Importance of Copyrights and Licensing in Computer Software

Key Takeaways

• Copyright protects software code as a literary work, while patents protect software inventions and functional processes.
• Registering a copyright offers stronger legal leverage than relying on automatic copyright protections alone.
• Licensing plays a crucial role in defining how software may be used, shared, or modified.
• Copyright infringement in software ranges from unauthorized copying to selling pirated versions.
• International protection for software requires compliance with the laws of each jurisdiction or use of treaties like the PCT.
• Software licensing models (e.g., proprietary, open-source, and subscription-based) shape monetization and enforcement strategies.

Why Is Software Patent or Copyright Important?

A software patent or copyright is a legal way to protect your software source code, idea, or invention.

Every software developer or company has to choose between patent and copyright. Some decide they want both. To make the choice, you have to think about what you're protecting. Are you protecting the code itself, or are you protecting the software idea and the process? Getting a patent versus registering a copyright are very different processes and might also change what you want to do with your software.

Software counts as intellectual property (IP.) IP is an original work that isn't tangible, but that is valuable. Lots of avenues, including copyright and patent, exist under the law to protect IP.

Both patents and copyrights protect software from theft under the law. Each one protects a different part of the software. Patents protect the idea, while copyright protects the written code. The advantages and disadvantages of both go beyond simple legal protection. Software patents, for example, are difficult to get. Copyright, on the other hand, might not protect your software the way you need.

Importance of Copyrights and Licensing in Computer Software

The importance of copyrights and licensing in computer software cannot be overstated in the digital age. Copyright ensures that developers and businesses retain control over their original code, while licensing defines how that software can be used, modified, or distributed by others.

Licensing is not only a legal tool but also a business strategy. It allows software creators to monetize their creations, protect against misuse, and define usage limits. Without clear licensing, even copyrighted software may be used in unintended or unauthorized ways, increasing the risk of revenue loss and IP infringement.

Moreover, effective copyright registration supports enforcement actions and allows rightsholders to seek statutory damages and attorney's fees. This dual structure—copyright protection plus enforceable licensing—forms the cornerstone of software intellectual property strategy.

Copyright vs. Patent: Overview

The difference between copyright and patent is an old conversation. The Supreme Court has been dealing with this since 1879. The Baker v. Selden case of 1879 dealt with that difference. The court's decision described the difference between these two legal protections.

In 1976, the House Committee on the Judiciary wrote a report that went with the Copyright Act passed in the same year. In that report, the committee said that copyright doesn't prevent people from using the ideas you talk about in your copyrighted work. That includes the process that results from using computer code.

Copyright and Software Protection

Copyright is for original works, like songs, books, and software code. A copyright protects what's known as the "expression" of your work. Copyright protects your software code from someone else copying it and using it without your permission. The U.S. Copyright Ac details how this protection works.

When you hold the copyright to a work, you can:

• Make copies
• Distribute the work (like selling it)
• Make "derivative works" (like translations or abridgment)
• Share or perform the work in public

The Copyright Act of 1976 adds an exception to these rights. If someone wants to use a copyrighted work for educational or nonprofit purposes, they can.

Original software is automatically copyrighted under international law. Software counts as a "literary work" under U.S.C. § 101 of the Copyright Act. Whoever created the software has the copyright. You don't have to apply for anything or file anything for that to be true.

A copyright lasts for the lifetime of the author, plus 50 years in many countries, and 70 years in others, including the United States. As soon as your work is in "fixed and tangible form" it is automatically copyrighted.

However, officially registering copyright with the U.S. Copyright Office and the Library of Congress is a good idea. It gives you more legal protection in case someone tries to steal your software or use it without your permission. It usually only takes three months, and is $500 or less to have a lawyer do it for you.

Registering your copyright is inexpensive (much less than $1,000) and usually takes only a few months.

Copyright doesn't protect the idea behind the code. Title 17 U.S.C. §102(b) of the Copyright Act says that copyright doesn't protect "any idea, procedure, process, system, method of operation, concept, principle, or discovery."

Types of Software Licenses

Software licenses vary in how they allow users to access, use, and distribute the software. Common types include:

• Proprietary Licenses: Users purchase the right to use software under strict terms; the source code is typically withheld.
• Open Source Licenses: Allow free use, modification, and distribution under conditions (e.g., GNU General Public License, MIT License).
• Freeware and Freemium Licenses: Offer software at no cost but may restrict commercial use or offer premium features for a fee.
• Subscription-Based Licenses: Grant access for a specific time period, often renewable automatically.
• Enterprise Licenses: Tailored for business use, often covering multiple users or devices with enhanced support.

Choosing the right license type helps manage user expectations and enforce usage boundaries.

