Attorney Steve Software & Technology Law Updates - [End-User License Agreements]

Introduction

            End-User License Agreements, or EULAs, are typically thought of as those annoying pop-up agreements that arrive on your computer screen after installing new software. There are many complex vertices to these agreements than most people realize. Throughout this blog, you will learn what EULAs are, what all they entail, how to correctly write them, and some consequences from not formatting correctly.

What is a EULA? 

            The legalese that a software user sees once a download is finished is a legal contract between the software author or publisher and the user. Sometimes referred to as a “software license” this form of contract can be accurately compared to a rental agreement. The user agrees to use the software for specific purposes and within certain limits much like a tenant agrees to use a property. A user can “accept” these terms in many ways such as removing the shrink-wrap from the package, breaking the seal on a CD or application case, sending a card back to the software producer, installing an application, or using an application.

            EULAs occur in two different versions: the “shrink-wrap” license and the “click-through” license. When a products' packaging has a label on the exterior stating that by removing the shrink-wrap and opening the package the opener agrees to the EULA within the package without reading it. The “click-through” version of a license often appears before the software has been installed and installation cannot proceed unless “I Agree” is chosen on the pop-up window. 

Due to the fact that the user normally does not see the term until after purchasing these contracts can at times be contracts of adhesion. Contracts of adhesion are generally presented on a “take it or leave it” basis, along with giving one party no room to negotiate because of their unequal bargaining ability. Given that EULAs involve a purchaser of a specified good, traditionally software, they do not hold equal bargaining ability.

In the case that a user does not accept the terms provided in the EULA they could simply click “I do not accept” or return the product. Regardless, this form of contract typically presents important terms, restrictions of use, limits of liability and other important clauses.

 Why is a EULA important? 

            The world has been on a trend of increasing legal disputes and patent trolls or patent hoarders, persons or companies that attempt to enforce patent rights on alleged infringers beyond the patents actual value or contribution to the prior work and sometimes without ownership of said patent. As this trend continues it is obvious how essential end-user license agreements are. Software is an intellectual property just like any other legally, but since it is digital and often purchased over the Internet the ability for a user to illegally abuse or share the material increases. Copyright laws protect the publisher or creator from illegal use of material and in some cases involving EULAs, it can be source code. Source code is a text listing of commands to be compiled or assembled into an executable computer program. Keep in mind that the exact source code is registered not the basic idea or concept behind it. The creator of an original copyrighted source code can hold certain rights such as the ability to copy the software, modify versions of software, and distribute the software to the public by license.           

Essential elements of a EULA:

 Knowing why a EULA is important is one thing and writing a fully comprehensive and formidable license is another. These are 5 major clauses necessary for maintaining control of your software.

• “License Grant” clause
  • Allowing a user to buy the ability to use the software without actual ownership.
  • The licensee can only use the software within the parameters set by the copyright holder or licensor, allowing control to stay in its lawful hands.
  • Using phrases like “the products used by you are licensed, not owned, for use only under the terms of this license…”
• “Restrictions on Use” clause
  • Much like Terms and Conditions an End-User License Agreement can restrict undesirable uses of their software.
  • An example of this is explicitly stating that your software cannot be used for hacking servers.
  • “Your use of this application must be strictly in accordance with the terms of the related agreements and shall not:…”
• “Limitation of Liability” clause
  • As with many industries, liability limitation is essential. With unchecked liability, you may be opening yourself or business to lawsuits, that regardless of legitimacy can be expensive and tedious
  • Let's say someone installs your software on their computer and in the process of installing their device freezes and its memory is wiped clean. Whether your software did this or not without a “Limitation of Liability” clause you may have to lawyer up.
  • Use of many liable entities is preferred, much like “company, affiliates, partners, suppliers, licensors” along with use of broad coverage of any kind of damages “subsidiary, exemplary, special, or unintended damages resulting from or in connection with…”
• “Disclaimer of Warranties” clause
  • A user may have unachievable expectations for your software similar to zero-bugs or maximum frame rate this clause combats this issue.
  • For example, if you've developed a financial tracking app for business users and your servers are down, for whatever reason, the user cannot hold you responsible for the loss of data.
  • In essence, this clause states the software is “As Is” and the user holds general risk and discretion of use.
  • “There is no warranty that the application will and services will meet your requirements or requests…”
• “Termination” clause
  • Allows and protects the licenser to terminate licenses or withhold operation.
  • Being able to revoke or suspend licenses is a prominent aspect of EULAs and if worded correctly this clause can be used with little or no reason behind it guaranteeing the licenser as full control in any situation.

There are also special terms about piracy, infringement detection programs and others clauses to discuss with your software counsel.

Violation of terms of EULA 

If a user is found violating any of these legal agreements the rights holder, e.g. the licenser, has the ability to revoke the privileges allowed to them. Keys for effective clauses are in the wording, which must be both broad but also narrow. Broad in the sense of the right holder and narrow in the sense of the user is the best balance for a licenser. One thing to not worry about when writing your EULA is plagiarism or copyright infringement. Legal language is considered “boilerplate” meaning it is written in a standard format and without original expression. I am not saying there is no possible way you can be infringing a copyright by copying legal text, but it is fairly unlikely. Another way to avoid losing lawsuits is to make your EULA obvious of what all it entails and force the user to “read” the terms before clicking “I Accept”.

Conclusion

             If you are a software creator or publisher having a EULA is a necessity for maintaining legal control of your property. As with any legal document accurate wording is needed, in this case, to discern your licensee's rights from your own. Avoiding liability and abuse is your goal and cleverly worded clauses will allow you to achieve this. By understanding and following all of the points made above you should have a foolproof End-User License Agreement.

Blog written by Tomas Braly, Texas A&M graduate.

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