Software License Management

What is software license management?

Software license management exists to protect the value of software intellectual property. But what does that really mean?

Intellectual property (IP) is an asset that is not physical in nature but was instead created by the mind. It could be a story, a work of art, a mathematical equation, or computer code. The latter is referred to as Software IP.

Like all IP, the default position is that Software IP belongs to the individual or company that created it. Ownership can be transferred through legal agreement (e.g, by purchasing the rights to it) or an organization commissioning a project will often require that they own all IP generated by the project.

Unauthorized distribution or use of Software IP is illegal. Only the IP owner can grant authorization—normally in the form of a software license agreement. This is in essence a "lease" of the software, not a sale—it is a right to use, explained in the license agreement.

For many companies large and small, it is through licensing their Software IP that they generate revenue. Whether they think about it in those terms or not, this is exactly what software publishers do every day.

This ability to generate revenue makes Software IP directly valuable to the owner. But Software IP is also an asset contributing directly to the valuation of a company. This is critical to new startups when raising capital and for established companies’ real-world valuation when an exit is planned. Developing IP is also expensive—companies need to show a return on the investment (a profit), which means the company needs to protect the IP and its value.

Protecting value with software license management

When granting someone the right to use your software IP, you will set rules around that usage and probably specify payments the user has to make in return for using your IP. These will be defined in the license agreement the user agrees to. Even open source software does this: there are restrictions on how the software can be distributed, and a specified price (usually free, but not always).

car theft breaking lock

While license agreements define legal rules, they do not put any physical limitations on the usage of your software. This is where software license management comes in. In the context of protecting value, software license management provides the physical barriers to ensure the rules you defined in the license agreement, as well as any payment terms, are enforced.

Think of it this way. It may be illegal for someone to drive off in your car without your permission, but you wouldn’t park it on a busy street without locking the door and turning the alarm on. Software license management is the lock and alarm for your valuable IP.

How does software license management work?

License management systems protect Software IP by issuing a digital token to users. This token—often called simply a “license” or “license key”—encapsulates the rules defined under the legal agreement.

It is the job of the software application being licensed to validate the token by only giving access to the application’s functionality if the token is valid. With solutions like PACE Licensing, the validation can be performed without requiring any code to be written by the developer of the software being licensed.

The digital token and how it is validated take many different forms. Common forms include:

  • An activation code the user would enter into the software’s user interface
  • A digital certificate deposited into a USB key
  • A cloud service that stores the entitlements against a user’s account

The correct form to use depends on developer requirements, Software IP type, and the practicalities of the end-user environment.

Therefore, a license management platform consists of two parts: a license generation and distribution service, and a client-side component that validates the license.

The importance of security

No matter how the licensing solution is integrated into your software, it is important that it stays integrated. If someone can decouple or circumvent the licensing code within your software, then they can use it without authorization.

Software is not the sealed box it often appears to a user. Hackers use reverse engineering techniques to first understand and then modify software. These techniques are almost as old as computer programming itself and easy to learn by any competent software developer.

Programmer working about software cyberspace

Hackers create modified versions of software applications and plugins with the licensing checks nullified, colloquially known as “cracks”. The existence of a crack can very quickly destroy the value of the Software IP—and the valuation of the company that owns it.

This means that software license management cannot simply be a functional implementation. Preventing software piracy means building a robust solution based on software security technologies (obfuscation, anti-tamper and white-box cryptography). These technologies harden the software, thwarting attempts to create a cracked version.

A license gives a customer access to your software and the rights to use that software. A secure license ensures that only the customer you intended can use those rights.

Deploying secure license management

PACE’s Software License Management Platform is unique in the software license management world because it focuses on security. This is due to the culture within the organization: PACE is a security-first company. PACE builds defenses in one of the most heavily cracked industries, and its reputation is that it has the only truly secure product. To achieve this, PACE had to become a global leader in software security, and that security technology is a fundamental component of the PACE Licensing platform.

All of which means our customers are protected from cracking, and their value is secure.

To learn more about how we protect the value of our customer’s software IP, reach out to schedule a demo.

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