Types Of Software Licence Models In The UK
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Understanding software licence models helps UK businesses choose the right terms, manage risk, and protect intellectual property. For practical contract support, see our AI Generated British Software Licence Agreement resources.
Licence Model | Description | Common Use Cases | Typical Fee Structure | Contract Complexity |
|---|---|---|---|---|
Perpetual licence | ||||
Perpetual Software Licence | Customer receives ongoing rights to use a specified software version, usually subject to licence conditions. | On-premise software, legacy business systems and products sold with long-term use rights. | One-off fee | Medium |
Subscription licence | ||||
Subscription Software Licence | Rights to use the software continue only during a paid subscription term. | SaaS platforms, hosted applications and software with frequent updates. | Recurring fee | Medium |
Fixed-Term Software Licence | Software may be used for a defined period without necessarily renewing automatically. | Project deployments, public sector contracts and temporary business initiatives. | One-off fee, Recurring fee | Medium |
Auto-Renewing Subscription Licence | Licence renews automatically unless cancelled within the agreed notice period. | Commercial SaaS, productivity tools and continuously supported applications. | Recurring fee | Medium |
Monthly Rolling Licence | Licence runs month to month and can usually be cancelled on short notice. | Small business SaaS, flexible team tools and low-commitment software purchases. | Recurring fee | Low |
Annual Prepaid Subscription Licence | Customer pays upfront for a year of software access and use rights. | Business SaaS, discounted annual plans and budgeting certainty. | Recurring fee | Low |
Trial licence | ||||
Free Trial Licence | Software may be used free of charge for a limited evaluation period. | Lead generation, product evaluation and self-service SaaS onboarding. | Free of charge | Low |
Paid Trial Licence | Customer pays a reduced fee to evaluate the software for a short period. | Enterprise pilots, proof-of-concept deployments and controlled evaluations. | One-off fee | Medium |
Proof-of-Concept Licence | Limited licence for testing feasibility against agreed technical or commercial criteria. | Enterprise procurement, integrations and pre-contract technical validation. | Free of charge, One-off fee | Medium |
Beta Testing Licence | Pre-release software is licensed for testing, feedback and defect reporting. | Product launches, user testing and controlled release programmes. | Free of charge | Medium |
Evaluation-Only Licence | Use is restricted to assessment and excludes production or commercial use. | Pre-sales reviews, procurement testing and vendor comparisons. | Free of charge, One-off fee | Low |
Enterprise licence | ||||
Enterprise-Wide Licence | Broad licence covering many users, teams or group companies within an enterprise. | Large organisations standardising software across departments or subsidiaries. | Mixed pricing | High |
Enterprise licence, Subscription licence | ||||
Enterprise Subscription Agreement | Large-scale subscription covering agreed products, users and support levels. | Strategic vendor relationships and multi-year digital transformation programmes. | Recurring fee, Mixed pricing | High |
Enterprise licence | ||||
Master Software Licence Agreement | Framework agreement governing multiple orders, products or deployments over time. | Ongoing supplier relationships, repeat software purchases and modular services. | Mixed pricing | High |
Enterprise licence, User-based licence, Device-based licence | ||||
Volume Licence | Customer receives multiple licences, often with tiered pricing or centralised management. | Businesses buying software for many employees, laptops or workstations. | Mixed pricing | Medium |
Enterprise licence | ||||
Group Company Licence | Use rights extend to named or defined affiliates within a corporate group. | UK parent companies, multinational groups and shared service centres. | Mixed pricing | High |
Site licence | ||||
Single-Site Licence | Software may be used at one specified physical location. | Schools, offices, labs, factories and single-location businesses. | One-off fee, Recurring fee | Low |
Site licence, Enterprise licence | ||||
Multi-Site Licence | Software use is permitted across several named or defined locations. | Retail chains, universities, NHS suppliers and distributed businesses. | Mixed pricing | Medium |
Site licence | ||||
Campus Licence | Licence covers users or devices within an educational campus or institution. | Universities, colleges, research institutions and teaching labs. | Recurring fee, Mixed pricing | Medium |
Site licence, Enterprise licence | ||||
Territory-Limited Licence | Use rights are limited to a defined country, region or territory. | UK-only deployments, regulated sectors and territorially priced software. | One-off fee, Recurring fee | Medium |
User-based licence | ||||
Named User Licence | Only individually identified users may access or use the software. | Professional software, SaaS seats and regulated access controls. | Recurring fee, One-off fee | Low |
Per-Seat Licence | Customer buys a set number of seats for authorised users. | Team collaboration tools, office software and CRM systems. | Recurring fee, One-off fee | Low |
