Everything You Should Know About Proprietary Software

When it comes to using third party software, things can get tricky regarding rights. There are typically two costs associated with the use of software: the purchase of the program and the license to use it.

There are several types of licenses as far as software is concerned. For example, open-source software is freely available for anyone to use and modify as they please.

On the opposite end of the legal rights spectrum is proprietary software. Proprietary software can be expensive and its use is often heavily restricted by its owner, which is why many businesses opt to develop their own proprietary software instead.

What Is Proprietary Software?

Proprietary software has proprietary rights, meaning the user only has the right to use the program and not modify or share it. Proprietary software can be used in many ways but is often found in proprietary operating systems.

To use proprietary software, you must purchase a license. For example, Windows is proprietary software and you need to purchase a license in order to use it.

If you buy proprietary software and never install it, that's fine–but you still need to buy a license for every computer on which you want to run the program, even if those computers are personal and are not being used as part of a business or school.

It's important to note that even though you purchased the license, you do not own the software. The software company still owns the copyright to the program and can revoke your license if you don't follow its usage rules. Additionally, since you are not the owner, you can not resell or modify the software.

In contrast, if you decide to develop your own custom software (or hire a developer to do so for you), then you’ll have complete ownership and control over your own proprietary software.

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Origin And History

Back in the day, computer systems were massive. These systems were not available to the everyday user due to their size and cost. In fact, most organizations would lease computers instead of buying them.

The computer manufacturers would supply software for the computers they leased free of charge. They would even provide the source code. It wasn’t until 1969 that IBM began to charge separately for the use of their software.

Although there were many complaints about the copyright infringement of software, it wasn’t until 1983 that binary software became copyrightable in the U.S.

Prior to the judicial case of Apple Computer, Inc. v. Franklin Computer Corp, only source code had been copyrightable, which meant that anyone could modify the source code and use the derivatives however they wanted. The legal rulings in this case essentially birthed proprietary software.

Proprietary Software Today

Proprietary software has become an enormous industry. Billions of dollars are made every year from selling proprietary operating systems, software programs, and more. And while open-source software continues to grow in popularity, proprietary software is still very much alive and well.

However, there have been some recent controversies involving proprietary software. For example, Microsoft has been caught trying to shut down open-source projects several times to try and make it more difficult for users to switch to open-source alternatives. Moreover, Apple has been criticized for its closed system, which doesn't allow users much freedom or flexibility.

It’s these restrictions on existing proprietary software solutions that have led many businesses to develop their own software programs.

The Legal Limitations of Using Proprietary Software

Proprietary software is only legal if you have a license to use it. If you buy the license to a proprietary program, you must agree to any terms and conditions set out by the copyright owner. If there are no restrictions on how or where you can install proprietary software, then it's considered "free," however this is rare.

Most proprietary licenses are very restrictive, often prohibiting the software from being shared or modified. Moreover, as part of the license you must agree to never to sue the copyright owner if something goes wrong with the program. Violating these terms can result in your license being revoked and legal action being taken against you.

Hence, it's not uncommon for proprietary licenses to include an "anti-reverse engineering" clause prohibiting attempts to gain access, alter, or copy the software. In other words, proprietary licensing is meant to protect a company's investment in its proprietary information and prevent people from using their system however they please.

Some Limitations Of The Licenses

As proprietary software is proprietary to the company who developed it, they are the ones in charge of enforcing its terms. Doing so can create problems because proprietary licenses aren't always easily enforceable under copyright law; instead, many use contract or trade secret law as their legal basis.

Such legal basis is used when a term within an agreement isn't allowed by copyright law in one way or another. For example, a proprietary software license might forbid reverse engineering of the program to discover its source code.

Enforcing such a term would be illegal under copyright laws because it prevents people from accessing and using their own property (the computer) as they see fit.

Hence, many proprietary licenses include clauses that require disputes to be settled by arbitration and the terms to be enforced under contract law. Doing so makes proprietary licenses easier for companies to enforce.

It also gives more control to the owner of the proprietary software than a copyright could provide–which is why proprietary software licenses are sometimes criticized as being “unfair” for consumers.

What Exclusive Rights Can A Proprietary Software Owner Exercise?

A proprietary software license gives the copyright owner several exclusive rights, including the right to:

  • Sell, distribute, or lease the software program
  • Control how and where the software program is used
  • Decide who can access the software program and under what conditions
  • Restrict reverse engineering or modification of the program
  • Protect their investment in the proprietary information

It's essential to be aware of these restrictions before agreeing to any proprietary license terms. These terms are legally binding, and you may face consequences if you violate the terms of the license.

With that in mind, the following are some of the restrictions that software owners can apply to their proprietary software:

Use Of The Software

Proprietary software owners have complete control over how their software is used by those who purchase a proprietary license. As a result, the software owner can decide to restrict how the software is used by limiting its functionality or preventing it from being used in a particular way.

