Latest News

Understanding End-User Licensing Agreements

End-user licensing agreements (also called EULAs) are a type of software licensing contract between the owner of the software and the purchaser or user of the software.  Under the first sale doctrine, owners of software must “license” as opposed to “sell” software in order for them to maintain their ownership rights over the software.  As a result, these EULAs define ways in which the copy of the software may be used.

We have all seen these.  EULAs pop up as dense portions of legalese prior to the installation of any software.  Users have to scroll through the agreement and finally click on an “I Agree” button.  By now, such agreements are ubiquitous in the software and consumer electronics industry.  Millions of users are clicking buttons that purportedly bind them to agreements that they have likely never read.

EULAS come in various types, the most common being either a shrink-wrap or click-wrap agreement.  Shrink-wrap licenses refer to software agreements enclosed within a tangible software package or box that is inaccessible to the customer until after purchase.  Click-wrap licenses refer to contracts that are presented to the user during the installation procedure.  The user has the choice to accept or reject the agreement in order to install it.

EULAs often contain similar terms, such as ownership rights over the intellectual property, license grants, warranties, indemnities, term and termination, and various miscellaneous clauses.  The EULA may also contain extensive liability limitations to protect the owner and hold them harmless to the extent that the software causes any damage to user’s computer or from improper use.  The miscellaneous provisions often include clauses relating to applicable law, venue restrictions, arbitration, or successors.  Many key phrases in the agreements are often bolded, underlined, or in all caps.

Whether these licenses are legally binding differs between jurisdictions, though many courts have held such licenses to be enforceable.  The enforceability depends on several factors, such as the terms of the contract, the laws of the state, fairness, or whether the contract is considered unconscionable as an adhesion contract.  While there certainly is controversy over the use of EULAs, courts have not made generalized decisions regarding the enforceability of such contracts.

In the News