Authorised User Licence | Use is limited to users authorised by the customer or supplier. | Business applications requiring account-based access and user administration. | Recurring fee | Low |
Active User Licence | Charges apply based on users active during a billing or measurement period. | SaaS platforms with fluctuating user populations. | Usage-based fee, Recurring fee | Medium |
Registered User Licence | Charges apply for each user registered in the system, whether active or not. | Customer portals, compliance systems and internal business applications. | Recurring fee | Low |
User-based licence, Enterprise licence | ||||
Employee-Count Licence | Fees are calculated by reference to total employees or workforce size. | HR software, intranet tools and company-wide compliance platforms. | Recurring fee, Mixed pricing | Medium |
User-based licence | ||||
External User Licence | Permits defined third parties to access software connected to the customer. | Customer portals, supplier platforms and partner extranets. | Recurring fee, Usage-based fee | Medium |
Device-based licence | ||||
Per-Device Licence | Software may be installed or used on a specified number of devices. | Desktop software, point-of-sale systems and shared workstations. | One-off fee, Recurring fee | Low |
Per-Installation Licence | Each installed copy of the software requires a separate licence. | Desktop applications, engineering tools and local server products. | One-off fee, Recurring fee | Low |
Per-Server Licence | Licence is based on the number of servers running the software. | Database software, middleware and on-premise server applications. | One-off fee, Recurring fee | Medium |
Per-CPU Licence | Fees are based on the number of processors used to run the software. | High-performance server software and infrastructure platforms. | One-off fee, Recurring fee | Medium |
Per-Core Licence | Fees are calculated by reference to processor cores allocated to the software. | Databases, virtualised servers and enterprise infrastructure software. | One-off fee, Recurring fee, Mixed pricing | High |
Virtual Machine Licence | Licence is measured by virtual machines or virtual instances running the software. | Cloud deployments, private clouds and virtualised enterprise environments. | Recurring fee, Usage-based fee | High |
Container-Based Licence | Licence is measured by containers, clusters or containerised deployments. | Kubernetes deployments, DevOps platforms and microservices architecture. | Recurring fee, Usage-based fee | High |
Concurrent user licence | ||||
Concurrent User Licence | A maximum number of users may access the software at the same time. | Shared professional tools, CAD software and shift-based workforces. | One-off fee, Recurring fee | Medium |
Floating Licence | Licences are shared from a pool and checked out while in use. | Engineering, design, data analysis and specialist software used intermittently. | One-off fee, Recurring fee | Medium |
Concurrent user licence, Site licence | ||||
Network Licence | Software is accessed over a network subject to user, device or location limits. | Office networks, labs and shared internal software deployments. | One-off fee, Recurring fee | Medium |
Subscription licence | ||||
Metered Usage Licence | Charges depend on measured consumption such as transactions, minutes or records. | Cloud software, communications platforms and data processing services. | Usage-based fee | Medium |
Pay-As-You-Go Licence | Customer pays only for actual software usage during each billing period. | Cloud services, APIs, developer tools and variable workloads. | Usage-based fee | Medium |
API Call Licence | Licence and fees are based on the number of API requests or calls. | Data APIs, AI services, payment tools and integration platforms. | Usage-based fee, Mixed pricing | Medium |
Transaction-Based Licence | Charges are linked to completed transactions processed through the software. | Fintech, ecommerce, booking platforms and payment processing software. | Usage-based fee, Mixed pricing | High |
Enterprise licence | ||||
Revenue-Share Licence | Licensor receives a percentage of revenue generated using the software. | Platforms, embedded software, marketplaces and commercial partnerships. | Usage-based fee, Mixed pricing | High |
Subscription licence, Trial licence | ||||
Freemium Licence | Basic software use is free, with paid upgrades for features, users or limits. | Consumer apps, developer tools and self-service business SaaS. | Free of charge, Mixed pricing | Medium |
Subscription licence | ||||
Feature-Tier Licence | Different licence tiers unlock different functions, limits or service levels. | SaaS pricing plans, product-led growth and segmented customer offerings. | Recurring fee, Mixed pricing | Medium |
Subscription licence, Enterprise licence | ||||
Module-Based Licence | Customer licenses selected software modules rather than the whole product suite. | ERP, CRM, finance systems and configurable enterprise software. | Mixed pricing | Medium |
Subscription licence | ||||
Add-On Licence | Additional features or capacity are licensed on top of a base product. | Analytics packs, integrations, premium support and extra storage. | Recurring fee, One-off fee, Mixed pricing | Low |
Source code licence | ||||