For example, proprietary software licenses might limit the number of computers that can access the software or how many times a proprietary program is used. They could also prevent users from transferring the software to other people.

Inspection And Modification Of The Source Code

Proprietary software licenses often forbid users from inspecting or modifying the program's source code. Such practices are commonly implemented to protect the company's investment in its proprietary information, which competitors could use to create similar programs in the future.

Such restrictions limit users from modifying the software to meet their specific needs. Moreover, if users have issues with the software, they cannot inspect the source code to address the issue–they'll have to depend on the software owner to fix the problem for them.

Redistribution, Sharing, Or Transferring

Proprietary software licenses often forbid users from redistributing, sharing with other entities, or transferring the license. Users cannot sell their proprietary license, even if they no longer want it. It also means that you cannot make a copy of the software and either sell or give that copy away.

The inability to share your software can be very inconvenient since you are not allowed to transfer the software between different computers. Because the number of users may be restricted by your license, you would have to upgrade your license (i.e., pay more) to install it on additional computers.

It also means that users cannot share the software with other people, which might be necessary for some businesses to fulfill contractual obligations.


Proprietary software owners also have complete control over their software program's compatibility with other systems and applications. A lack of compatibility can be an issue for businesses that need to ensure that their proprietary software is compatible with the other programs.

Suppose the proprietary software owner has not included this compatibility in their proprietary license. In that case, the user cannot use an adapter to make it compatible with another program. This can affect the way the business’ own system functions, and may lead to operational issues.

Hardware Use

Proprietary software licenses often include restrictions on using proprietary programs with hardware devices. Such programs might not work or function correctly when used with specific hardware devices, which can be a problem for businesses that need to use proprietary software with particular types of hardware.

For example, some proprietary software programs may only be compatible with desktops and not mobile devices. Others may only work on products made by specific brands, such as Apple or PC.

Advantages Of Proprietary Software

Owners have a lot of control when selling proprietary software licenses. However, this doesn't necessarily mean that the advantages of proprietary software benefit only them. There are plenty of advantages for the user as well.

The following are a few of the primary advantages of using proprietary software.

Product Stability

Owners of proprietary software aim to provide an excellent user experience by ensuring the product is stable and functions well. This is because the product is monetized and the company wants to protect their brand and reputation.

This degree of quality control contrasts with open-source software, which does not have the same oversight, and can often become unstable due to the number of people modifying it.

While open-source software is constantly updated with new features, proprietary software owners usually take their time to ensure that their proprietary software is stable before implementing any changes. Doing so benefits users greatly since they'll be able to depend on the software functioning as intended.

Clear Development Roadmap

Proprietary software owners also have a clear development roadmap for their proprietary software. They plan out future changes and updates to their software to ensure the ongoing viability of the product.

Moreover, their software will always be compatible with the other programs that users might be using. There's comfort in knowing what to expect from the software in the future, especially any anticipated updates or the addition of new features.

Conversely, open-source software is often developed without such a roadmap. Any future updates or added features are generally unknown.

Easy Navigation For End Users

Proprietary software owners strive to make their software as user-friendly as possible. The reasoning behind this is simple: if their software isn't easy to navigate and use, then their users will stop paying for it. Proprietary software developers, therefore, spend a lot more time testing their software to ensure that it's user-friendly.

This ease of use is not always the case with open-source software, which can be less user-friendly as lots of changes are often happening at once.

Excellent Compatibility

Even though software owners can restrict compatibility, proprietary software often inherently works with various operating systems and devices.

Proprietary developers spend a lot more time developing the proprietary code than open-source developers do. This is because if the program has better compatibility with other systems and hardware, they'll be able to sell more licenses over the long run.

Tailored Support For Users

Proprietary software is a popular choice for businesses as certain software programs are developed with specific industries in mind. The owners of these software programs tailor the features of the software to the needs of the businesses, and offer technical support where required.

On the other hand, open-source software is created by a community of programmers. The software is therefore more generalized and isn’t necessarily tailored to meet the requirements of a specific proprietary software audience.

Disadvantages Of Proprietary Software

While there are a fair share of advantages to both developing proprietary software and using it as a licensee, it's also important to understand the disadvantages.

The following are a few of the disadvantages of proprietary software to keep in mind:

Development And Maintenance Costs

Hiring proprietary software developers is very expensive, making it difficult for businesses to develop proprietary software. Although the high cost of development and maintenance is often worth it (considering proprietary software can be more profitable over the long run), it can be very costly if nobody actually licenses the software.

Not to mention that users will expect long-term maintenance for as long as they are paying for the license. Users will also expect that software security is regularly updated, that any bugs are patched, and that new features are added regularly. Failure to do so will result in the loss of customers.

User Dependency

Proprietary software is often proprietary code that users can't see or edit, which means they are entirely reliant on the owners of the proprietary software.

Such dependence can be a big problem if proprietary developers suddenly stop supporting the proprietary code. Users have no control over what happens and will likely have to invest time and resources to find replacement software.

