This article is written by Monisha Mohanan, pursuing Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles from LawSikho.
EULA stands for end-user license agreement. It is a legally binding contract between a developer or vendor of the software (licensor) and the user of the software (licensee). EULA will vary from one product to another; however, it basically details granting of a license, restrictions of usage, copyright infringement, warranty disclaimer, liability limitations, terminations of licensing and other related agreements. Ultimately, it protects the owner or licensor of the app from any copyright infringement and any other misuse of the software by the end-users. It is in compliance with the provision of the Indian Contract Act, 1872. Even the court interprets these agreements as legal and valid contract formations and it still applies other common law surrounding the contract.
Advantages of end-user license agreements
As a developer or vendor of the software, there are many reasons for which it is important to include a EULA agreement with the software. Some of the essential reasons are listed as follows:
1. Grant of license
EULA allows the user to limit and restrict the use rather than actually selling the software to the user or providing them with full ownership and allows the owner or licensor to maintain far more control over the distribution and use of the software. It is also important to enforce all other terms and conditions that the owner or licensor wish to include in their software so that it would set a stage regarding how a user will be able to interact with the software by granting a license that comes with a term of use.
2. Restriction on use
This is one of the main advantages of EULAs that the owner or licensor can use this agreement to restrict the undesirable or illegal use of the software. This can even stop the users from replicating their product and potentially selling it on their own.
For instance, the owner or the licensor can simply and clearly say that the software cannot be used for any illegal activities, or that which involves spamming other users, screen scraping, hacking servers, reverse engineering, or any other undesirable activities.
If the user is found to be violating your legal agreements or engaging in any of the restricted uses then the owner or licensor has the right to revoke the granted license.
3. Limiting the liability
Limiting the liability is one of the important and crucial advantages to the owner or the licensor of the software. Without setting up the liability limitation, it is just opening oneself and the business to lawsuits, out of which many will be financially burdening and time-consuming.
For instance, at the time of installation of the software, if the mobile device of the user crashes due to the installation of the same, then the user may try to sue you to replace or repair the devices.
At such time, limiting the liability in the legal agreement shall come to in rescue as the user could not be able to sue for the damage that was caused in the user’s mobile device as the user has agreed to the owner or licensors EULA before the installation of the software. Hence, the user must have essentially assumed the risk that comes with the installation.
4. Disclaimer of warranties
When the user installs the software, they may have expectations that the owner or licensor would not be able to meet such as zero bugs in the coding, 100 % up-time of the software.
The disclaimer of warranties clause in the EULA describes that the software is made on an “As is” and “As Available” basis. In such a way, if the user has any unreasonable expectations then this clause will protect the owner or the licensor from bearing any responsibility for any faults of the software.
For instance, if the owner or the licensor has a business intelligence software app that tracks the sales of the company and if the servers were down for a period of time for which the sales of the company cannot be tracked, at such time the disclaimer of warranty clause will prohibit a company from holding the licensor responsible for lost data or lost sales.
Alongside acting as an agreement for granting licenses, EULA is also valuable in protecting the licensor’s rights to revoke licenses. All of this is possible because of including the termination clause stating the licensor has the right to suspend or terminate licenses and associated rights.
6. Intellectual property
Infringement issues are universal, and therefore it is essential to avoid such issues. On completion of the software development, EULA includes copyright infringement; if such infringement occurs then the user may be held responsible for any legal issues arising from the infringement.
The disadvantage of end-user license agreements
It is very disappointing to see large software developers or licensors take advantage of their end-users for making them use all the silly rules before they even use the product or the software which limits the end-users license agreements, and favours the owner or the licensor. Here are the disadvantages of EULAs which are as follows:
1. Lengthy agreement
Every user who has purchased the software has come across an agreement contract between the software developer and end-users to protect the interest of both parties. These agreements are often too lengthy for the end-users to devote the time to entirely read them. So most often many users simply just scroll to the bottom and click “Accept” by trying to get to the software as soon as possible. As a result, it has been becoming more common for the licensor to include all and fine prints which benefit them and fewer benefits to the users.
2. Drafting agreement in favour of the owner or licensor
Taking advantage of the users not reading the agreement entirely to save their time and energy leads the licensor to draft the agreement in favour of them in the first place. The end-user license agreements are usually ensured that after the purchase of the software, it is not copied or altered. Different software has different stipulations and some of them have heavily favoured the licensor over the user.
3. Hidden risks
While some of the criticisms which revolved around the EULAs are that they had hidden privacy implications of the end user’s agreement and many such clauses include or allow such computer or device to provide the information to the third party on a very regular basis without even notifying the end-users of such software.
4. Terms that adversely harm the licensee
There are many terms that are written into the EULAs that would adversely harm the licensee or the consumers. Some of the most commonly used terms in the agreement which affects the licensee are mentioned as follows; “Do not criticize this product publicly”, “Do not use this product with other vendor’s product”, “We are not responsible if this product messes up with your computer”, “Using this product means you are being monitored”, etc., The EULAs was developed to protect both the users and the licensor, but protecting the end user seems to be a bit complicated.
Are end-user license agreements enforceable?
EULAs are legally binding contracts and are enforceable if the user or the licensee has agreed to the terms of the agreement before the purchase. As in reference to the case laws of ProCD, Inc. v. Zeindenberg and Feldman v. Google, Inc., the United States Court has clearly mentioned EULAs are enforceable between the owner or the licensor and the user or the licensee, as the user or the licensee has the sufficient time to read and clearly understand the agreement and acknowledge the same before purchasing it. EULAs are also enforceable in India and are in compliance with the provision of the Indian Contract Act, 1872.
EULAs are very crucial and essential in establishing the ownership rights of the software or the product by setting conditional terms and policy which restricts the end user from any illegal or undesirable use of the software. The EULA also allows the user to use copyright infringement of the software, therefore it must be drafted in such a manner that it protects the interest of the user and primarily protects the licensor from any copyright infringement.
Most often it is forgotten that the acceptance of the mentioned terms in the EULA implies that the end-users are agreeing to rent or purchase the license to use software from the developer.
It is usually lengthy and written in specific legal language making it difficult for the average end-user to give informed consent. And most often many users just accept it without even reading the entire agreement due to its lengthiness, this may lead many of the users not able to give informed consent.
And it is very disappointing to see that the large software developer or the licensor take advantage of their end users by drafting the agreement majorly in the favour of the licensor. The EULA was always meant to protect both the end-user and the licensor, but it seems that the end-users are getting the short end of the stick after paying a good amount of money for products or the software they cannot control.
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