Source Code Licence | Licensee receives rights to access, use or modify the software source code. | Customisation, internal development, critical systems and vendor handover. | One-off fee, Mixed pricing | High |
Source Code Escrow Licence | Source code is held by an escrow agent and released after agreed trigger events. | Business-critical software, insolvency risk and long-term supplier dependency. | Recurring fee, One-off fee | High |
Modification Rights Licence | Licensee may adapt or modify software within agreed contractual boundaries. | Bespoke systems, internal tools and customer-specific integrations. | One-off fee, Mixed pricing | High |
Derivative Works Licence | Licence permits creation of adaptations or derivative software based on original code. | Custom products, forks, client-specific versions and software localisation. | One-off fee, Mixed pricing | High |
Source code licence, Enterprise licence | ||||
Internal-Use Source Code Licence | Source code may be used and modified only for the customer's internal business purposes. | Enterprise customisation, regulated operations and in-house maintenance. | One-off fee, Mixed pricing | High |
Enterprise licence | ||||
OEM Licence | Software is licensed for bundling with another supplier's hardware or software product. | Hardware devices, embedded systems and packaged commercial products. | One-off fee, Usage-based fee, Mixed pricing | High |
Device-based licence, Enterprise licence | ||||
Embedded Software Licence | Software is licensed as part of a device, machine or hardware product. | IoT devices, medical devices, vehicles, appliances and industrial equipment. | One-off fee, Usage-based fee, Mixed pricing | High |
Enterprise licence | ||||
White-Label Software Licence | Licensee may rebrand and supply the software under its own brand. | SaaS resellers, fintech platforms and agency-delivered client portals. | Recurring fee, Usage-based fee, Mixed pricing | High |
Reseller Licence | Licensee may resell licences to end customers under agreed terms. | Channel sales, value-added resellers and software distribution networks. | Mixed pricing | High |
Distributor Licence | Distributor is authorised to market and distribute software in a defined channel or territory. | International expansion, indirect sales and sector-specific software channels. | Mixed pricing | High |
Enterprise licence, User-based licence | ||||
Managed Service Provider Licence | MSP may use software to provide services to its own customers. | IT outsourcing, security monitoring, cloud management and hosted services. | Recurring fee, Usage-based fee, Mixed pricing | High |
Enterprise licence, Source code licence | ||||
Sublicensable Licence | Licensee may grant defined software use rights to permitted third parties. | Platforms, partner ecosystems, group companies and outsourced service delivery. | Mixed pricing | High |
User-based licence, Device-based licence | ||||
Non-Transferable Licence | Licence rights cannot be assigned, transferred or shared without permission. | Standard commercial software, individual accounts and controlled deployments. | One-off fee, Recurring fee | Low |
Perpetual licence | ||||
Transferable Licence | Licence may be transferred to another party if contractual conditions are met. | Business sales, asset disposals and perpetual licence portfolios. | One-off fee | Medium |
Enterprise licence, Source code licence | ||||
Exclusive Software Licence | Only the licensee may exercise defined rights, potentially excluding the owner. | Strategic partnerships, sector exclusivity and commissioned software commercialisation. | One-off fee, Recurring fee, Mixed pricing | High |
Perpetual licence, Subscription licence | ||||
Non-Exclusive Software Licence | Licensor may grant the same or similar rights to multiple customers. | Most commercial off-the-shelf software and SaaS products. | One-off fee, Recurring fee | Low |
Enterprise licence, Source code licence | ||||
Sole Software Licence | Only the licensor and one licensee may use the defined rights. | Joint ventures, bespoke software and semi-exclusive commercial arrangements. | One-off fee, Recurring fee, Mixed pricing | High |
User-based licence, Enterprise licence | ||||
Internal Business Use Licence | Software may be used only for the customer's internal business operations. | Standard B2B software and restrictions against service bureau use. | One-off fee, Recurring fee | Low |
Enterprise licence, User-based licence | ||||
Service Bureau Licence | Licensee may use software to process data or provide services for third parties. | Payroll bureaux, outsourcing providers, hosting providers and data processors. | Recurring fee, Usage-based fee, Mixed pricing | High |
User-based licence, Device-based licence | ||||
Client Access Licence | Users or devices need access licences to connect to server software. | Server products, enterprise networks and controlled internal access. | One-off fee, Recurring fee | Medium |
Subscription licence, User-based licence | ||||
SaaS Access Licence | Customer receives online access to hosted software rather than a local copy. | Cloud applications, web platforms and managed online software services. | Recurring fee, Usage-based fee | Medium |
Enterprise licence, Device-based licence | ||||
Private Cloud Licence | Software is licensed for deployment in the customer's private cloud environment. | Regulated sectors, security-sensitive workloads and enterprise infrastructure. | Recurring fee, Mixed pricing | High |
