In proprietary software, an end-user license agreement or software license agreement is
the contract between the licensor and purchaser, establishing the purchaser's right to use
the software. The license may define ways under which the copy can be used, in addition
to the automatic rights of the buyer including the first sale doctrine and 17 U.S.C. § 117.
Many form contracts are only contained in digital form, and only presented to a user
as a click-through where the user must "accept". As the user may not see the agreement until
after he or she has already purchased the software, these documents may be contracts
of adhesion. Software companies often make special agreements
with large businesses and government entities that include support contracts and specially
drafted warranties. Some end-user license agreement form contracts
accompany shrink-wrapped software that is presented to a user sometimes on paper or
more usually electronically, during the installation procedure. The user has the choice of accepting
or rejecting the agreement. The installation of the software is conditional to the user
clicking a button labelled "accept". See below. Many EULAs assert extensive liability limitations.
Most commonly, an EULA will attempt to hold harmless the software licensor in the event
that the software causes damage to the user's computer or data, but some software also proposes
limitations on whether the licensor can be held liable for damage that arises through
improper use of the software. One case upholding such limitations on consequential damages
is M.A. Mortenson Co. v. Timberline Software Corp., et al. Some EULAs also claim restrictions
on venue and applicable law in the event that a legal dispute arises.
Some copyright owners use EULAs in an effort to circumvent limitations the applicable copyright
law places on their copyrights, or to expand the scope of control over the work into areas
for which copyright protection is denied by law. Such EULAs are, in essence, efforts to
gain control, by contract, over matters upon which copyright law precludes control. This
kind of EULAs concurs in aim with DRM and both may be used as alternate methods for
widening control over software. In disputes of this nature in the United States,
cases are often appealed and different circuit courts of appeal sometimes disagree about
these clauses. This provides an opportunity for the U.S. Supreme Court to intervene, which
it has usually done in a scope-limited and cautious manner, providing little in the way
of precedent or settled law.
Comparison with free software licenses
A free software license grants users of that software the rights to use for any purpose,
modify and redistribute creative works and software, both of which are forbidden by the
defaults of copyright, and generally not granted with proprietary software. These licenses
typically include a disclaimer of warranty, but this feature is not unique to free software.
Copyleft also include a key addition provision that must be followed in order to copy or
modify the software, that requires the user to provide source code for the work and to
distribute her modifications under the same license; thus effectively protecting derivative
works from losing the original permissions and being used in proprietary programs.
Unlike EULAs, free software licenses do not work as contractual extensions to existing
legislation. No agreement between parties is ever held, because a copyright license
is simply a declaration of permissions on something that otherwise would be disallowed
by default under copyright law. Shrink-wrap and click-wrap licenses
The term shrink-wrap license refers colloquially to any software license agreement which is
enclosed within a software package and is inaccessible to the customer until after purchase.
Typically, the license agreement is printed on paper included inside the boxed software.
It may also be presented to the user on-screen during installation, in which case the license
is sometimes referred to as a click-wrap license. The inability of the customer to review the
license agreement before purchasing the software has caused such licenses to run afoul of legal
challenges in some cases. Whether shrink-wrap licenses are legally binding
differs between jurisdictions, though a majority of jurisdictions hold such licenses to be
enforceable. At particular issue is the difference in opinion between two US courts in Klocek
v. Gateway and Brower v. Gateway. Both cases involved a shrink-wrapped license document
provided by the online vendor of a computer system. The terms of the shrink-wrapped license
were not provided at the time of purchase, but were rather included with the shipped
product as a printed document. The license required the customer to return the product
within a limited time frame if the license was not agreed to. In Brower, New York's state
appeals court ruled that the terms of the shrink-wrapped license document were enforceable
because the customer's assent was evident by its failure to return the merchandise within
the 30 days specified by the document. The U.S. District Court of Kansas in Klocek ruled
that the contract of sale was complete at the time of the transaction, and the additional
shipped terms contained in a document similar to that in Brower did not constitute a contract,
because the customer never agreed to them when the contract of sale was completed.
Further, in ProCD v. Zeidenberg, the license was ruled enforceable because it was necessary
for the customer to assent to the terms of the agreement by clicking on an "I Agree"
button in order to install the software. In Specht v. Netscape Communications Corp., however,
the licensee was able to download and install the software without first being required
to review and positively assent to the terms of the agreement, and so the license was held
to be unenforceable. Click-wrap license agreements refer to website
based contract formation. A common example of this occurs where a user must affirmatively
assent to license terms of a website, by clicking "yes" on a pop-up, in order to access website
features. This is therefore analogous to shrink-wrap licenses, where a buyer implied agrees to
license terms by first removing the software package's shrink-wrap and then utilizing the
software itself. In both types of analysis, focus is on the actions of end user and asks
whether there is an explicit or implicit acceptance of the additional licensing terms.
