What is an End User Licence Agreement?

What is an End User Licence Agreement?

For those working in software development, it can be hard to know how to protect your intellectual property. On the one hand, it is in your interest to make your product available for users online. Yet on the other is the risk of unauthorised distribution, use and even reverse-engineering by a competitor.

There is no complete fix for these problems. However, from a legal perspective, you can protect yourself in a number of ways. The most common way, particularly for software, is through an End User Licence Agreement ("EULA").

Essentially, this is a contract between you (the developer) and the user. It allows the purchaser to use the software, but places restrictions on exactly how it can be used. It is particularly useful to protect your copyright in any software you develop and then make available for purchase.

Unlike other forms of property, software is more often licensed than sold. Users rent the software subject to the terms of a EULA. This ensures that the consumer gets to use the product, but that you as a developer retain control over it.

Click-wrapped EULAs

You have probably encountered many EULAs online before, as they are almost a standard part of any closed-source software. You know those long documents that pop up before you install a new program? Those are click-wrapped agreements. When you click "I agree" you are agreeing to the terms in the EULA.

This is a pretty handy form of contract. It's much quicker and easier than mailing a copy to each user and having them send a signed copy back (though this is an alternative option).

Common terms and restrictions

Some common restrictions on software use include preventing:

  • Copying of the software
  • Modification
  • Reverse-engineering
  • Unauthorised distribution
  • Using the software for unlawful purposes
  • Using deep-links, robots, spiders or page-scraping 

Of course, simply having these terms in a contract doesn't magically mean you will be able to prevent people from doing these things. Often companies rely on a legal contract as well as the architecture of the software to prevent such activity.

But what the EULA can do is provide a way of enforcing your rights after something goes wrong. It's well worth ensuring you are protected from the outset by drafting a EULA before making the software available to users.

Issues with click-wrapped agreements

The downside to these kinds of EULAs is that most people don't read those boxes when they pop up. They just click "agree" and move on – which is not the best idea.

But software companies also share part of the responsibility for ensuring that their agreements are easy to understand and not arduous in length. Companies like Paypal and iTunes have been criticised for their extremely complex, long and intimidating EULAs.

At the end of the day, if the user has clicked "agree" they have agreed. But if you want to stop them from infringing a term in the first place, it's a good (not to mention, ethical) idea to make those terms clear.

Protecting yourself, as well as your software

While this article has mainly discussed how EULAs can protect your interest in your software, there is a flipside as well. Namely, they can be necessary to protect yourself if the software is used for unlawful purposes – for example, the unauthorised copying of sound recordings.

However, the Federal Court of Australia have made it clear that simply having this kind of term in your EULA is not enough. As the court held in Universal Music v Sharman Networking, if there is a term in the agreement that is being ignored by users, and no further action is being taken to prevent the unlawful use of the software, you might be liable for that use.  This will depend on whether you have "authorised" copyright infringement, which can be difficult to establish, but is still a risk for certain software developers.