Perpetual licence, Subscription licence, Device-based licence | ||||
Bring Your Own Licence | Customer applies existing licence entitlements to an approved cloud or hosted environment. | Cloud migration, hybrid infrastructure and enterprise licence optimisation. | Mixed pricing | High |
Device-based licence, Enterprise licence | ||||
Disaster Recovery Licence | Permits standby or backup use for disaster recovery or business continuity. | Business-critical systems, backup sites and resilience planning. | One-off fee, Recurring fee, Mixed pricing | Medium |
Trial licence, Device-based licence | ||||
Development And Testing Licence | Software may be used only in development, staging or test environments. | Software projects, QA environments and non-production testing. | Free of charge, One-off fee, Recurring fee | Low |
Trial licence, Subscription licence | ||||
Sandbox Licence | Software access is limited to isolated testing or experimentation environments. | API testing, developer onboarding and safe integration work. | Free of charge, Recurring fee | Low |
User-based licence, Site licence | ||||
Academic Licence | Discounted or restricted licence for teaching, research or educational use. | Universities, schools, colleges, students and academic researchers. | Free of charge, Recurring fee, Mixed pricing | Medium |
User-based licence, Trial licence | ||||
Student Licence | Licence for individual students, often restricted to learning and non-commercial use. | Learning software, design tools and programming environments. | Free of charge, Recurring fee | Low |
Trial licence, Open source-related licence | ||||
Non-Commercial Licence | Software may be used only for non-commercial purposes. | Education, charities, personal projects and community use. | Free of charge, One-off fee | Medium |
Subscription licence, User-based licence | ||||
Charity Licence | Discounted or free licence for eligible charitable or non-profit organisations. | UK charities, social enterprises and non-profit operational software. | Free of charge, Recurring fee, Mixed pricing | Low |
Open source-related licence | ||||
Open Source Licence | Software is licensed under terms allowing access, use, modification and redistribution. | Community projects, developer tools, infrastructure software and shared libraries. | Free of charge | Medium |
Permissive Open Source Licence | Allows broad use and redistribution with limited obligations such as notices. | Libraries, commercial-friendly components and developer frameworks. | Free of charge | Low |
Copyleft Open Source Licence | Redistributed modified versions must usually be licensed under the same terms. | Community software, shared improvements and code intended to remain open. | Free of charge | High |
Weak Copyleft Licence | Copyleft obligations apply more narrowly, commonly to modified library code. | Software libraries used in proprietary or mixed-source applications. | Free of charge | High |
GPL-Style Licence | Strong copyleft licence requiring downstream freedoms when covered software is distributed. | Open source applications and projects prioritising software freedom. | Free of charge | High |
LGPL-Style Licence | Library-focused licence allowing linking with proprietary software subject to conditions. | Reusable libraries and components embedded in wider software products. | Free of charge | High |
AGPL-Style Network Copyleft Licence | Network users may receive source code rights for modified server-side software. | Hosted open source applications and network-facing services. | Free of charge | High |
Apache-Style Licence | Permissive licence with express patent licence and notice requirements. | Commercial-friendly open source projects and infrastructure software. | Free of charge | Medium |
MIT-Style Licence | Short permissive licence allowing broad reuse with copyright and permission notices. | JavaScript packages, small libraries and commercial reuse-friendly code. | Free of charge | Low |
BSD-Style Licence | Permissive licence allowing reuse with attribution and limited endorsement restrictions. | Operating system components, libraries and academic software projects. | Free of charge | Low |
Creative Commons Code Asset Licence | Licence often used for software documentation, datasets or media, not core code. | Documentation, training materials, sample content and non-code assets. | Free of charge | Medium |
Open source-related licence, Enterprise licence | ||||
Dual Licensing Model | Software is offered under an open source licence or a separate commercial licence. | Open-core businesses, commercial exceptions and enterprise customers avoiding copyleft. | Free of charge, Recurring fee, Mixed pricing | High |
Open source-related licence, Subscription licence | ||||
Open-Core Licence Model | Core product is open source while premium features are commercially licensed. | Developer platforms, infrastructure tools and community-led SaaS businesses. | Free of charge, Recurring fee, Mixed pricing | High |
Open source-related licence, Trial licence | ||||
Community Edition Licence | Free or open version with limited features, scale or support compared with paid editions. | Developer adoption, small teams and open source project communities. | Free of charge | Medium |
Open source-related licence, Subscription licence | ||||
