Software Licence Agreement Templates: UK Legal Guide

At a glance

• A licence grants permission, not ownership. The licensor keeps the copyright; the licensee only gets the rights the document specifically gives them.
• Copyright protects software automatically. A computer program is protected as a literary work from the moment it's written, with no registration required (Copyright, Designs and Patents Act 1988, s.3(1)(b)).
• Some user rights can't be excluded by contract. A lawful user's right to make a necessary back-up copy (s.50A) and, in limited circumstances, to decompile code for interoperability (s.50B) apply regardless of what the licence says. The right to adapt software to correct errors (s.50C) is narrower — it can be switched off by the agreement.
• Formality matters for assignments and exclusive licences. An assignment of copyright is only effective if it's in writing and signed (s.90(3)); an exclusive licence must also be in writing and signed (s.92). An ordinary non-exclusive licence has no such requirement.
• Consumer licensees get statutory digital content rights. Where the licensee is a consumer, sections 34 to 41 of the Consumer Rights Act 2015 imply terms that the software must be of satisfactory quality, fit for purpose and as described — and section 47 stops a trader excluding those rights by contract.
• Liability clauses face different tests depending on who you're dealing with. Business-to-business exclusions must satisfy the reasonableness test in the Unfair Contract Terms Act 1977; consumer exclusions of the CRA 2015 digital content rights are simply not binding, however they're worded.

What a software licence agreement is

A software licence agreement is a contract between the owner of software (the licensor) and someone who wants to use it (the licensee). Rather than selling the software outright, the owner grants permission to use it on specific terms. That distinction — permission, not ownership — runs through everything else in the document.

Under UK intellectual property law, a computer program is protected as a literary work under section 3(1)(b) of the Copyright, Designs and Patents Act 1988, automatically and from the moment it's recorded in writing or another fixed form. No registration or formality is needed for copyright to exist. The author, or their employer if it was written in the course of employment, keeps ownership unless they actively assign it. A licence is how the author allows others to use the work while keeping the underlying rights.

These agreements can cover almost anything: a one-off desktop application, a mobile app, a cloud-based SaaS platform, an API, or an open-source library. They apply whether the software is paid for or free, and whether it's aimed at consumers, businesses, or other developers.

The terms set out what the licensee can do (install, copy, modify, redistribute), what they can't, how long the permission lasts, and what happens if things go wrong. Without one, both parties are exposed: the owner has limited practical control over how the software is used, and the user has no clearly documented right to rely on it.

Licence vs assignment: why the distinction matters

A licence is permission. The licensor keeps the copyright and can, depending on the terms, licence the same software to other people, keep developing it, or terminate the licensee's rights if they breach the agreement.

An assignment is a transfer of ownership. Once copyright is assigned, the original author has no further control over the software unless the assignment reserves specific rights back to them. Assignments carry a formality that licences don't: under section 90(3) of the CDPA 1988, an assignment of copyright is not effective unless it is in writing and signed by or on behalf of the assignor. An ordinary non-exclusive licence has no equivalent requirement — it can, in principle, even be implied from the parties' conduct, though relying on that in practice is a poor substitute for a written agreement.

Most commercial software deals are licences. Assignments are less common, and tend to appear where a client has commissioned bespoke development and wants to own the resulting code outright, in company acquisitions where IP is being transferred, or in employment and contractor arrangements dealing with work created for the business. Confusing the two — for example, describing a deal as a "licence" when the parties actually intend a permanent transfer of ownership — is one of the more expensive drafting mistakes in this area, because the legal consequences (including tax treatment) differ substantially.

Types of software licence

Several independent choices shape what kind of licence you're granting or taking.

Perpetual vs subscription/SaaS. A perpetual licence is usually paid for with a one-off (or capped) fee and gives the licensee an ongoing right to use a specified version of the software indefinitely, though the licensor may still charge separately for updates or support. A subscription or SaaS licence ties the right to use the software to continued payment: access typically stops, sometimes immediately, when the subscription ends. SaaS arrangements often don't involve installing software locally at all — the licensee is really being given access to a hosted service, so the licence terms usually sit alongside separate service-level and data-handling commitments.

Exclusive, sole, or non-exclusive. Under a non-exclusive licence, the licensor can grant the same rights to other licensees and can go on using the software itself. Under a sole licence, the licensor agrees not to license anyone else, but keeps the right to use the software itself. Under an exclusive licence, the licensor agrees not to license anyone else and not to use the software itself either. Exclusive licences carry a formality requirement of their own: section 92 CDPA 1988 defines an exclusive licence as one that must be in writing and signed by or on behalf of the copyright owner, and section 101 gives an exclusive licensee broadly the same rights and remedies against infringers as if they had been assigned the copyright — a significant commercial and legal upgrade over an ordinary licence.

Open-source licences (MIT, GPL, Apache and others) are a distinct category: standard-form licences with pre-set conditions, commonly requiring attribution, source disclosure, or that derivative works be released under the same terms. They're licences in the same legal sense as any commercial agreement, just with terms the licensor doesn't get to negotiate.

