The main purpose of this article is to answer the question and provide options for gaining back licenses from users that no longer actively use Confluence.
The short answer, is licenses can be freed up from by disabling users and flushing the Confluence Cache.
This is currently the preferred way to get a license back. It is preferred to disable a user as historical information and user history is maintained.
Before a user can be removed all edits, comments and spaces must be removed or the user will not be removed. It is advised to only remove a user, if that user never actually used his or her account.