An End User License Agreement, “EULA,” or Software License Agreement, is an agreement whereby a software owner grants a software user the right to use the owner’s software. The software owner may be referred to as the “licensor,” while the software user may be referred to as the “licensee.” The right to use the software is considered a “license.”
Although software licenses may come in many forms, this article is limited to a discussion of commercial software license agreements, and does not discuss permissive licenses, public domain licenses, or other open-source licenses.
In the software context, an EULA is most commonly used with downloadable software. In other words, an EULA is used where a software owner allows a software user to download an copy of the licensed software for use on the customer’s own computer or other system.
Although an EULA may be used in connection with software offered as a service, commonly known as “SaaS,” because SaaS subscriptions don’t always grant a user a “license” in the SaaS product, and because SaaS products are generally offered under a subscription model, SaaS products are often governed by Subscriptions Agreements and Terms of Use Agreements, not EULAs. Nonetheless, an EULA may be used in conjunction with a SaaS Subscription Agreement, such as where a SaaS Subscription calls for numerous end users to access and use the SaaS Service under a master subscription agreement. In such cases, the end users may be required to sign an EULA prior to using the SaaS product.
Information concerning Key Considerations in Software as a Service (SaaS) Agreements can be found here.
As with most commercial agreements, the terms included in an EULA will be dependent on the specific nature of the transaction between the software owner and software user, and should be tailored to meet the specific needs of the contracting parties. Nonetheless, a few general considerations when drafting, reviewing, or negotiating an EULA, or other Software License, include the following:
- License Grant: A “License Grant” or “Grant of License” provision is arguably the most important provision in an EULA. Because the provision describes the type and scope of the license granted by the software owner to the software user, the provision must be carefully worded to ensure each party is giving up, or receiving, only what is intended. When describing the scope of the license, consideration should be given to, among other things, whether the license will be (1) exclusive or non-exclusive, (2) perpetual or for a specific term, (3) worldwide or limited to a specific geographic area, (4) transferrable or non-transferrable, and (5) revocable or non-revocable.
- Reservation of Ownership Rights: Software owners should ensure their EULAs are carefully worded to ensure they reserve ownership rights in their licensed software, both through careful wording when granting licenses and rights of use to customers, and by including express reservations of ownership in their software, its underlying code, and any related intellectual property or trade dress.
- Term: Although a license term may be described in the grant of license provision itself, care should be given to describe (i) the starting date of a license, (ii) the end date of a license (if applicable), and (iii) what occurrences, if any, will trigger a licensor’s termination or revocation rights.
- Use Restrictions/Export Restrictions: An EULA should contain provisions describing how the licensed software is, and is not, allowed to be used by a licensee. This can be accomplished through the use of both general, and specific, statements of use. For example, a general statement should be included limiting use of the software to either business or personal use. A specific statement may restrict a user from, for example, reverse-engineering, modifying, decompiling, or disassembling a software’s underlying code, or from importing or exporting the software in contravention of applicable local and international laws governing software exportation.
- Warranties: An EULA should include clear statements describing the warranties, if any, provided by a licensor to the licensee. In many cases, a limited warranty may be provided to users guaranteeing the software for a set period of time. In other cases, the EULA may disclaim most, if not all, warranties. In either event, the EULA should carefully describe the scope of warranties provided, or identify the warranties disclaimed, to avoid situations where a provider is deemed to warrant more than they intended or a customer is left without recourse for faulty products purchased.
The above-listed provisions are just a few of the many provisions which should be carefully considered when drafting, negotiating, or reviewing a Software License Agreement, End User License Agreement, or EULA. For more information regarding how the Law Office of Nicholas J. Vail, PLLC assists software providers, developers, licensors, licensees, and other technology providers, click here.
