Software License Agreement
A software licence agreement grants customers the right to use your software under defined conditions while the developer retains all IP ownership.
What is a Software License Agreement?
A software licence agreement grants a licensee (customer) the right to use software owned by the licensor (developer) under specified conditions. Unlike a SaaS subscription agreement, which governs cloud-based software access, a licence agreement is more commonly used for on-premise software, white-label products, and software development kits (SDKs).
The core distinction between a licence and a sale is ownership: the licensor retains all IP rights in the software. The licensee receives only the rights explicitly granted in the agreement — nothing more. This makes the scope of the licence (what can and cannot be done with the software) the most critical provision to get right.
When do you need a Software License Agreement?
- ✓When distributing on-premise software installed on customer infrastructure
- ✓When licensing an SDK or API to developers for integration into their own products
- ✓When selling a white-label product that will be resold or rebranded by the customer
- ✓When granting enterprise customers perpetual licences to a specific software version
- ✓When licensing software as part of a broader commercial agreement
Key provisions to include
Licence Grant
The specific rights granted — to use, copy, modify, sublicense, distribute — and any limitations.
Permitted Users
Who may use the software — named users, concurrent users, or unlimited deployment within an organisation.
Restrictions
What the licensee cannot do — reverse engineer, sublicense, share, or use competitively.
Fees & Royalties
Licence fee structure — one-time, annual, per-user, or royalty-based on downstream revenue.
IP Ownership
Explicit statement that the licensor retains all IP in the software.
Maintenance & Support
Whether bug fixes, updates, and support are included, and on what terms.
Term & Termination
Whether the licence is perpetual or time-limited, and grounds for early termination.
Common mistakes to avoid
Granting a broad licence without specifying restrictions — anything not restricted is potentially permitted
Not specifying whether the licence is exclusive or non-exclusive — non-exclusive is the commercial default
Failing to address what happens to software and data at licence termination
Not including audit rights to verify the customer is complying with usage restrictions
Frequently asked questions
What is the difference between a SaaS agreement and a software licence agreement?
A SaaS agreement governs access to cloud-hosted software delivered over the internet. A software licence agreement typically governs on-premise software installed on the customer's own infrastructure, or the distribution rights for software components. The structural difference is delivery mechanism: cloud access vs. installed deployment.
Related documents
Draft your Software License Agreement in minutes
Try Neureson free for 3 days — no credit card required.
Start for free →