Understanding Digital Product Licenses: A Guide for Digital Creators

Did you know that the legal rules around what a customer can do with a digital product after purchasing it are more complicated than you might think?

Sounds crazy… I know, but here’s how this works. ⬇️

In the legal world, there’s something called the first sale doctrine. Generally speaking, it limits a copyright owner's ability to control the resale or other disposition of a particular lawfully acquired copy of a copyrighted work. But digital products can raise additional questions because the customer may receive a license to use the product rather than ownership of the underlying intellectual property, and the terms of the transaction may also govern how the product can be used.

Still sound crazy? Well to be quite honest with you, it’s because IT IS!

As a digital creator, the last thing you want is people ripping off your products for their own.

You put a lot of time and effort into creating your products and as a business owner, you want to know that time and effort is going to pay off – aka grow your business by attracting new followers, subscribers, and even earn you money (rightfully so).

In business, you have 3658375937 billion things to worry about (not an exact number, just an educated guess 😅) and someone reselling your products shouldn’t be one of them. 

SO, how can you avoid this? As your legal bestie, I’m here to tell you how.

Short answer: digital product licenses help clarify how customers can and cannot use your digital products. When paired with properly implemented Terms of Purchase and clickwrap acceptance, licensing terms can help reduce the risk of unauthorized sharing, resale, and misuse of your products.

What Is a Digital Product License?

A digital product license explains what a customer is and is not allowed to do with a digital product after purchasing it. Depending on the product and the terms of the license, it may address whether the customer can use the product personally or commercially, modify it, share it, redistribute it, or use it for a specific period or purpose.

A license is different from ownership. In many digital product transactions, the customer is purchasing access to or permission to use the product under specific conditions rather than acquiring ownership of the creator's underlying intellectual property.

Ownership vs. Licensing: What Are You Actually Selling?

When you sell a digital product, you're generally not selling ownership of the underlying intellectual property. You're giving the customer permission to use the product under specific terms.

Think of it this way: purchasing a digital product doesn't necessarily mean the buyer can do whatever they want with it. The license determines what the buyer is allowed to do, such as whether they can use the product personally, use it in their business, modify it, share it, or redistribute it.

For example, if you sell a Canva template, your customer may be allowed to customize it and use the finished design for their own business. That doesn't necessarily mean they're allowed to turn around and sell the original template to someone else.

This distinction between ownership and licensing is one of the most important concepts for digital product sellers to understand. Your Terms of Purchase should clearly explain what rights the customer receives when they buy your product and what they are not permitted to do.

How To Protect Your Digital Products From Being Resold 

The most simple answer is this: implement contracts and/or licensing agreements in your business. 

Yes, it really is THAT simple!

But if I know anything about being a business owner myself, it’s that simple doesn’t always equal easy.

Sometimes the most simple tasks are the hardest for us to do, so let me break this down a bit further and give you a seriously EASY way to implement this in your business.

First things first, it’s important to understand the different types of digital product licenses.

When you're creating digital products, understanding the types of licenses you can offer is crucial. It's the difference between protecting your work and maximizing its potential in the market.

The Key Licenses to Consider

Exclusive License

An exclusive license gives one specific licensee exclusive rights to use the licensed work in the ways outlined in the agreement. Depending on the terms, the creator may be restricted from granting those same rights to other people or businesses during the license term.

Exclusive licenses are often used for custom-created works, intellectual property transfers, or high-value licensing arrangements.

Non-Exclusive License

A non-exclusive license allows multiple customers to purchase and use the same digital product while ownership of the intellectual property remains with the creator.

The license can still include restrictions on sharing, resale, modification, or redistribution.

For instance, if you create a software tool, you might offer a non-exclusive license to multiple companies or individuals. 

For most digital product shops selling templates, guides, courses, or downloads to multiple customers, a non-exclusive license with clear usage restrictions is often more common than a true exclusive license.

Rights-Managed License 

A rights-managed license is specific and controlled. You define how, where, and for how long the buyer can use your product. This could include restrictions on geographical use, the duration of use, and the type of use.

Let’s use a photographer as an example – that’s an example of a digital work where the photographer may choose to implement a rights-managed license to control how a particular image is used.

Royalty-Free License

A royalty-free license lets the buyer pay once and use the product multiple times without paying additional fees, however, there are usually restrictions, such as not being able to sell the product as if it were their own.

This is a super common license for music, stock imagery, or other forms of media where the customer would typically need to use the digital product over and over again.

Personal Use License

A personal use license is exactly what it sounds like: the buyer can use the product for their own personal use, but they cannot profit from it or use it for any business purposes.

For example, a graphic designer might create digital templates that people can purchase for personal use, such as invitations or social media graphics, but they cannot resell them for business gain.

Commercial Use License

A commercial use license generally allows the buyer to use the digital product in connection with a business or other revenue-generating activity. However, commercial use does not automatically mean the buyer can resell, redistribute, or sublicense the product itself. Those rights depend on the specific terms of the license.

General Public License (GPL) and Creative Commons

GPL and Creative Commons are licensing frameworks that allow creators to grant certain permissions to the public under predefined terms.

