Knowing the difference between a proprietary software license and other forms of licensing is important to a creator or a user of different forms of software. The last thing you would want to face is any type of legal problems because you misused software or distributed it when you had no right to do so. Knowing how to properly handle software is crucial for everyone, students and professionals alike.

What Does Proprietary Software Mean?

Proprietary software refers to any software that has a copyright and has limits to use and distribution. These limits are imposed by the developer, publisher, or vendor. It is the property of the owner and can be used with specified conditions.

It may also be referred to as closed-source or commercial software. This form of software is typically commercial software that consumers can purchase, lease, or license from the developer. It does not allow a user to have access to the source code.

Consumers can purchase proprietary software for a fee but may not distribute or copy it in any way.

The majority of software is proprietary and is developed by ISVs, or independent software vendors. There are restrictions imposed by the developer or vendor that are elaborated in the end-user license agreement, or the EULA. You will also find the restrictions listed in the Terms of Service for the software.

The user of the software has to accept the agreement before the software can be installed or used. The vendor or developer can opt to take legal action against users who violate the terms of use.

Types of Proprietary Software

Source code is a way of writing software from a human standpoint using programming language before converting to machine code. This is readable by a computer’s central processing unit. The source code is required for modification or improvement of a program.

Software that is not considered proprietary includes public domain software and anything labeled “free.” Free software, which is also known as open source software, does not cost money and can be utilized by anyone for any use with few restrictions.

The few restrictions that exist will vary depending on the terms in the license, but it is common to require that an original license be included. Linux is one of the most common examples.

Public domain software is a type of software that is donated for public use by the holder of the copyright, meaning it is no longer copyrighted. The consequence to this is that is free and can be used for any purpose by anyone with zero restrictions.

Freeware, which is different than free software, is a form of proprietary software provided free of charge. There are, however, some stiff restrictions on the use of this software. The source code is also kept confidential. Adobe Acrobat reader is a common example.

Any software provided by a large company will include very long and complicated EULAs. There are many prohibitions, but the most common is that there is to be no copies made of the software under any circumstances, only using it on a specified number of machines, or the reverse engineering of the software.

Almost all of the software created by Microsoft is proprietary, which includes Windows products and Microsoft Office. There are some products in the Microsoft family that are free, including Internet Explorer.

Other creators of proprietary software include:

  • Adobe
  • Borland
  • IBM
  • Macromedia
  • Oracle
  • Sun Microsystems

During the dawn of computing, most all software was free. It was shared among developers and researchers who worked to make improvements. That situation changed when computers became commonplace. The need for proprietary software transformed into a profitable business model.

Recently, however, some companies have realized that free software can also be financially smart when offered. IBM, for instance, still gets billions of dollars from Linux, which is completely free for the user.

Leaders in the industry believe that proprietary software will decrease since there is a growth in the competition from free software. They also believe that free software will overtake the dominating OS and applications. Proprietary software will still be strong in many markets, specifically for those used for business and technical niches, due to a specialized market.

If you need help with understanding proprietary software licenses, you can post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.