Court Cases Important to Software Copyright

If someone copies your code exactly, then copyright protects you. If something is extremely similar, copyright also protects you. However, proving that something is very similar in court can be difficult. Here are some court cases that addressed this issue:

• 1986 case Wheelan Associates Inc. v. Jaslow Dental Labs dealt with software that used an original structure, even though not all of the code was original. The court ruled that copyright protected the software.
• 1992 case Computer Associates International, Inc. v. Altais, Inc . also dealt with software that had pieces that were not original. In this case, the opposite effect happened. The court ruled that only the original code in the software had copyright.
• 2014 case Oracle America, Inc. v. Google, Inc. dealt with software material that can be copyrighted. The Federal Circuit ruled on appeal that the software in question was copyrighted because it was original.

Software Copyright Infringement Examples

Copyright infringement in software takes various forms, such as:

• Making unauthorized copies of a software application.
• Sharing or selling pirated versions of commercial software.
• Reverse-engineering or decompiling code to create derivative versions.
• Uploading proprietary software to public repositories without permission.
• Altering and redistributing a program while removing or bypassing copyright notices.

Such infringements can lead to lawsuits, heavy financial penalties, and criminal charges. Even seemingly minor violations—like unauthorized installation across multiple devices—may constitute infringement under copyright law.

The Three-Part Copyright Test

In 1992, Computer Associates International, Inc. v. Altai, Inc. dealt with parts of software that copyright law protects. They used the three-part "Abstraction-Filtration-Comparison" test, and recommended it as a future way to answer questions about whether one software has violated the copyright on other software.

• Abstraction separates the expression of the code from the ideas
• Filtration takes out the parts of the code that don't qualify for copyright
• Comparison puts the original work and the alleged copied work side-by-side to see if one is a copy

One aspect of code that filtration takes out will be algorithms. Algorithms are not creative works. The way you put them together can be protected under copyright law, which is part of what happened in the 1986 Wheelan case.

Patent and Software Protection

A patent protects an invention or an original idea. Patents keep others from using or selling your invention, even if they haven't plagiarized actual parts of your software code. Copyright law's limitations has pushed many developers to seek patents for their software. The uptick in software patents began in the 1990s, and has escalated since.

Patents can be used to prevent other people from:

• Using your software
• Importing your software
• Selling your software

Large U.S. lawsuits resulting in millions or billions of dollars have happened over software patents. Big companies like Apple have sued for patent infringement and won.

The U.S. Patent Act gives Congress the ability to grant patents through the United States Patent and Trademark Office (USPTO). Software developers and companies more and more are using patents to protect their software from theft.

To qualify for a patent, your software needs to:

• Be new and original
• Be useful
• Have a "non-obvious" piece of code or function

Software patents are usually utility patents (instead of design or plant patents). That means they have to qualify as:

• A process
• A machine
• An "article of manufacture"
• A "composition of matter"
• An improvement on an existing utility

A patent lasts for 20 years. After that your software goes into the Common Domain. When you apply for a patent, you have to disclose the invention. That voids other ways you might protect yourself, such as keeping your source code a trade secret.

Considerations Outside of Patent Protection

If you decide not to apply for a patent, using NDAs (non-disclosure agreements) and other methods of secrecy help protect your software. You can have contractors, vendors, and employees sign NDAs.

Applying for a patent is very expensive. It can cost thousands to tens of thousands of dollars. From the day you file your patent application, it can take up to two years to receive your patent.

Important Patent Cases That Relate to Software

A 1931 Supreme Court ruling said that "laws of nature" cannot receive patents. These are discoveries, not inventions. Math, algorithms, and formulas usually count as laws of nature. The algorithms and math formulas in software code can't receive patents. But court cases since 1931 have created guidelines for patenting software. Listed here are some notable cases:

• Gottschalk v. Benson - a 1941 case. The court said that an algorithm could not have a patent. But they went on to say that the algorithm didn't have a specific use, which is why they didn't award a patent.
• Daimond v. Diehr - a 1981 case. A computer software helped to operate machinery in a specific way. This software process received a patent. The software contained an algorithm. The algorithm earned a patent because of the unique process it was used in.
• State Street Bank & Trust Co. v. Signature Financial Group, Inc. - a 1998 case. This ruling established testing an invention for patent-eligibility by seeing if it creates a "useful, concrete, and tangible result." Since software can meet that definition, this ruling was good for developers seeking software patents.
• Bilski V. Kappos - a 2010 case. This case, on appeal at the Supreme Court, began the precedent for software as an "abstract idea" that does not meet the older standards for a patent. This case also said that the "machine or transformation" test is a good way to start figuring out if software is an invention and can be patented.
• Alice Corp. v. CLS Bank International - a 2014 case. In the Alice case, the court ruled that abstract ideas will not receive patents. The software in question only used a "generic computer" to run a business model. The process of using software on a generic computer isn't unique enough to separate software from "abstract." After the ruling, courts revoked some software patents under these guidelines.

Since the Alice ruling, software patents have been harder to get. Numerous cases have gone to court, and many patents have been rejected due to the "abstract idea" rule. One notable exception was 2014's DDR Holdings v. Hotels.com, which succeeded in showing that software can still be eligible for a patent. This was the first case to see a positive result since the Alice decision.

