A present invention license reallocation system and method facilitates flexible and effective licensing distribution. The license reallocation system and method enables convenient movement of licensed information between hardware devices while ensuring appropriate compliance with license terms. An expired license indication is generated on license expiration. The expired license indication indicates that prior license keys associated with proprietary information are expired. Upon receipt of a valid expired license indication and expired license keys new license key(s) is issued presumably for a different hardware. A license serial number (LSN) that is both globally unique and mutable is utilized to generate license keys. In one embodiment, the license serial number includes system serial number (SSN) and an extension serial number (ESN). The global uniqueness of the SSN ensures that the tuple (SSN, ESN) is globally unique and the mutable but non-repeating nature of the ESN ensures that the tuple is allowed to change without repeating its value.