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In this paper we propose a novel binding mechanism that can protect FPGA IP from being cloned, tampered, or misused; and facilitate the pay-per-use licensing to limit the FPGA IP's execution to specific FPGA devices only. In this mechanism, the FPGA vendors will provide each enrolled device with a Physical Unclonable Function (PUF) that can be deployed securely during fabrication process. The core vendor will embed an augmented Finite State Machine (FSM) into the original FSM structure of the hardware IP (HW-IP) to react on the PUF response to a given challenge. The proposed binding method does not need any Trusted Third Party (TTP) or block cipher for key management and exchange. We analyze several known attacks to hardware IP and show that our method is secure against these attacks. Experimental results on MCNC benchmarks show that the proposed method incurs small design overhead in …