Define License?

April 7, 2010

Any company looking for expansion capital or growth venture capital should understand the term ‘license‘ (in the software world at least). 

To keep it simple, it is the right/permission to use the software from the owner. Remember that the user is not provided with ownership to the software (as that is retained), but they do receive the right to use the software.

Q: What are the boundaries of the right to use?

A: Well, that depends on what the license agreement says…usually in the GRANT section (and yes ‘most’ of the click-wrap license agreement you agree to are enforceable). There are literally thousands of possible license metrics (ways to measure usage) so you should communicate your license metric inside and outside your license agreement (e.g. on the product webpage, in an FAQ).

So the key things to remember for any company looking for Boston Venture Capital, are: 
1) Know what your license agreement says, as you are granting you users specific legal rights. 

2) Grant the users the correct usage rights (but not necessarily more), as that is what they are going to expect.

3) It would be really great if your software operated 100% consistently with those license rights (i.e. if the license is limited to one module, then don’t allow them to use other modules; if the license is limited to one user, then don’t allow more users access; maybe have a counter in the software so the user can tell if they are within their license rights or exceeding them). 
Of course this summary only addresses one type of definition of a license, as there are other legal uses of the term ‘license’ (government license, professional licenses, license to enter property, etc.).
While defining software licenses can get very complicated, this is a simple summary that may help you understand the definition of a ‘license.’ 

President and Shareholder

<strong>Jeremy Aber</strong> consults OpenView portfolio companies on legal and contract matters. Jeremy runs his own IT focused law firm, the <a href="http://www.aberlawfirm.com/">Aber Law Firm</a>, and has over 18 years experience in technology and corporate law.