New updates or changes can be made by the proprietary owners at any time. In some cases, this may mean the software no longer serves the needs of some users. Since the software can’t be modified or changed, users will have to ride out their contract and then find a replacement, which can be expensive for many reasons.

Less Flexibility

Proprietary software is often seen as less flexible than open-source software, primarily because the source code is sealed and not available to the public. As a result, proprietary software can only be used for specific purposes–which is the primary reason why businesses have to license proprietary software to use it.

You won’t be able to make changes to the software without the cooperation of the proprietary developers. Such lack of flexibility can be a big issue for businesses that need to change the software to meet their specific needs.

Bulky And Heavy Delivered Products

Proprietary software is a bulky and heavy product, making it difficult to install and use. Open-source software does not have this issue as it is often delivered as a lightweight and easy-to-install product.

Proprietary software also requires more system resources to run, which can be a problem for proprietary software users that have limited hardware resources.

License Fees

Licensing is where the real cost lies when it comes to proprietary software. Not only does a business have to pay for the software itself, but they also have to purchase a license for each machine on which it's installed. License fees can be very costly, especially if proprietary software is being installed on a company's entire network.

In addition, the licensing agreement for proprietary software can be very restrictive, meaning that proprietary developers place all kinds of restrictions on how proprietary software is used.

Such restrictions include limiting the number of users allowed to use it, how the proprietary software is installed, and what features can be used. Failure to adhere to the licensing agreement for proprietary software can result in legal ramifications.

The Pricing And Economic Aspect

Proprietary software can be lucrative for developers. Developers can charge however much they see fit, especially if their software offers something unique that no other company offers.

Fortunately for users, most proprietary software programs are available on various tiers. Higher tiers are more expensive but provide access to more features. Such a pricing system offers flexibility for users by allowing the user to decide how they interact with the product.

Its Use In Government Environments

Proprietary software is often used in government environments, as it offers a high level of security and control. Additionally, the proprietary software is generally developed with government users in mind.

Governmental departments avoid using open-source software because it lacks proprietary support and carries security vulnerabilities. Such vulnerabilities can be devastating since you can assume that government departments store sensitive data on the software.

Proprietary Versus Other Forms Of Software

Proprietary software provides the most control to its developers and the least amount of control to its users. However, proprietary software is not the only option for your software needs. There is a spectrum of software options, each with their own characteristics.

The other types of software licenses include:

Open-Source Software

Open-source software is the polar opposite of proprietary software. With open-source software, developers make the source code for their program available to anyone who wants it. As such, anyone can view, modify, and redistribute the code as they see fit.

Open-source software is often developed in a collaborative environment where developers constantly add, modify, or change it. Open-source software can sometimes be susceptible to security vulnerabilities as a result. It's worth noting that open-source licenses are typically free.

Can Open-Source Software Become Proprietary?

While it's not common, open-source software can become proprietary. When this happens, the software developers stop releasing the source code and start charging people to use it.

In some cases, the proprietary software developers will take open-source software and repackage it as their own product. This practice is known as a “proprietary fork.”


Freeware is proprietary software that is available for free, which means anyone can download it and use it without paying a licensing fee. However, some freeware may have restrictions on the way it can be used. Independent developers often develop freeware as a way to get their software out to the public.

Users can change freeware source code, but the developers generally don't support it. Additionally, any changes made to the code must be made available to the public. Freeware can also be redistributed, but the developers typically require that users include a link to the original source code.


Shareware is a proprietary software that is initially free. The caveat is that users pay a licensing fee if they want to keep using it. This fee contrasts to the costs associated with proprietary software as it is usually a one-time payment and gives users the right to use the software for an indefinite period of time.


Abandonware is proprietary software that has been abandoned by its developer. When proprietary software has been abandoned, it means that it's no longer being supported or updated, and any security vulnerabilities have likely gone unpatched. Users should avoid using abandonware as it's inherently insecure.

Why Is The Software Environment So Diverse?

The software development environment is incredibly diverse for several reasons. The proprietary versus open-source debate is the most significant contributor to this diversity. Open-source software is often developed by communities whose sole goal is to improve available technology.

Not only does the existence of open-source software provide an affordable alternative to individuals and smaller businesses, but they provide competition to proprietary developers, who must improve their own offerings to make their software worth paying for.

The variety of available software licenses leads to better and more innovative software products. It's also crucial for users, as it gives them more options to choose from. If they're not happy with the features or security of one product, they can try another product that better suits their needs.

Ensure Your Software Assets Are Secure

While there are a few drawbacks to proprietary software, the benefits far outweigh them. If you are going to use a third-party program, make sure it’s proprietary software to ensure that your data is secure.

By investing in proprietary software, you’ll get the peace of mind of having a reliable, thoroughly tested, and functioning software that serves the purpose you need it for. If developing software, make it proprietary software so that you protect all of your software assets under copyright and contract laws.

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