All we need to know about IP protection and flexible licensing

By : |December 16, 2007 0

BANGALORE, INDIA: Software—and the Intellectual Property (IP) embedded in it—are intangible yet highly valuable company resources. In fact, IP is on its way to becoming the ultimate asset of every organization that develops, manufactures and sells software and computer-integrated equipment or systems.

Disassembling and reverse engineering a company’s software, and the theft of its IP, is more hazardous to the organization than the theft of any other physical asset. Software and IP theft has the ability to not only impact an organization’s credibility—the leakage of professional know-how, expertise, trade secrets and algorithms could also give competitors a dominant edge. In a world in which competitive advantage is gained through technological breakthrough, protecting IP becomes crucial to every organization.

Intellectual Property—which ranges from ideas, inventions, technologies, and patented, trademarked or copyrighted work and products—can account for as much as 80 percent of a company’s total market value. Secrets and IP are considered financial assets in today’s business climate, with corporations and shareholders recognizing the long-term value of such assets. Therefore, threats to IP such as knowledge seepage, forgery, patent infringement and license violation create a real concern.

This article discusses the means available today for software and system vendors to protect their IP and software assets and eliminate the threats associated with software and IP theft.

Legal steps are insufficient protection
From a legal standpoint, there are four major IP categories—patents, trademarks, copyright and trade secrets. IP that is registered with state and federal agencies in one of those categories is protected by law, and if infringed upon or abused, the violators can be prosecuted. However, IP can also be something broader and less tangible than these four protected classes.

It can be software source and binary code; software data; analysis procedures; mathematical calculations and algorithms; intelligence of how certain equipment functions; the logic of how data received from equipment is employed; and so on.


Registering this type of IP in one of the legal categories will give software and system vendors some level of protection, but cannot provide any means of immediate enforcement. Companies may not be aware when their IP is exposed or stolen and falls into the hands of the competition. Nevertheless, the damage will have been done and by the time the felony becomes known it will probably be too late. What might result in years of lawsuits and litigation cannot—and will not—restore the value of the stolen asset.

To reduce the risk of losing profits and competitive edge, and to eliminate dangers of theft and violation, strong software and IP protection solutions must be implemented by software and system vendors. Solutions that surpass legal protection requirements, and offer powerful technology that ensures enforcement, must be applied.

Software Digital Rights Management (DRM) solutions are the de-facto standard today for protecting software IP. From a broad perspective, DRM offers technological solutions for limiting the unrestricted use and transfer of digital content. Software DRM provides additional benefits as it offers solutions that prevent software piracy, protect IP and enable software licensing and compliance.

Industrial espionage–a genuine threat
Since software can be reverse engineered, IP embedded in software requires protection. Reverse engineering of software involves deconstructing a program’s machine code and exposing the source code in which it was written. Legitimate reverse engineering of software is commonly performed to retrieve the source code of a program because the source code was lost, to study how the program executes certain operations, to improve the performance of a program, or to fix a bug.

To enable these operations, reverse engineering tools such as dumpers and disassemblers are readily available to software engineers, and are used in their day-to-day work.

Conversely, reverse engineering tools are also used to unlawfully copy and duplicate programs, steal knowledge, secrets, and algorithms. Business competitors also put significant effort into reverse engineering the opposition’s product, examining its secrets, and preparing a rapid response so that a competitor’s advantage will not endure.


While such illegal actions constitute copyright violation, in most cases that will not deter curious and diligent competitors whose sole purpose is to steal IP—even if the licensed use of the software specifically prohibits reverse engineering.

The problem intensifies with programming languages and environments running on top of virtual machines such as .NET and Java, and presents greater risks to software and system vendors. Reverse engineering this code is quite effortless since these languages utilize Intermediate Language, which is an intentionally exposed format and consequently easy to tamper with. In these cases, the task of reverse engineering does not require an expert.

Therefore, protection against reverse engineering becomes a crucial element in any Software DRM solution. Powerful solutions offer two major technologies for protection against reverse engineering—obfuscation and encryption.

