LicenseSpring Types of Licenses

Software Licensing Management: An ISV's perspective

Organizations that create products with a software component, usually consider how to license their products to others, whether it's to partners, customers, or other groups within the organization. Software License Management is crucial to ensure a successful launch of a new title.

Learn more about Software license management through this comprehensive guide. LicenseSpring is a modern License Manager used within hundreds of many Software and Hardware products.

What is Software Licensing?

Software Vendors develop products by writing and then usually compiling source code into a Software binary, which is then distributed. In nearly all cases, the vendor does not want to distribute the source code (their secret sauce). Instead, they will license their software for use by its intended audience. Specifically, software licensing governs the agreement between the Vendor (owner of the software), and the user of the software, which specifies a few important details, namely:

  • License Grants & Restrictions: Rights and limitations on how the the software title may be used
  • Rights to Modify the functionality of the software product.
  • Distribution Rights: Whether or not the licensee is allowed to distribute the software they have been granted a license for.
  • Intellectual Property Rights: a very important part of the software license is determining who retains the IP rights of the product, and any derivative works
  • Warranties, Disclaimers, and Liability: Vendors be explicit in the software licenses they grant whether there are any warrantied, disclaimers, and liability.
  • Amendments and Updates: Most software is expected to be maintained and updated from time to time, as is the licensing terms (at least for active projects).
    For a more in-depth conversation on what is software licensing, please visit our blog post on the topic

Why should Software Vendors care about Software License Management?

There are many reasons why an ISV, or the software department should carefully consider how they license their software and hardware products. Here are some of the main reasons:

  • Legal Risks: It's not unheard of organizations failing to meet legal obligations or losing IP rights due to sloppy software license management. Failing to manage licenses correctly can lead to legal disputes, infringement claims, and penalties.
  • Revenue Protection: Setting up guard rails around software licenses that are issued can help ensure users are paying for the software they use according to their ToS.
  • Business Insights from License Usage: By analyzing usage patterns (even as simple as counting the number of different software license models used) can help a business better understand what business model works best for them, and how to further grow profitability.
  • Reputation & Customer Relationships: Straightforward, transparent licensing practices that adheres to or improves on industry norms can help build trust with existing and prospective customers.

What is the difference between open source and closed source (commercial) Software Licenses?

Whether you decide to license your software using an open-source or closed source license, will depend on a few factors, but generally differ in the rights and freedoms providing the use, modification and distribution of software:

  • Source code: Open Source Software grants users access to the software's source code, while Commercial software typically does not.
  • Modification & Redistribution: Open source Software is typically free to modify and redistribute provided credit is referenced. Commercial Software Licensing often places strict restrictions on Modification and Redistribution rights, or will have separate licenses for each use-case (End-User License vs an OEM software license as an example).
  • Development Process: Open source, although might be sponsored by an organization, is typically built by a community, which is usually not paid for their work. Commercial software has a controlled development process, usually limiting external contributions.

Although there are a lot more nuances between software licensing that is open sourced vs closed source, LicenseSpring focuses primarily with enabling software vendors to implement commercial software license models within the products they distribute.

Common Commercial Software Licensing Models:

Here are some of the most common types of software licenses that ISVs employ when distributing software products:

Perpetual Licenses:

A perpetual license is a type of software license that grants users the right to use a specific version of a software product indefinitely, without the need for ongoing subscription or renewal fees.

Time-Limited Licenses:

A time-limited license is a type of software license that grants users the right to use a software product for a specific duration or period.

Unlike perpetual licenses that provide indefinite usage rights, time-limited licenses have an expiration date or a predefined time period during which the software can be accessed and used.

LicenseSpring provides support for both start dates and end dates in managing software licenses. This allows for precise control over the validity period of a software license, dictating when it becomes active and when it expires.

Device Node-Locking:

Device node-locking restricts the use of software or digital content to specific devices, preventing unauthorized copying or sharing. License Node-Locking refers to binding the licenses a unique and persistent device identifier, ensuring that the software or content can only be used on authorized devices.