Depending on the specific license selected, users may be allowed to share, modify, distribute, or build upon the work, provided they follow the applicable license requirements. These licenses are commonly used for software, educational materials, and creative works.

Understanding each of these license purposes is the first step in protecting your digital products because they allow you to know which license YOU specifically need. 

Something important to remember is that every digital product will be different. 

Each time you create a new digital product, you must consider: how do I want people to be able to use this product? What is the intent?

Thinking about those things each time you create a digital product will allow you to then implement the correct licensing agreement into your terms of purchase, which is where the actual clause will be stated that buyers must agree to.

License Type	Commonly Used For	What It Controls
Exclusive	Custom work or unique IP arrangements	Who has exclusive rights and what rights are exclusive
Non-Exclusive	Templates, courses, downloads, software	Allows multiple customers to receive licenses
Rights-Managed	Photography, stock media, creative assets	Where, when, and how the work can be used
Royalty-Free	Stock imagery, music, media	Repeated use without additional royalties, subject to restrictions
Personal Use	Consumer downloads and personal projects	Limits use to personal purposes
Commercial Use	Business resources and creative assets	Allows business-related use, subject to license terms
GPL / Creative Commons	Open-source software and certain creative works	Permissions and restrictions established by the specific license

Example: Selling a Canva Template

Let's say you sell a Canva template that customers can customize for their own businesses.

You might allow customers to:

• Customize the template for their own use.
• Use the finished design in their business.
• Make reasonable modifications to the template.

You might prohibit customers from:

• Reselling the original template.
• Sharing the template file with other people.
• Giving the template away as a free download.
• Using one purchase to create products for multiple unrelated businesses.

The exact rules depend on your business model and the product you're selling, but the point is this: your license should clearly spell out the permissions you're giving customers and the boundaries around those permissions.

How Do You Choose the Right Digital Product License?

The right digital product license depends on what you want your customers to be able to do with the product and whether you plan to sell that same product to multiple customers.

Ask yourself:

• Will multiple customers purchase this product?
• Do I want customers to use it personally, commercially, or both?
• Should customers be allowed to modify it?
• Can customers share it with others?
• Do I want to restrict redistribution or resale?

Your answers will help determine which licensing structure makes the most sense for your digital product.

How to Implement a Terms of Purchase for Digital Goods

Once you know what type of licensing you need for your digital product, it’s time to actually put it into action, so you can help reduce the risk of customers improperly sharing, distributing, or reselling your work. 

So, how do you do it? Insert a Terms of Purchase at checkout.

The important thing for your Terms of Purchase is that you display your licensing agreement. The Boutique Lawyer's Terms of Purchase for Digital Products template already has that and allows you to edit based on your needs. 

You want to also make sure that your terms are set up as a clickwrap at checkout, so that the customer is actively agreeing to them when they make the purchase. Learn more about clickwrap agreements and why they work. 

In practical terms, this means customers should have a clear opportunity to review the Terms of Purchase and take an affirmative action indicating that they agree to them, such as checking an "I agree" box before completing their purchase.

The exact setup and enforceability of clickwrap agreements can depend on the implementation and applicable law, so the goal is to make the terms clearly presented and the customer's acceptance clear and documented.

Frequently Asked Questions About Digital Product Licenses

Can someone legally resell my digital product?

It depends. The answer may turn on copyright law, whether the customer purchased ownership of a particular copy or received a license to use the product, the terms of the transaction, and the specific facts involved. Clear licensing language can help establish what uses you have authorized and what uses are prohibited, but it does not guarantee that unauthorized resale or misuse will never occur.

Do I need a license agreement for every digital product?

Most digital creators benefit from including licensing language within their Terms of Purchase so customers understand how the product may be used.

What is the difference between personal use and commercial use?

A personal use license generally limits use to personal purposes, while a commercial use license allows use in connection with a business or revenue-generating activities, subject to the license terms.

Is a digital product license the same as ownership?

No. A license generally gives someone permission to use a work in specific ways, while ownership involves owning the underlying rights or property itself. When you sell a digital product, you should clearly explain what rights the customer receives and what they are not permitted to do with the product.

Is a Terms of Purchase enough to protect my digital products?

A Terms of Purchase can be an important part of your legal foundation, especially when paired with clear licensing language and properly implemented acceptance at checkout. It can help establish the rules governing the transaction and give you stronger footing if a customer misuses your products, but no document can guarantee complete protection against misuse.

If you sell templates, guides, courses, downloads, or other digital products, your Terms of Purchase is often one of the most important legal documents in your business because it gives you a place to clearly communicate licensing rights and restrictions.

All you've gotta do is grab our Terms of Purchase for Digital Products template, plug in the details that apply to your business, and set everything up on your website.

Oh and to make it even easier for you, you’ll receive step by step instructions for how to implement the template correctly and put your business on stronger legal footing.

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ABOUT THE AUTHOR, AMBER GILORMO – ATTORNEY AND FOUNDER OF THE BOUTIQUE LAWYER

Amber Gilormo is the cool lawyer behind The Boutique Lawyer – a one-stop contract template shop for creative entrepreneurs, online business owners, coaches, and service providers.

From client agreements to digital product terms and everything in between, our lawyer-drafted templates take the guesswork out of staying legally protected online (no legal jargon required).

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