What is a proprietary software licence?

Everything on this site about open source licences is about what an author gives away. A proprietary licence is the other direction: what an author keeps. It is less discussed because it is less romantic, and more relevant to most developers than any open source licence, because it is how software gets paid for.

What it grants and what it withholds

A proprietary licence grants the right to use the software. That is usually the whole of the grant.

It withholds everything else. No right to copy beyond what use requires. No right to modify. No right to redistribute. No right to reverse engineer, decompile, or extract the source. No right to sublicense or transfer, or transfer only on stated conditions. Ownership of every copy stays with the licensor.

proprietary licence
  │
  ├── grants ────► use, within a defined scope
  │
  └── withholds ─► the source
                   modification
                   redistribution
                   reverse engineering
                   sublicensing and transfer
                   ownership of any copy

Contrast that with the permissive licences, where the grant is close to everything and the withheld part is one notice. The two are opposite ends of a single scale, with copyleft in the middle. That scale is laid out in software license types.

The standard terms

Beyond grant and restriction, a proprietary licence covers the same ground every time.

Scope. Who may use it, on how many machines or seats, for what purpose. Internal business use only, or resale, or embedding.

Term. Perpetual, or for a period, or while a subscription is paid.

Territory. Rarely restricted for software; sometimes for export reasons.

Fees. What is paid, when, and what happens on non-payment.

Updates and support. Whether included, for how long, and whether the licence covers new versions.

Warranty. Usually a narrow warranty that the software substantially performs as documented, for a short period, and a disclaimer of everything else.

Liability. Capped, typically at fees paid. Excluding consequential loss.

Termination. On breach, on non-payment, on insolvency. And what the licensee must do on termination: stop using it, destroy copies, certify that they have.

Governing law. Which country’s courts, and whose law.

Perpetual versus subscription

A perpetual licence grants use of the licensed version indefinitely. Updates and support are sold separately, usually as an annual maintenance fee. If the customer stops paying maintenance they keep the version they have. This is the traditional model and customers like it because they own something.

A subscription grants use only while payment continues. Updates are included. Stop paying and the right to use ends. This is the current default for most commercial software because the revenue is predictable and the vendor controls the version in use.

Neither is more proprietary than the other. They are two payment structures under the same kind of licence.

┌─ WORTH CHECKING ─────────────────────────────────────────────────────┐
│                                                                      │
│  Private, finished, owned by you: $500+ each to AI labs.             │
│                                                                      │
│  [ See what my repos are worth ]                                     │
│                                                                      │
└──────────────────────────────────────────────────────────────────────┘

Writing one for your own software

The hole in every search result for this topic is that nobody explains what to actually write if you want to sell a small piece of software on your own terms. Here is a minimal structure. Not legal advice; a starting point for a conversation with someone who can give it.

1. Grant. Licensor grants Licensee a non-exclusive, non-transferable licence to install and use the Software on [number] devices for Licensee’s internal purposes.
2. Restrictions. Licensee shall not copy (except for backup), modify, distribute, sell, lease, sublicense, reverse engineer, decompile, or attempt to derive the source code of the Software.
3. Ownership. The Software is licensed, not sold. Licensor retains all right, title and interest, including all intellectual property rights.
4. Term. This licence is perpetual [or: continues while the subscription is paid] unless terminated under clause 7.
5. Fees. Licensee shall pay the fees set out in the order. Late payment suspends the licence.
6. Warranty and liability. The Software is provided as is. Licensor’s total liability is limited to the fees paid in the twelve months before the claim. No liability for indirect or consequential loss.
7. Termination. Licensor may terminate on material breach not cured within thirty days. On termination Licensee shall cease use and destroy all copies.
8. Governing law. [Jurisdiction].

Eight clauses. A page. It is not everything a large vendor’s EULA contains, and for most independent software it is enough to be clear about what is and is not being permitted, which is the entire purpose.

Proprietary, source-available, open source

Three positions on one scale, defined by what the licensee may do.

Open source grants use, modification, and redistribution to anyone, with conditions ranging from attribution to copyleft.

Source-available shows the source but restricts use, typically prohibiting competing services. Readable, not open. BUSL and SSPL are the common examples, and calling them open source is the marketing move to watch for.

Proprietary withholds the source and restricts use to what the licence grants. The default for commercial software, and the default position of any code that has not been licensed at all.

The state your unpublished code is in

This is the point worth ending on, because it reframes the whole topic.

Every private repository you own is proprietary right now. It is fully copyrighted, nobody has a copy, and nobody has permission to do anything with it. You have not written a licence because you have not granted anything. What copyright provides before any licence is added is covered in is code protected by copyright.

A proprietary licence is what you write when you decide to let someone use that code on your terms. That could be a customer paying for a tool. It could be a lab paying for a non-exclusive right to train on it, which is a proprietary licence in every meaningful sense: narrow grant, everything else withheld, ownership retained, fee paid.

The difference between those two customers is what they do with the grant. The structure is the same, and so is the precondition: it has to be yours. What makes a private repository licensable is worked through in can you license private repositories.

What to read next

• Software license types, the full scale from proprietary to public domain
• Is code protected by copyright, what you own before you license anything
• Dual licensing, running a proprietary licence alongside an open one