One embodiment of the present invention provides a system that facilitates the transfer of a software license from a first client to a second client. The system operates by receiving a request at the first client to deactivate the software license for an associated application installed on the first client. The system then receives a deactivation request that includes an identifier for the license at a license activation server from the first client. Next, the system validates the identifier on the license activation server to determine if the identifier is a valid identifier. If so, the system sends a deactivation message to the first client, receives a deactivation response from the first client, and increments a count of license instances available for the identifier on the license activation server.