Ben Coogan

End user licence agreements – Why, what, when and how?

Ben Coogan

31 July 2015

IT Licensing

We are often asked as to what are the key terms for an end user licence agreement (EULA) both by potential licensors and potential licensees to proprietary software.  It’s a great question, but it usually involves us asking a whole lot of questions in order to give the answer.

 

There’s a reason for this.

 

 

 

A technology licence agreement and an EULA will have different terms and purposes.  A general technology licence agreement is not going to cut it when the parties need an EULA.

 

For those who deal with these agreements, they will know that general technology licenses and EULAs differ as technology licenses are generally one-off agreements between relatively equal parties which grant broad rights.  By comparison, an EULA is a standard form agreement (often implemented by way of “click-wrap”, e.g. a display with an “I agree” button during installation) with a narrow grant of rights to all persons that may use the software to the extent necessary for the software to be used.  For example, EULA’s typically restrict the licensee’s right to copy, redistribute or modify the software and normally do not grant access to software’s source code.

 

It is important to remember that the EULA is designed to protect the software developers’ investment in the software by preventing third parties from effectively “stealing” the software’s monetary value without authorisation.  This monetary value is based on the intellectual property that is contained in the software.

 

The end users, on the other hand, are most interested in the products and, in particular, the security, reliability, useability and the total cost.

 

An EULA may also include conditions on how the software may be used. This is important for developers as they cannot predict (or test for) every particular circumstance in which the software may be used, and may commercially need to include a disclaimer on liability to carve out those exceptional circumstances, or a restraint based on the developer’s need to comply with its local laws (e.g. export controls).  End users must also be aware of the conditions on their use of the software and any exclusions.

 

Therefore, when negotiating or drafting agreements, it is sometimes hard to balance these different concerns (which may vary depending on the functionality of the software) and a tailored EULA is often required.

 

Further, if you are a developer of an app available on Apple’s App store, then a tailored EULA is better than relying on Apple’s generic EULA.  Apple’s EULA may not cover off on important Australian law requirements and may be unenforceable.  The same Australian law concerns will arise if you are dealing with a foreign company and the agreement needs to be looked at carefully.

 

We are not avoiding the question altogether though. The following are some the sorts of clauses that you do need to consider when an EULA is being drafted:

 

  • Does the licensor take responsibility for the software?
  • Does the licensor provide full or any partial support or training to the user?
  • Does the EULA include installation?  And acceptance testing?
  • Does the EULA include the provision for updates and releases?  And what happens if the user refuses an update / new release?
  • Is there a refundable trial period?
  • Is the license fee one off or periodic?
  • How is the fee to be paid?
  • Does the licensor take responsibility for guarantees or warranties?
  • What is the limitation of liability for the software?  Most of the time, but not always, it is limited to a refund of the price paid for the software if it fails.  However, it is critical that this clause does not try to limit liability beyond what is allowed under Australian legislation / law.
  • Who takes the responsibility for what if there is an infringement of intellectual property by a third party?
  • What is the dispute resolution procedure?
  • What is the governing law or the EULA?
  • What are the addresses for service of the notices?
  • How is the agreement to be executed?

 

However, bear in mind that an IT lawyer can assist you in drafting a tailored EULA that is more likely to hit the mark and be enforceable when it really counts.  If you have at least thought about the issues identified above, you are much more likely to give us good instructions so we can draft the EULA that you are after.