This article is written by Knut Helge Kirkhus, pursuing a Diploma in Entrepreneurship Administration and Business Laws from LawSikho.com. Here he discusses “What is an End-User License Agreement (EULA) and its key terms?”.
An end-user license agreement (EULA) is a legal agreement between a software company or developer of software (known as licensor) and the end-user who uses the software (known as licensee) and in compliance with the provisions of the Indian Contract Act, 1872. To illustrate this further, a website (music portal) where music can be downloaded legally, has signed a music license agreement with the owner of the copyrights and such music portals makes the end-user agree to an agreement called end-user license agreement (EULA), to ensure the owners of their copyright.
Should a business produce any software or has a website, then it’s required to have an enforceable agreement with the end-users in order to protect the business intellectual property and to limit potential liability. Usually, such agreements are referred to as End-user License Agreement of UELA’s.
The courts interpret these EULAs as legal contracts, valid contract formation and other common law surrounding the contract still applies.
Clickwrap up an agreement
With the courts becoming more comfortable enforcing the EULA, especially when it is in a form of click-wrap agreement. A clickwrap agreement is a type of contract, contained in a digital form, which is widely used with the software licenses and online transactions where the user has a choice to accept or reject to the terms and conditions prior to using the specific product or service. These are generally enforceable, as long as it’s clear and conspicuous notice of terms.
Key terms in EULA
The most common and important clauses that every EULA requires in order to get the users to accept such EULA are license granting, restriction on use, related agreements, copyright Infringement/Intellectual property, termination of licensing, warranty disclaimer and limitation of liability.
The duration of the license in a EULA is immensely important. Some software programs such as Anti-virus programs have an annual license. It is therefore when preparing the EULA to explicit state the duration of the EULA, as it may open up for users to be able to alter time and settings and harm the duration of the EULA. To avoid such one can also consider, once the software is installed, to require the user to mandatory register his software copy online on your corporate website. In case that the license is valid only for a limited time, the start period is recommended to be from the precise time and date of registration of the user copy
The primary purpose of a EULA is to grant a license of use for the software to an end-user.
The EULA must specify that both licensor and the end-user will be bound by laws of India and must mention the court which will have jurisdiction over the matters in case a dispute or infringement arises. The agreement must also specify if any alternative dispute resolution methods are preferred by the licensor to which the user agrees.
The enchantress of contract law is that it bestows to even choose the law that would govern an agreement. Unfortunately, the end-user rarely get such an opportunity. A software company in India can maximize its advantage and convenience by expressing that both parties of the EULA agree to be bound by the laws and regulations of Inia. And likewise, the judicious court which may be approached in an event of a dispute is under the jurisdiction of a civil court.
Basic License Clauses
The software company or developer still owns the software and all intellectual property associated with it, Hence, it’s crucial to have a proper license clause which clarifies the extent of the license. A basic license usually states terms such as:
- Where the user can use the license, such as India or worldwide.
- Exclusive or non-exclusive use, particularly if only one person can use the license.
- Transferable or non-transferrable, especially if the user can transfer the license to another party.
- Revocable or irrevocable, specifically if you are able to terminate and revoke the license.
- Perpetual or non-perpetual, such as the license only last for a specific term of indefinitely.
From a software company or developer’s perspective, the acknowledgement, warranties and representation are of utmost importance as an agreement from the user that the software company has control so that the license does not transfer any ownership and from a user’s perspective the software company or developer wants to ensure that there’s an agreement from the user that the software does not infringe upon any intellectual property rights. Especially as a paying customer, it is of paramount importance that the user knows that there are no intellectual property issues if they use the software features.
Restriction of Use
Restrictions clause details any restrictions when using or operating the software. Such restrictions may be as follows:
- Reproducing the software, except if the EULA permits it.
- Codifying, modify or creating new set up from the software.
- Disabling any security measures.
- Reduplication of the software.
- Distribution, selling, sub-licensing or leasing the software except if the EULA permits it.
The EULA prescribes the guideline on how a user must operate the software, however, there should exist other legal agreements which includes restrictions it would be most beneficial to place link to all other agreements to the EULA.
Copyright Infringement/Intellectual property
Due to the completion of software programs, infringement issues are universal and therefore essential to avoid any such issues, hence most EULA includes extensive but specific language that makes it clear that if such infringement occurs the user may be held responsible for legal issues arising from the infringement
It is of paramount importance for the software company or developer to keep rights to terminate the license in the event of a violation of use or similar issues and such clauses tend to be unconditional and grants a firm right to the provider or licensor of the software rather than the end-user.
Customers who order the software often face a problem when it comes to supporting and maintaining the finished product, therefore, an utmost important clause in a EULA is a disclaimer of warranties. Such clause describes that the software is made “as is” and consequently the licensor or provider is not responsible to furnish the software to satisfy the end-user.
Limitation of liability
Many EULAs upholds extensive liability limitations. Generally, most EULA will attempt to hold harmless the software licensor in the event that the software causes damage to the user’s computer or data, and some software also proposes limitations on whether a licensor can be held liable for damage caused by improper use, however, important terms should be highlighted in a way that is easy to recognize and still easy to read. The limitation of liability clause clarifies to the magnitude to which each party will be legally responsible if erroneous events occur with the software.
Settlement of dispute
Agree in the EULA of a dispute clause which covers any and all disputes arising in connection with the EULA shall be resolved by binding arbitration.
Most often forgotten, is the fact, that acceptance to the mentioned terms of the EULA implies that the user is agreeing to purchase or rent the license to use the software from the company or developer.
The EULA allows the user to use the Intellectual Property of the software publisher and therefore, it must be drafted in a manner that it protects the interests of the user, primarily protecting the Licensor from any form of intellectual property rights infringement
EULAs are usually lengthy, and written in highly specific legal language, making it difficult for the average user to give informed consent. If the company designs the EULA in a way that intentionally discourages users from reading them, and usage of complicated legal language which makes it difficult to understand, this may lead many of the users not to give informed consent.
Presently, to improve the implementation of law enforcement regarding the music industry where Section 58 of the Indian Copyright Act 1957 may not be enough as the practicality of implementation made available is largely superfluous.
Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skill.