I want to protect my software from being used without permission. I will provide it for free to the parties I authorize to use it.

Anyone knows a good protection scheme against having it copied and run by unauthorized parties ?

So far, I thought about introducing a key validation mechanism: periodically, the user needs to send me (web site query) a code based on which I generate a new code that app validates against. There is an initial code, and so I can track users...

Thoughts ?

Later edit: I changed the licensing part to avoid unfocused discussion.