The USPTO has been publishing guidelines on software patents since 1989.

Your Software Patent Application

The difficulties surrounding software patent eligibility don't stop companies from applying for patents. Lots of software is patented. Many successful applications have certain things in common. Your application needs to prove that your software is an invention, not an abstract idea.

Use Machine or Transformation

In the Bilski V. Kappos case, the "machine or transformation" isn't the only test to use when figuring out if software is eligible for a patent. But the court ruled that the test is an important factor. Machine or transformation means that the invention has to either use a particular machine, or transform one thing into another thing.

Software doesn't absolutely have to fit the machine or transformation test. But an invention that does fit the test is eligible for a patent. If you can fit your software to the test, then you probably have patentable software on your hands.

Show that your software needs a specific machine, not a generic computer, to run. The machine has to be significant to your software. If it is not an essential part of what your software does, then your software doesn't fit the machine part of the test.

Don't Focus on Code

The code is not the idea. When you go for a software patent, you are not trying to protect your lines of code. Copyright does that. Instead, think of your patent application as a description for the unique things your software invention does.

If you describe the idea well enough, competent coders could follow the directions without having to take any steps outside of your directions. Several codes could create the same result. That means you have to present lots of scenarios, including things that could go wrong. Discuss how your idea will deal with those problems.

Use Flow Charts

A general flow chart that shows the entire software process is a good place to start. Then, take each step of the flow chart and make detailed flow charts. Include these flow charts in your patent application. Flow charts are a good way to show the scenarios and problems your software might encounter and overcome.

Role of Licensing in Software Monetization

Licensing is integral to the business model of most software companies. It enables developers to generate revenue by controlling how and where their software is used.

Monetization strategies based on licensing include:

• Perpetual Licensing: A one-time fee for lifetime use.
• Subscription Licensing: Recurring revenue from ongoing use.
• Usage-Based Licensing: Charges based on metrics like user count or processing volume.
• Feature-Based Licensing: Different pricing for different sets of features or tiers.

Licenses also specify whether software may be sublicensed, bundled with other products, or used in SaaS environments. Crafting clear, enforceable licensing terms reduces ambiguity, limits liability, and enhances compliance.

Patents in Other Countries

Unlike copyright, patents do not extend between countries. Your U.S. patent is only good in the U.S. When you want to patent software abroad, you have to apply for a patent in every country you might want to use or sell the software. Sometimes regional patent offices cover several countries, which helps. The European Patent Office (EPO) covers several member states.

When filing patent applications in other countries, you need to be familiar with the patent laws in those countries. Material that qualifies for a patent in the U.S. might not qualify in another country. The reverse is also true.

The European Patent Convention (EPC) has different laws about patents and computer programs. In Article 52, the EPC says computer programs "as such" can't be patented.

The EPC says that a computer program (i.e. an invention) has to have a "technical character" to qualify for a patent. Computer programs alone do not qualify for patents unless you can prove a "technical character." That might mean software that has a specific industrial purpose, like controlling the temperature of something. The "technical character" has to apply to every part of the software.

The Patent Cooperation Treaty

The Patent Cooperation Treaty (PCT) creates a way to file an international patent. The PCT makes it simpler to get international patents, since you only have to file one application. The member states of the PCT look at the applications on their own. You might receive a patent in some countries, but not in others, with your PCT application.

Enforcing Software Copyright and Licensing Rights

Enforcement is essential to maintain the value of software IP. Here are key strategies:

• Monitoring: Track unauthorized use through digital watermarking or license key validation.
• Cease and Desist Letters: Send formal demands to stop unauthorized use or distribution.
• DMCA Takedown Notices: Remove infringing content from websites or repositories.
• Litigation: Pursue civil lawsuits for copyright or licensing violations.
• Audits: Periodically review license compliance, especially in enterprise environments.

In international contexts, rights enforcement often requires coordination with local counsel or the use of treaties like the Berne Convention or TRIPS Agreement. Registering software with national IP offices strengthens the ability to take legal action globally.

Frequently Asked Questions

1. What is the importance of copyrights and licensing in computer software?
   They protect software creators' legal rights, define how software can be used or shared, and support monetization strategies while reducing infringement risk.
2. Does copyright protect software ideas or just code?
   Copyright only protects the expression of the idea—i.e., the code—not the idea itself. For idea protection, a patent may be needed.
3. Is software automatically copyrighted once written?
   Yes, copyright protection is automatic upon creation in a fixed medium, but registration provides additional enforcement benefits.
4. What are the penalties for software copyright infringement?
   Penalties may include statutory damages, actual damages, and, in severe cases, criminal prosecution.
5. How does software licensing support monetization?
   Licensing models—such as subscription, feature-based, or usage-based—enable software providers to generate income while controlling usage.

If you need help with understanding Software Patent or Copyright, 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.