EULA Definition

An end user license agreement (EULA) is a legal contract between a software developer or vendor and the user of the software. It specifies in detail the rights and restrictions that apply to the software.

Although there are big differences among EULAs, typical components are definitions, a grant of license, limitations on use, a copyright notice and a limited warranty. Some EULAs also provide detailed lists of what may and may not be done with the software and its components.

EULA Development

EULAs were originally fairly brief and simple. For the most part, they consisted of just a standard warranty and a reminder to not copy or redistribute the software (and perhaps a warning about errant radio frequency emissions). However, they gradually increased in complexity, and today many of them are monstrosities that few users even attempt to read.

Beginning in 2000, state governments in the U.S. began adopting the Uniform Computer Information Transactions Act (UCITA), a commercial code for software licenses and other computer information transactions. This controversial code was written by the National Conference of Commissioners, an organization of legislators, judges, attorneys and law professors who develop the uniform state commercial laws.

Subsequent to the introduction of the UCITA, software developers and vendors have been adding far more restrictive and invasive conditions to their EULAs. For example, some EULAs now permit the developer or vendor to search the user's system without prior notification. And some restrict the means by which the user is permitted to resolve disputes, or even go so far as to prohibit the user from complaining publicly about the product!

Means of Acceptance of EULAs

There are several ways in which acceptance of a EULA is acknowledged by the end user. The acceptance method is decided by the software vendor and usually depends, at least in part, on the way in which the software is distributed. They include:

(1) By the user opening a shrink-wrapped package or an envelope containing the software. This method is employed for software that is distributed in boxes and books, respectively.

(2) By the user mailing a signed agreement or acceptance card to the software developer or vendor. This method is also sometimes used for software that is distributed in boxed form.

(3) By the user clicking on an acceptance form that appears on the user's monitor. This method is typically employed for software that is downloaded from the Internet.

Online agreements are legally enforceable if they are designed correctly. As one example of a step that some software vendors have taken to strengthen enforceability, the interfaces have been modified in order to require the user to scroll through the agreement before being able to click the "Accept" button. Enforceability has also been enhanced by the digital signature laws enacted in various countries and states during the past few years.

Criticisms of EULAs

EULAs for some proprietary software (i.e., commercial software) have become the object of extensive criticism. There are several reasons for this, but they mostly derive from the lack of free competition in the software field and the consequent lack of choice with regard to EULAs. They include:

(1) EULAs on shrink-wrapped packages virtually require the user to agree to the EULA before being able to read it. This is because such EULAs are usually contained inside of the shrink-wrapped packages.

(2) EULAs are usually incomprehensible to most users due to their extensive use of arcane legal terminology, long and complex sentences and (sometimes) fine print. Consequently, few people even attempt to read more than the first few words of such agreements.

(3) EULAs are too restrictive. Virtually all of the restrictions in some EULAs have been the subject of complaints. A common complaint is that some EULAs prevent users from legally installing the software on a second computer for use at a different location (such as at home) even if the computers will be used by only one individual and only one at a time.

Another type of restriction is the prohibition of the user from criticizing the software or its developer. And some EULAs contain clauses that could be interpreted as prohibiting users or journalists from publishing reviews or benchmark test results without prior permission.

(4) Some EULAs provide the software developer or vendor with highly intrusive powers. For example, Microsoft EULAs state that they give the company the right to collect information about the user's system and its use and to supply this information to other organizations. They also state that they grant Microsoft the right to make changes to the user's computer without requesting permission. In addition, EULAs frequently have a clause that allows vendors to make updates (i.e., changes that benefit the vendor) to users' systems without asking or notifying the user.

(5) EULAs for costly software do not provide sufficient protection for the user from poor quality control or defects in the software. For example, some Microsoft EULAs offer a warranty for only the first 90 days and do not provide a warranty for updates and patches.

(6) EULAs often contain provisions with which users would disagree -- if they were able to read and understand them. However, they have no choice other than to say that they accept them even if they intend to violate the provisions of the EULA, because of the real or perceived lack of alternative products and EULAs from which to chose.

(7) EULAs often greatly limit the software developer's or vendor's liability for defects in the software. Critics point out that similar waivers of liability would not be tolerated for other products, such as aircraft, pharmaceuticals or foodstuffs.

(8) Some provisions of EULAs are vague and difficult to correctly interpret even by legal experts, and questions remain as to the extent of enforceability. Examples include prohibitions on users publicly complaining about the software, restrictions on journalists from reviewing the software and pronouncements of limited liability.

In spite of all of these horrendous problems with the EULAs on most of the commonly used proprietary software programs, users are well aware that there is generally no choice other than to passively agree to them. Although each individual user does have the option of not accepting a EULA and thereby surrendering the rights and ability to use the software, this is rarely a practical choice because of a real or perceived lack of alternatives.

Comparison of Licenses for Proprietary and Free Software

There are several important differences between the licenses for proprietary software and those for free software. Free software is software that is free both in a monetary sense (i.e., it can be obtained by anyone at no cost) and with regard to use (i.e., it can be used by anyone for any desired purpose, including studying, copying, installing on any number of computers, modifying, giving away and selling).

(1) The term EULA usually is not applied to free software. Rather, the term license is generally used. However, these licenses are similar to EULAs in that both are legal contracts between the developer or vendor of software and its user.

They are also similar in that both include a strong disclaimer. However, there is a big difference. Free software is provided at no cost to the user. Proprietary software is provided in exchange for payment, and thus it is reasonable for users to have expectations for certain levels of performance, reliability and security.

(2) Licenses for proprietary software tend to be long and complex, whereas those for free software are usually much shorter and far easier to read.

(3) The intent or philosophy of the licenses is very different. Those for proprietary software emphasize (a) rights of the developers or vendors, (b) restrictions on users' rights and (c) limitations on the liability of the developers or vendors. In sharp contrast, the licenses for free software emphasize the rights of the users.

The vast differences in the licenses for the two categories of software can be seen by looking at some of the provisions of the EULA for Microsoft Windows XP and those of the GPL (GNU General Public License), the most commonly used license for free software:

Some provisions of the EULA for Microsoft Windows XP:

  • copying is prohibited
  • the software may be used only on only one computer and that computer must have no more than two processors
  • the software may not be used as a web server or file server
  • registration is required
  • the software might stop functioning if changes are made to the hardware
  • updates to the software could change the EULA if Microsoft so desires
  • the software may be transferred to another user only once
  • restrictions are imposed on reverse engineering
  • Microsoft is granted the rights to collect information about the user's system and its use and to supply this information to other organizations
  • Microsoft is given the right to make changes to the user's computer without requesting permission
  • a warranty is provided for the first 90 days
  • no warranty is provided for repairs, updates or patches

Some provisions of the GPL:

  • any user has the right to copy, modify and redistribute the software
  • no party may prevent another from having these same rights
  • no warranty is provided, as there is no fee
  • the user has the rights to sell the software and charge for services for such software
  • any patents related to the software must be licensed for everyone's use or not licensed at all
  • modified versions of the software must carry no license fees
  • the full source code must be made available
  • if there is a change in the license, the general terms of the existing one will be maintained

Created April 2, 2004. Updated February 28, 2006.
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