Software is a little different from most other items we purchase in our everyday lives. Have you heard about "licensing" software and are wondering what that means? We'll explain the difference between buying and licensing software.

What does it mean to license software?

When you purchase software, you receive a copy of the software and a license to use it. You don't actually own the software—ownership rights belong to the software company, and you're still limited by the terms and conditions of the license.

Know what your software license says

A software license gives you the right to use a software product. It also governs the use of the software along with the copyright laws, which prevent the unauthorized distribution or reproduction of the software. A license might also specify, among other terms and conditions, whether or not you may install the software on more than one computer and whether or not you can create backup copies of the software.

Even free software, otherwise known as freeware, might come with a license that dictates its use. This is generally in order to prevent a user from altering the software in an attempt to resell it.

Before you install an application, always read the license. Most vendors won't negotiate or modify a software license; if it includes unfair or unreasonable terms, your only recourse might be to return the software to the vendor.

Don't pirate your software

Understanding the difference between buying and licensing software is also important because using more copies of the software—for instance, Microsoft Office—than you have licenses purchased can lead to lawsuits and fines. Pirated software is more common at small businesses, which are also the most susceptible to being put out of business by fines and legal fees. As well as making sure you are paying for every copy of the software you use, you'll also want to make sure that your employees understand your policy as well. If you can't afford to license software, keep in mind that open-source versions are often available for free.

FAQs about software ownership vs. licensing

Below we have summarized the most important questions and answers on the subject