Principles of Software Licensing

1. One way to define a contract is as an exchange of promises for which the law is willing to remedy a failure to perform. A contract is a state of affairs existing between parties. To call a document a contract is, strictly speaking, incorrect. But a document may be evidence of a contract.

2. A license is not a contract. A license is a permission granted by one party to another allowing the use of intellectual, personal or real property. Its sole purpose is to extinguish the fear of lawsuit for infringement or trespass. Stated another way, a license is a single party's promise not to sue. Since a license by itself does not involve any exchange (i.e., mutuality of consideration), it never alone creates a state of contract.

3. It is never correct to refer to a license as having beenbreached or violated by a licensee.  Breach is a term of art under contract law doctrine, and it is just strange to say that a promise by one party has been violated by another party. Rather, a wrongdoing licensee may be said to haveexceeded the scope of a license, and, as a result, to have infringed a property owner's rights. Similarly, a license is never properly said to be enforced by the licensor. A license is a shield, not a sword, available to the licensee. It is used only to defend a licensee against an owner's claim of infringement. However, it can be said, somewhat colloquially, that a licensee may ask a court to enforce a license.

4. Despite the fact that a license is not itself a contract, a license might be an element of a contract. In other words, the license-- which is a promise not to sue-- can sometimes be given in exchange for a promise by another party, perhaps a promise to pay money or a return license. A contract that includes a software license as a party's promissory obligation is usually called a software license agreement.* This contrasts with a so-called bare license, which, as discussed above, does not include an element of return consideration.**

5. When a license is consideration in a contract, the license may be enforced under the law of contract. Generally speaking, as long as the licensee has not materially breached that contract, and it is not otherwise void or voidable, then the licensee is entitled to protection under the license. On the other hand, if a licensee under a license agreement materially breaches that agreement, then the contract may be terminated by the licensor, resulting in the licensee's loss of license.

6. A bare license-- which, by definition, is not a part of a contract-- must be enforced outside the rubric of contract law. A bare license is enforceable by the licensee under either equity concepts such as promissory estoppel or, alternatively, under property law that independently recognizes the effectiveness of licenses as a means for unbundling and sharing ownership interests.

* Software vendors like Microsoft and Intuit sell licenses to desktop software products. They often include in their products the terms of a software license agreement-- sometimes called an end user license agreement (EULA)-- to which a user must agree.

** The General Public License (GPL) and the Berkeley Software Distribution (BSD) license are examples of bare licenses.