Like you say Venkatesh, this is a common challenge for software developers, and 
all I can say is that you must use your creativitiy in finding ways to solve 
this. I think this issue should remain "undocumented". If there existed one 
standardised way to implement this, it would too easily be cracked by someone, 
and it would ruin the prospects of making an decent earning for all of our work.

To provide some kind of assistance, I think perhaps your suggestion #2 could be 
elaborated on in a more creative way. Think lateral. If you are desperate you 
can contact me off list.

On the other hand, I personally think there is no way to fully protect oneself 
against users doing what they can to get software for free. What we do in our 
applications is to price is so reasonable that we remove most of the incentives 
to crack it, make it easy to buy and activate (instantly through our website), 
offer regular updates (which includes the app itself so its a hassle to tamper 
with it), and lastly, try to make apps which meet the users specific needs in 
such a way that they actally choose to pay to support its further development.

Good luck,
Kristian
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