All non-floating licenses within LicenseSpring have fields "total activations" and "max activations", which are used to parametrize node-locking to licenses.

By using the field "Max Activations", you can specify the number of devices that can be bound to a given license.

You may use our device fingerprinting solution, or override it with your unique identifier. You can learn more about what goes into generating a unique and a persistent computer ID here.

Floating Licenses: 

Also sometimes referred to as a network license or a concurrent license, floating license is a software licensing model that controls simultaneous usage of a license. This is common in certain industries or scenarios, such as Database access, where X users from a given company can access at the same time.

Trial Licenses:

A trial license is one of the most common types of software licenses, as it grants the user the right to temporarily evaluate a software product before deciding on procuring a commercial software license.

These software licenses provide temporary access to the full functionality of the software, enabling users to explore its features and capabilities.

Named-User Licensing:

User-based software licensing is a licensing model where software licenses are assigned to a specific person, allowing a specific user to install and use the same software license on multiple devices they own or use. This is usually on contrast with License Keys, which are usually bound only to a device, or an instance.

Offline Licensing: 

Offline software licensing refers to a licensing mechanism that allows the software to be activated and used without requiring a continuous internet connection.

Consumption-based Licenses:

The per-use or consumption license model is a software licensing model where users are charged based on the actual usage or consumption of the software or digital service.

Instead of purchasing a fixed license for a specific period or number of users or devices, the cost is determined by the amount of resources consumed or the extent of usage.

Subscription Licensing: 

Subscription licensing is a software licensing model where users pay a recurring fee, typically on a monthly or annual basis, to access and use the software.

Instead of a one-time purchase, users maintain an ongoing subscription to continue using the software and receive updates and technical support.

LicenseSpring makes a clear distinction between a time-limited license and a subscription license. (tl;dr, it has to do with where the source of truth lies).

Site Licenses: 

A site license is a type of software license that grants permission to an organization or institution to use a software product across multiple computers or devices within a specific location or site.

Instead of licensing the software on a per-user or per-device basis, a site license provides a broader authorization for all eligible users within a designated site.

Licensing Product Features:

License features refer to specific functionalities or capabilities that are included or restricted based on the terms of a software license.

The activation feature is a straightforward functionality present in a license. It can be either enabled or disabled, indicating whether the license supports activation or not.

Consumption feature licensing enables metered usage of a specific feature within an application. This licensing model proves useful when the vendor intends to restrict the number of times a particular function is executed or a specific report is generated.

Trial / Perpetual icon

Trial / Perpetual

Issue licenses to work indefinitely, and set the duration of the trial period
Time-Limited icon


Issue licenses that are valid for a set period of time, using either an expiry date, or days remaining model
Floating icon


Deploy a license management server, or use the LicenseSpring cloud to configure concurrent usage of your software
Node-Locked icon


Lock a license to a set number of machines by setting max activations, possible due to our device fingerprinting technology
Subscription icon


Synchronize the validity of your license with the subscription period of your billing cycle
Consumption icon


License according to a pay-per-use model, which can be cyclically reset
User-Based icon


You have the option to either issue license keys, or set usernames and passwords for your licenses

How to Implement any Software Licensing Model within your product using LicenseSpring:

LicenseSpring was built to help implement and enforce all common commercial types of software licenses, regardless of the development environment (You can find a list of the supported SDKs in our documentation). All of the Software licensing models mentioned above can easily be used to monetize your product. Here is how you can get started:

First, submit a request to open an account. We will review your request and contact you for next steps.

If you are approved, We will send an invite to a demo account of the Vendor Platform.

Dashboard View from the LicenseSpring Vendor Platform

a typical vendor will need to perform 3 steps to start to manage their software licenses effectively.

  1. Define your product, and configure the software license policies within the LicenseSpring platform.
  2. Add our SDK into your codebase, or make calls directly to our webhooks. This allows your product to activate, deactivate, and check the status of a license within your applications at the appropriate time.
  3. Integrate with third-party e-commerce and fulfillment platforms, or use our Management API to programmatically create customers/orders/licenses. Please visit our documentation for more information and a complete guide on getting started with us.

