share and is publicly available. This kind of licence allows for modification, but users may have to credit the original author when they use it. As such, you may use this kind of code within your own software.

On the other hand, as the name suggests, closed-source software is not as open. It may still be free, but the source code generally is not readily available. Additionally, there is not the same opportunity for user modification within the licensing. Therefore, its creators will distribute the software in its final form. 

As a whole, software licences will range in the permissibility of what their users/clients can do with the software itself. So if you are developing software for your clients, you need to think about what kind of access you want to grant to your software and how your licence will reflect this. For example, if a business contracts you to develop their app, the licence you develop for that program may not include access or code modification rights.

Using a Software Licence Agreement

You set out the terms of your software licence in a legally binding agreement. This document is often a software licence agreement or End User Licence Agreement (EULA). As the licensor, you can use this document to grant usage rights to a licensee (such as a user or client).

Depending on how you get this document to your users or clients, you need to pay particular attention to:

  • the fairness of its terms;
  • the depth of what it covers;
  • its readability; and
  • how your users or clients show their acceptance of your terms.

In particular, you want to establish a precise method of acceptance for your licence terms. This confirmation is easier to get when you develop a software licence that only one of a few businesses will use, as you may get their signatures personally. 

However, if thousands of people will download your software, you need a clear acceptance method. An example of this could be forced scrolling through your licence agreement and a tickbox saying “I Accept These Terms” that users must tick before they proceed.

Developing the Terms of Your Software Licence

The terms of your software licence can be extensive, and you should cater them to suit your business and what it wants to achieve. A lawyer can help you draft your software licence, whether it be a one-off document with a particular business or something that you intend to use repeatedly. Your software licence should cover terms such as:

  • fees/royalties;
  • what rights it grants;
  • the nature of the software as a good or service;
  • the length of the licence;
  • master licensing rights;
  • support mechanisms;
  • termination;
  • renewal;
  • reverse engineering/modding capabilities;
  • indemnities;
  • limitation of liability; and
  • privacy.

Key Takeaways

When you develop software, you will use a software licence to determine how you distribute and profit from that software. This legal document will specify what rights you grant to your users or clients and the conditions attached to these rights. If you would like more information or help with developing your own software licence, contact LegalVision’s data, privacy, and IT lawyers on 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What is a software licence?

A software licence is a legal document that specifies the rights of people who use or distribute your software, including its source code, which copyright law applies to. Sometimes developers call this an End User Licence Agreement (EULA).

What types of software licence are there?

The software licence types can range according to how they let others use their source code and their general permissibility/openness. These kinds include open domain licences, LGPL, permissive licences, copyleft, and proprietary licences.

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