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Software licensing and business

Software is an integral part of most businesses. 

When purchasing software for your business, it’s important to understand its licensing terms. You should make sure you obtain the right type of licence to save you from potential legal action. 

Software is a type of intellectual property and is protected by copyright law. As such, when you buy software, it usually comes with a software licence. 

This is an agreement between the software developer or publisher (ie the copyright owner) and you (ie the end-user), which grants you permission to use or distribute the software. It usually includes terms on how the software can and can’t be used and its duration. Some may also include who can use the software eg home users or businesses. 

Without a licence, your use of the software constitutes a breach of the developer’s rights.

Choosing the appropriate licence agreement for your business can help save costs in two ways:

  1. it ensures that you have the right number of licences for your business so you wouldn’t have to spend more to purchase additional individual licences 

  2. it saves your business from potential litigation in the future for obtaining too few licences

There are three main types of end-user licence agreements:

  • single-user licence: this only allows the programme to be installed on one device 

  • volume or multi-user licence: this allows the programme to be installed and used simultaneously in various devices, a maximum number of users is usually prescribed

  • site licences: this allows anyone at the location to use the programme

When you sign up for a software trial, you’ll receive a trial licence which expires by the end of the trial period.

When purchasing software, you should consider:

  • its purpose
  • who will be using it
  • how many devices it will have to be installed in.

You should also make sure that the licence permits the programme to be used in a business setting. 

If your business has less than five employees, then it may be more appropriate to purchase single-user licences. 

Where your business has more than five employees, obtaining a multi-user licence or a site licence may be more economical.

You must also pay attention to the terms of the licence so you understand the full extent of your rights and any conditions attached to your use of the software. For example, you may be required to pay monthly subscription fees or renew your licence annually. Certain licences may also require you to purchase a new licence after exceeding a specific number of installations.

Using unlicensed software or breaking the terms of a licence is considered software piracy. This is a criminal offence and you and your business may face prosecution. If convicted, you can be subject to unlimited fines or imprisonment. The offence can be committed even if you aren’t aware that the software is illegal.

Additionally, you should be mindful that software often has piracy detection built-in. If activated, it may report you or disable key features. Your employees can also anonymously report you to the Federation for Software Theft or the Business Software Alliance.

You should only buy software from reputable sources. 

The following are indicators that the software may be illegal:

  • where it’s sold at a much cheaper price than its market price 

  • where it isn’t in English or the printing on its packaging is poor

  • where the certificate of authenticity or licence document is missing 

If in doubt, you can check the licence number with the software developer or publisher. 

You can also appoint someone in your business to manage software used in your business, whose approval should be obtained before the purchase or installation of any software. It may also be useful to prohibit your employees from downloading non-company approved software on their work devices. 

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