'Wherein' is generally only used in formal writing. The Oxford English Dictionary gives the following senses and quotes. I have given the most recent quote, from which you can tell that the word is no longer generally used.
In what (thing, matter, respect, etc.)?
1891 - Oh, Britannicus! wherein have we offended?
In which (place, material thing, writing, etc.)?
1888 - Peering keenly into the shadow wherein she stood
In, at, during, or in the course of which (time).
1819 - Length of days Wherein to act the deeds which are the stewards Of their revenue.
In which (matter, fact, action, condition, etc.); in respect of which.
1889 - There began a round of pleasure for Julia wherein she was the central figure.
Into which.
1585 - We came to an anker very nigh the castle, wherin when our patrone would followe vs [etc.].
For this one the etymology is useful.
It's a Latin word, formed with the prefix con- (meaning 'with') plus the verb descendere (meaning 'go down, descend'), and together meaning to lower oneself metaphorically in status by associating with inferiors.
This is Classical Roman culture, remember; it featured a rigidly enforced vertical social hierarchy, with rich nobles at the top, slaves at the bottom, and everybody else in between.
In Modern English, with a somewhat different social system — and extremely different social values — the word has come to mean not so much to treat everyone alike — which is now a good thing, after all — but rather to be perceived to be making an effort to treat everyone alike, especially one's presumed "inferiors".
Since this is a matter of interpretation, often by those who feel condescended to (note the Passive of an intransitive verb with a transitivizing preposition, like insist on), condescension is easy to complain about, but very hard to distinguish from personal dislike.
Best Answer
It is a general legal term, not specific to software or intellectual property. An "encumbrance" means "a claim by someone to some legal rights relating to something owned by someone else". https://en.oxforddictionaries.com/definition/encumbrance #1.1
For example, in the property that I live in, there is an "encumbrance" that the owners of the neighbouring property must be allowed access to do maintenance on the parts of their own house which are only accessible from the land surrounding my house.
Thus "encumbered code" means computer code that is subject an encumbrance - i.e. to a claim of legal rights by a third party.