A software license is a legal instrument governing the use or redistribution of software.

Since the 1970s, software copyright has been recognized in the United States. Despite the copyright being recognized, most companies prefer to sell licenses rather than copies of the software because it enables them to enforce stricter terms on redistribution. Very few purchasers read any part of the license, initially shrink-wrap contracts and now most commonly encountered as clickwrap or browsewrap. The enforceability of this kind of license is a matter of controversy and is limited in some jurisdictions. Service-level agreements are another type of software license where the vendor agrees to provide a level of service to the purchaser, often backed by financial penalties.

Copyleft is a type of license that mandates derivative works to be licensed under the license's terms. Copyleft licenses are free and open source licenses. Attempts have been made to describe licenses which do not uphold the Four Freedoms, such as the Server Side Public License and others, as "copyleft", but this is widely rejected as an abuse of the term. The other types of free licenses lack this requirement: for permissive licenses, attribution is typically the only requirement, and public-domain-equivalent licenses have no restrictions. The proliferation of open-source licenses has compounded license compatibility issues, but all share some features: allowing redistribution and derivative works under the same license, unrestricted access to the source code, and nondiscrimination between different uses—in particular, allowing commercial use.

The source code (or compiled binaries in the form of object code) of a computer program is protected by copyright law that vests the owner with the exclusive right to copy the code. The underlying ideas or algorithms are not protected by copyright law, but are often treated as a trade secret and concealed by such methods as non-disclosure agreements. Software copyright has been recognized since the mid-1970s and is vested in the company that makes the software, not the employees or contractors who wrote it.

The tendency to license proprietary software, rather than sell it, dates from the time period before the existence, then the scope of software copyright protection was clear. These licenses have continued in use after software copyright was recognized in the courts, and are considered to grant the company extra protection compared to copyright law. According to United States federal law, a company can restrict the parties to which it sells but it cannot prevent a buyer from reselling the product. Software licensing agreements usually prohibit resale, enabling the company to maximize revenue.

Traditionally, software was distributed in the form of binary object code that could not be understood or modified by the user, but could be downloaded and run. The user bought a perpetual license to use a particular version of the software. Software as service (SaaS) vendors—who have the majority market share in application software as of 2023^[update]—rarely offer perpetual licenses. SaaS licenses are usually temporary and charged on a pay-per-usage or subscription basis, although other revenue models such as freemium are also used. For customers, the advantages of temporary licenses include reduced upfront cost, increased flexibility, and lower overall cost compared to a perpetual license. In some cases, the steep one-time cost demanded by sellers of traditional software were out of the reach of smaller businesses, but pay-per-use SaaS models makes the software affordable.

Initially, end-user license agreements (EULAs) were printed on either the shrinkwrap packaging encasing the product (see shrink-wrap contract) or a piece of paper. The license often stipulated that a customer agreed if they did not return the product within a specified interval. More recently, EULAs are most commonly found as clickwrap or browsewrap where the user's clicks or continued browsing are taken as a sign of agreement. As a result of the end of physical constraints, length increased. Most EULAs have been designed so that it is very difficult to read and understand them, but easy to agree to the licensing terms without reading them. Regardless of how easy it is to access, very few consumers read any part of the license agreement. Most assume the terms are unobjectionable or barely notice agreeing while installing the software. Companies take advantage of consumers' inattention to insert provisions into EULAs.

Proprietary software is usually offered under a restrictive license that bans copying and reuse and often limits the purchaser to using the software on one computer. Source code is rarely available. Derivative software works and reverse engineering are usually explicitly prohibited. Many EULAs allow the vendor to collect information about the user and use it in unrestricted ways. Some EULAs restrict the ability of users to exercise copyright over derivative work made using the software, such as creative creations in the virtual worlds of video games.