Commercial Open Source Support Licence | Software may be open source, but paid support, warranties or services are contracted separately. | Enterprise adoption of open source databases, frameworks and infrastructure tools. | Recurring fee, Mixed pricing | Medium |
Perpetual licence, Open source-related licence | ||||
Royalty-Free Licence | Licensee may use the software without ongoing royalties after grant or payment. | Developer SDKs, embedded components and commercially reusable libraries. | One-off fee, Free of charge | Medium |
Enterprise licence, Source code licence | ||||
Royalty-Bearing Licence | Licensee pays royalties based on sales, deployments, users or other commercial metrics. | Embedded software, licensed IP, OEM deals and commercial redistribution. | Usage-based fee, Mixed pricing | High |
Perpetual licence, Subscription licence | ||||
Maintenance-Only Licence | Use rights already exist fees cover updates, fixes or support services. | Perpetual licences with annual support and update arrangements. | Recurring fee | Medium |
Update And Upgrade Licence | Licence defines rights to patches, minor updates and major new versions. | Long-term deployed software and products with versioned releases. | Recurring fee, One-off fee, Mixed pricing | Medium |
Device-based licence, Perpetual licence | ||||
Offline Licence | Software may be used without continuous internet access or online activation. | Secure environments, remote sites, defence, manufacturing and field operations. | One-off fee, Recurring fee | Medium |
Device-based licence | ||||
Node-Locked Licence | Software is locked to a particular machine, hardware identifier or environment. | Engineering tools, specialist desktop software and secure deployments. | One-off fee, Recurring fee | Low |
Device-based licence, Concurrent user licence | ||||
Hardware Dongle Licence | Software use is controlled by a physical hardware key or dongle. | Specialist design, media, engineering and industrial software. | One-off fee | Low |
Subscription licence | ||||
Data-Limited Licence | Usage rights or fees depend on storage, records, datasets or data volume. | Analytics tools, data platforms, backups and document management systems. | Usage-based fee, Recurring fee | Medium |
Subscription licence, Enterprise licence | ||||
Output-Based Licence | Fees or restrictions depend on generated outputs such as reports, images or documents. | AI tools, reporting software, rendering platforms and document automation. | Usage-based fee, Mixed pricing | High |
AI Model Usage Licence | Licence governs use of AI models, prompts, outputs, limits and permitted applications. | Generative AI services, embedded AI features and automated decision tools. | Usage-based fee, Recurring fee, Mixed pricing | High |
Dataset-Linked Software Licence | Software use is bundled with rights to access or process licensed datasets. | Market data platforms, research tools, AI training platforms and analytics products. | Recurring fee, Usage-based fee, Mixed pricing | High |
Enterprise licence, Subscription licence | ||||
Government Framework Software Licence | Licence is procured under public sector framework or government commercial terms. | UK public sector SaaS, cloud services and technology procurement. | Recurring fee, Mixed pricing | High |
How Should UK Businesses Choose A Software Licence Model?
The licence model should match how the software is deployed, paid for and audited. Perpetual and subscription licences usually need clear clauses on term, renewal, support, updates and termination. User-based, device-based and concurrent models need precise definitions of user, device, session and audit rights to avoid disputes.
Which Software Licence Models Usually Need More Detailed Contract Terms?
Enterprise, source code, escrow, white-label, OEM, reseller and managed service provider models are usually more complex because they involve wider usage rights, sublicensing, redistribution, integration, confidentiality, intellectual property ownership and post-termination obligations.
What Should Be Checked For Open Source Software In The UK?
Open source-related models can be free of charge but legally important. Copyleft licences may require source code disclosure or downstream licence terms when software is distributed. UK businesses should track open source components, licence notices and attribution obligations, especially where software is supplied to customers or embedded in products.
What Pricing Risks Should Customers Look For?
Usage-based, metered, cloud, API and consumption models should specify measurement methods, reporting periods, overage charges, price increases and suspension rights. Subscription and SaaS licences should also cover renewal mechanics, cancellation deadlines and access to data at the end of the term.
Why Does The Licence Need To Reflect UK Legal And Regulatory Context?
Software licence agreements for UK use should align with UK contract law, copyright ownership and data protection obligations. Where software processes personal data, the agreement may need UK GDPR-compliant processor terms, security commitments and rules for international transfers.
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FAQs
The main types include proprietary licences, open source licences, subscription or SaaS licences, perpetual licences, enterprise licences, user-based licences, site licences and trial or evaluation licences.
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