Code obfuscation is a technique that transforms source code in order to make it difficult to understand. The code remains legible, but names and identifiers are changed from their original self-explanatory names to meaningless terms that yield no information. This makes it extremely challenging for human interpretation. Obfuscation obstructs reverse engineering without affecting the behavior of a program.

Encryption is used on the object code of software that is produced by a compiler. It transforms the code in a way that makes it completely illegible to humans and decompilers. An encryption key is utilized, ultimately preventing code examination by anyone without access to the key.

While both techniques are strong anti-reverse engineering methods, each is suitable for different languages and environments.

A robust Software DRM solution will provide both techniques and ensure ultimate enforcement to prevent reverse engineering. Moreover, a solution that relieves engineers from the task of implementing these techniques themselves is highly beneficial. Automatic Software DRM tools for code obfuscation and file encryption enable software engineers to quickly and easily protect their programs without learning complex security methods and protection technologies.



Licensing — a means for increasing sales and accelerating growth
Today’s software industry is more competitive than ever. As with many other industries that once enjoyed exceptionally high margins, software products are becoming increasingly commoditized, with resulting deterioration in both revenues and bottom line profits.


To combat these trends software and system vendors now see the need to change the way they market their products, to increase the value they offer their customers and to gain competitive advantage by better differentiating their offerings from the competition.

Licensing is amongst the most promising approaches to achieving more competitive, value-based offerings. Today, software and system vendors are seeking ways of moving away from the traditional model based on perpetual licenses and printed End User License agreements toward more flexible licensing models that yield attractive offerings and products that appeal to end users, not only in terms of features but also in pricing.

IP protection and secure licensing go hand-in-hand
Software license compliance was originally driven by software vendors who had motivation for preventing piracy. Now, this focus has broadened both in audience and in reason. Software and computer integrated systems providers realize that secure and flexible licensing can enforce compliance and increase sales. The providers’ end users are demanding licensing options, since they want to pay for what they need and use and increase their return on investment.

End users want to clearly state their preferences and expect their providers to offer appropriate licenses and charge according to value. Addressing these increasing demands can only be achieved with Software DRM solutions that offer secure and flexible software licensing capabilities.

Through licensing, leading Software DRM solutions provide software publishers and system vendors a means for assigning usage terms to software. Regardless of public perception, it is not the software that is purchased—rather it is the right to use the IP contained within the software. Licensing is also inseparable from pricing, as licensing is a tool that enables the implementation of innovative pricing and business models, including: try-before-you-buy, rental, subscription, pay-by-use, pay-per-feature, floating users and other metered and on-demand models.

At first glance, it may appear limiting to distribute software with licensing terms that seem restrictive. In reality, while earnings per copy sold may be less, in essence, the likelihood that users will be willing to purchase the rights to a license increases, since a particular license may be more compatible with their needs. This, in turn, provides the software provider with the flexibility to reach more potential customers who will be willing to make the investment.

Furthermore, utilizing sophisticated licensing models creates a means of differentiating a software or system vendor company’s product from the competition. Organizations are able to provide their customers with more attractive software offerings. Subsequently, more software is sold, and sales increase.




Protecting a company’s assets and revenue goes beyond IP protection. In fact, IP protection and licensing go hand-in-hand. Every licensing model represents a particular dollar value, making licensing terms (and the IP they license) attractive to professional hackers. Thus, it comes as little surprise that the more powerful Software DRM solutions on the market today—which offer flexible licensing—also provide protection for the actual software, the software IP, and the terms of the licensing model. Software that is licensed with protected terms requires no additional compliance measures, since it is enforced by the software itself.

Robust licensing systems therefore ensure that the terms are encrypted, digitally signed and securely stored in locations (on the PC or in an external device) that prevent tampering and allow access only to their rightful owner (the software provider).

When a company’s products are illegally copied and distributed; hacked and sold for a fraction of the original price; its secrets and IP are stolen; or when there is violation of licensed features, modules and capabilities, the company’s revenues are immediately affected.

A robust Software Digital Rights Management solution can provide software and system vendors powerful and reliable tools for achieving strong IP protection and secure licensing. Implementing protection and licensing is of paramount importance to any company that wishes to demonstrate growth and gain a competitive edge.

The author is director of Software DRM Product Management , Aladdin Knowledge Systems



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