Proprietary software is computer software for which the software's publisher or another person retains intellectual property rights—usually copyright of the source code,
In 1969, IBM, which had antitrust lawsuits pending against it, led an industry change by and services, by unbundling hardware and software.
Bill Gates' "Open Letter to Hobbyists" in 1976 decried computer hobbyists' rampant copyright infringement of software, particularly Microsoft's Altair BASIC interpreter, and reminded his audience that their theft from programmers hindered his ability to produce quality software.
According to Brewster Kahle the legal characteristic of software changed also due to the U.S. Copyright Act of 1976.Robert X. Cringely's interview with Brewster Kahle, 46th minute
Starting in February 1983 IBM adopted an "Object code-only" model for a growing list of their software and stopped shipping source code.
In 1983, binary software became also copyrightable in the United States by the Apple vs. Franklin law decision, Impact of Apple vs. Franklin Decision before that only source code was copyrightable. Additionally, the growing availability of millions of computers based on the same microprocessor architecture created for the first time an unfragmented and big enough market for binary distributed software.
Vendors may also distribute versions that remove particular features, or versions which allow only certain fields of endeavor, such as non-commercial, educational, or non-profit use.
Use restrictions vary by license:
While most proprietary software is distributed without the source code, some vendors distribute the source code or otherwise make it available to customers. For example, users who have purchased a license for the Internet forum software vBulletin can modify the source for their own site but cannot redistribute it. This is true for many web applications, which must be in source code form when being run by a web server. The source code is covered by a non-disclosure agreement or a license that allows, for example, study and modification, but not redistribution. The text-based email client Pine and certain implementations of Secure Shell are distributed with proprietary licenses that make the source code available.
Some governments fear that proprietary software may include software bug or malware which would compromise sensitive information. In 2003 Microsoft established a Government Security Program (GSP) to allow governments to view source code and Microsoft security documentation, of which the Chinese government was an early participant. The program is part of Microsoft's broader shared source which provides source code access for some products. The Reference Source License (Ms-RSL) and Limited Public License (Ms-LPL) are proprietary software licenses where the source code is source available.
Governments have also been accused of adding such malware to software themselves. According to documents released by Edward Snowden, the NSA has used covert partnerships with software companies to make commercial encryption software exploitable to eavesdropping, or to insert backdoors.
In the case of proprietary software with source code available, the vendor may also prohibit customers from distributing their modifications to the source code.
Shareware is closed-source software whose owner encourages redistribution at no cost, but which the user sometimes must pay to use after a trial period. The fee usually allows use by a single user or computer. In some cases, software features are restricted during or after the trial period, a practice sometimes called damaged good.
The European Commission, in its March 24, 2004 decision on Microsoft's business practices, quotes, in paragraph 463, Microsoft general manager for C++ development Aaron Contorer as stating in a February 21, 1997 internal Microsoft memo drafted for Bill Gates:
Early versions of the iOS SDK were covered by a non-disclosure agreement. The agreement forbade independent developers from discussing the content of the interfaces. Apple discontinued the NDA in October 2008.
Some closed-source software is released by their owner at end-of-life as open-source or source available software, often to prevent the software from becoming unsupported and unavailable abandonware. 3D Realms and id Software are famous for the practice of releasing closed source software into the open source. Some of those kinds are free-of-charge downloads (freeware), some are still commercially sold (e.g. Arx Fatalis). More examples of formerly closed-source software in the List of commercial software with available source code and List of commercial video games with available source code.
Proprietary software that comes for no cost is called freeware.
Proponents of commercial proprietary software argue that requiring users to pay for software as a product increases funding or time available for the research and development of software. For example, Microsoft says that per-copy fees maximise the profitability of software development.
Software distributions considered as proprietary may in fact incorporate a "mixed source" model including both free and non-free software in the same distribution. Most if not all so-called proprietary UNIX distributions are mixed source software, bundling open-source components like BIND, Sendmail, X Window System, DHCP, and others along with a purely proprietary kernel and system utilities.
Some free software packages are also simultaneously available under proprietary terms. Examples include MySQL, Sendmail and ssh. The original copyright holders for a work of free software, even copyleft free software, can use dual-licensing to allow themselves or others to redistribute proprietary versions. Non-copyleft free software (i.e. software distributed under a permissive free software license or released to the public domain) allows anyone to make proprietary redistributions.
In India, one and a half million laptops were pre-loaded with screensaver of political minister Mulayam Singh Yadav. The author of software developed for these laptops included a Malware that would "crash" the device if the laptop's owner attempted to change, remove, or modify this feature.