Product liability Most licenses for software sold at retail
disclaim any warranty on the performance of the software and limit liability for any damages
to the purchase price of the software. One well-known case which upheld such a disclaimer
is Mortenson v. Timberline. Patent
In addition to the implied exhaustion doctrine, the distributor may include patent licenses
along with software. Reverse engineering
Forms often prohibit users from reverse engineering. This may also serve to make it difficult to
develop third-party software which interoperates with the licensed software, thus increasing
the value of the publisher's solutions through decreased customer choice. In the United States,
EULA provisions can preempt the reverse engineering rights implied by fair use, c.f. Bowers v.
Baystate Technologies. Some licenses purport to prohibit a user's
right to release data on the performance of the software.
Enforceability of EULAs in the United States The enforceability of an EULA depends on several
factors, one of them being the court in which the case is heard. Some courts that have addressed
the validity of the shrinkwrap license agreements have found some EULAs to be invalid, characterizing
them as contracts of adhesion, unconscionable, and/or unacceptable pursuant to the U.C.C.—see,
for instance, Step-Saver Data Systems, Inc. v. Wyse Technology, Vault Corp. v. Quaid Software
Ltd.. Other courts have determined that the shrinkwrap license agreement is valid and
enforceable: see ProCD, Inc. v. Zeidenberg, Microsoft v. Harmony Computers, Novell v.
Network Trade Center, and Ariz. Cartridge Remanufacturers Ass'n v. Lexmark Int'l, Inc.
may have some bearing as well. No court has ruled on the validity of EULAs generally;
decisions are limited to particular provisions and terms.
The 7th Circuit and 8th Circuit subscribe to the "licensed and not sold" argument, while
most other circuits do not. In addition, the contracts' enforceability depends on whether
the state has passed the Uniform Computer Information Transactions Act or Anti-UCITA
laws. In Anti-UCITA states, the Uniform Commercial Code has been amended to either specifically
define software as a good, or to disallow contracts which specify that the terms of
contract are subject to the laws of a state that has passed UCITA.
Recently, publishers have begun to encrypt their software packages to make it impossible
for a user to install the software without either agreeing to the license agreement or
violating the Digital Millennium Copyright Act and foreign counterparts.
The DMCA specifically provides for reverse engineering of software for interoperability
purposes, so there was some controversy as to whether software license agreement clauses
which restrict this are enforceable. The 8th Circuit case of Davidson & Associates v. Jung
determined that such clauses are enforceable, following the Federal Circuit decision of
Baystate v. Bowers. Criticism
One common criticism of end-user license agreements is that they are often far too lengthy for
users to devote the time to thoroughly read them. In March 2012, the PayPal end-user license
agreement was 36,275 words long and in May 2011 the iTunes agreement was 56 pages long.
News sources reporting these findings asserted that the vast majority of users do not read
the documents because of their length. Several companies have parodied this belief
that users do not read the end-user-license agreements by adding unusual clauses, knowing
that few users will ever read them. As an April Fool's Day joke, Gamestation added a
clause stating that users who placed an order on April 1, 2010 agreed to irrevocably give
their soul to the company, which 7,500 users agreed to. Although there was a checkbox to
exempt out of the "immortal soul" clause, few users checked it and thus Gamestation
concluded that 88% of their users did not read the agreement. The program PC Pitstop
included a clause in their end-user license agreement stating that anybody who read the
clause and contacted the company would receive a monetary reward, but it took four months
and over 3,000 software downloads before anybody collected it. During the installation of version
4 of the Advanced Query Tool the installer measured the elapsed time between the appearance
and the acceptance of the end-user license agreements to calculate the average reading
speed. If the agreements were accepted fast enough a dialog window “congratulated”
the users to their absurdly high reading speed of several hundred words per second. The main
plot of the South Park episode HumancentiPad was that Kyle did not read the terms of service
for his last iTunes update and therefore had inadvertently agreed to have Apple employees
experiment upon him. End-user license agreements have also been
criticized for containing terms that impose onerous obligations on consumers. For example,
Clickwrapped, a service that rates consumer companies according to how well they respect
the rights of users, reports that they increasingly include a term that prevents a user from suing
the company in court. See also
Abandonware Clickwrap license
Free software license Glossary of legal terms in technology
Good faith Contra proferentem
License manager List of software licenses
Shrink wrap contract Software Asset Management
Software license Terms of Use
Vernor v. Autodesk, Inc. References
External links Accessible editorial on enforcability of various
EULA-type licenses in the United States from 2002.