The legal framework behind software licensing

Permitted acts that a licence cannot always override

UK copyright law gives a "lawful user" of a computer program certain minimum rights, and it's worth knowing which of them a licence can restrict and which it can't.

• Back-up copies (s.50A CDPA 1988): a lawful user can make any back-up copy that's necessary for their lawful use. The statute is explicit that any term in the agreement purporting to prohibit or restrict this is void.
• Decompilation for interoperability (s.50B): a lawful user can decompile a program, within tight conditions, if it's necessary to obtain information needed to create an independent, interoperable program and that information isn't used for anything beyond that purpose. As with back-up copies, a contract term trying to prohibit this doesn't affect the right.
• Error correction and other necessary acts (s.50C): a lawful user can copy or adapt a program where it's necessary for their lawful use — for example, to correct errors — but only if the agreement governing their use doesn't already prohibit it. Unlike the two rights above, this one can be switched off by the licence terms.

For a licensor drafting the agreement, this means some restrictions you might want to impose (no back-ups, no decompilation for interoperability purposes) simply won't be enforceable. Others (no error correction, no other adaptation) can be, provided the licence says so clearly.

Consumer digital content rights

Where the licensee is a consumer rather than a business, sections 34 to 41 of the Consumer Rights Act 2015 imply terms into the contract: the digital content must be of satisfactory quality, fit for any purpose made known to the supplier, and match its description. These sit alongside, not instead of, the copyright licence itself. Critically, section 47 provides that a term excluding or restricting the trader's liability under those sections, or making a consumer's remedies subject to an onerous condition, is simply not binding on the consumer — regardless of how the exclusion clause is drafted.

Limiting liability

Limitation and exclusion of liability clauses are one of the most commercially important, and most commonly mis-drafted, parts of a software licence, and the applicable test depends on who's on the other side of the table.

• Business-to-business licences are governed by the Unfair Contract Terms Act 1977. Clauses excluding liability for negligence causing loss other than death or personal injury, and most other exclusion or limitation clauses in standard-term contracts, must satisfy a reasonableness test to be enforceable. Liability for death or personal injury caused by negligence, and liability for fraud, can never be excluded.
• Consumer licences are additionally governed by Part 2 of the Consumer Rights Act 2015, which renders any contract term unfair — and therefore not binding on the consumer — if it causes a significant imbalance in the parties' rights to the consumer's detriment, contrary to good faith. As noted above, section 47 goes further still for the specific digital content rights in sections 34 to 41.

Key clauses a software licence agreement should cover

• Scope of the grant — exactly what's being licensed (the compiled application, source code, documentation, specific versions or modules), and what's excluded.
• Type and duration — exclusive, sole or non-exclusive; perpetual or subscription; whether it can be transferred or sublicensed.
• Permitted and prohibited uses — installation limits, number of devices or users, whether modification or redistribution is allowed.
• IP ownership and reservation of rights — a clear statement that the licensor retains ownership of the underlying copyright, and that the licence doesn't transfer it.
• Warranties — what the licensor promises about the software performing as described, and any disclaimers.
• Liability and indemnities — caps on financial liability, exclusions for indirect loss, and what happens if a third party claims the code infringes their rights.
• Updates and support — whether they're included, chargeable, or not provided at all.
• Termination and consequences — what triggers it (breach, non-payment, insolvency), and what the licensee must do with the software and any data afterwards.

How to use this document

1. Decide what you're actually licensing. Be precise about the software itself. Is it the compiled application only, or does it include source code, documentation, updates, or supporting services? Many disputes come from vague descriptions. Spell out versions, modules, and anything that sits alongside the core product.
2. Choose the licence type. Decide whether the licence should be exclusive, sole or non-exclusive, and whether it's perpetual or tied to ongoing payment. Remember that an exclusive licence needs to be in writing and signed to take effect as such under section 92 CDPA 1988 — a verbal or loosely worded "exclusive" arrangement may not carry the legal consequences you expect.
3. Set out permitted and prohibited uses. Be explicit about what the user can do. Can they copy the software onto multiple devices? Modify it? Reverse-engineer it? Sublicense it to their own customers? Remember that some statutory user rights, such as making a necessary back-up copy, cannot be excluded regardless of what the licence says, while others, such as adapting the software to correct errors, can be restricted if you say so clearly.
4. Deal with liability, warranties and IP indemnities. Decide what the licensor promises about the software working as described, and what happens if a third party claims the code infringes their rights. Check which regime applies to your liability clause — the reasonableness test under the Unfair Contract Terms Act 1977 for business licensees, or the stricter position under the Consumer Rights Act 2015 if the licensee is a consumer.
5. Plan for termination and what happens next. Cover how either party can end the agreement, what triggers automatic termination, and what the user must do with the software afterwards. If data or customer records sit inside the software, the exit arrangements matter enormously.

This guide provides general information about how software licence agreements work under the law of England and Wales. It is not legal advice, and it is not a substitute for advice tailored to your specific software, business model, and the counterparties you are dealing with. The law described was accurate as at August 2026 and is subject to change — always check legislation.gov.uk and GOV.UK for the most current position.