Can I License Individual Features of My Product?

Within LicenseSpring, you can create a base product, and define all the different components that can be unlocked depending on which entitlements have been granted for a given license.

There are 2 main types of product features that can be licensed with LicenseSpring: Activation Licenses, and Consumption Licenses, where the vendor is looking to meter the usage of a specific component.

Our customers who find it the most helpful are often software developers and publishers with modular applications, apps with many different plugins and extensions, or even games with DLC and microtransactions.

You can even set expiry periods for features, if you only wanted customers to evaluate an upgraded product, for instance.

As of the time of this writing, we also added Metadata to individual features. That means a vendor can push custom JSON for any given feature, for any given license.

Finally, LicenseSpring also added in 2023 the ability to float individual licenses. For example, a Vendor can now configure a license to allow only a subset of users or node-locked devices to use specific features.

Editing Software License Entitlements after they have been issued:

On our platform, a License key only serves for Authorization, and does not contain any particular data on the entitlements. As such, a license can be reconfigured, even after it is in use. For example,

The Vendor can change the number of maximum activations for a license, and add or remove features.

A License can be reset, disabled, or re-enabled at any time (unless it was deleted).

One main Caveat: once a license is created, the type of a license cannot be changed (for example from perpetual to consumption-based).

How Does LicenseSpring Help Prevent Software Piracy?

LicenseSpring is NOT an anti-piracy service (at least not at the time of this writing). We focused on making it easy for vendors to implement and manage commercial software licensing models within the products they distribute. With that being said, the LicenseSpring service includes several capabilities that can be used to help detect as well as prevent unauthorized usage of a license.

First of all, every license is node-locked by default, meaning that it can only be used on a defined number of computers. Once the maximum activations is reached for a given license, it cannot be activated on another machine until it has been previously deactivated.

The vendor can also elect to add a limit on the number of device transfers allowed. That way, even if a license key made its way to an unauthorized user and there were available activations, they would not be able to use that given license key. Preventing device transfers comes in especially handy for offline license activations. At a very minimum, if a vendor notices a given license having a high transfer count, it could indicate unauthorized usage of that license and could trigger corrective actions, such as an audit.

When a license is activated, a fingerprint of the computer is used to uniquely identify it.

If the same license key is shared, it will use up an activation for each new device, until the maximum number of activations has been reached.

Frequently Asked Questions:

What Is a Software License Agreement?

A software license agreement is a legally binding contract that governs the terms and conditions of using a software product.

It outlines the rights and obligations of both the software vendor (licensor) and the end user, (licensee) and defines the permissions, restrictions, and limitations associated with the use of the software.

See our article about Software License Agreements for more information.

How Much Does a Software License Cost?

The cost of a software license varies depending on factors such as the type of software, licensing model, included features, and vendor pricing strategy.

Licensing models can include one-time upfront payments for perpetual licenses, recurring payments for subscription licenses, or usage-based fees for consumption licenses.

At LicenseSpring, unlike market incumbents like Flexera or Gemalto, we do not feel entitled to dip into your revenue streams. We are priced competitively, based on usage, not a percentage of your licensed revenue.

See LicenseSpring Pricing for more information.

How do Software Licenses Work?

Software licenses work by establishing a legal agreement between the software publisher and the user.

The license grants the user permission to use the software according to the specified terms and conditions.

The license agreement outlines the restrictions and limitations on software usage, such as the number of installations, authorized users, and any prohibitions on copying or modifying the software code.

Users may need to activate the software using a license key, and compliance with the license terms is crucial.

Support, updates, and intellectual property protection are typically addressed in the license agreement.

Effective license management involves monitoring compliance and keeping track of entitlements.

What are Proprietary Software Licenses?

A proprietary software license refers to licenses that are designed and controlled by the software vendor or owner.

These licenses grant specific usage rights to users while also imposing restrictions and limitations.

Proprietary software licenses are typically used for commercial software products and are protected by intellectual property rights and copyright law.

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