Software License Agreement

A software license agreement is a memorandum of contract between a producer and a user of computer software which grants the user a software license. A user may be any legal entity or an "end user", in which case the software license agreement is sometimes called an End User License Agreement (EULA, often pronounced YOO-lah). The agreement specifies the perimeters of the permission granted by the owner to the user.

If the software license agreement is between the software owner (licensor or producer) and a business or government entity, it should be regarded as a specialized form of contract with many terms (clauses) unique to the license and the nature of the software being licensed.

EULAs and shrink-wrapping

Most end user license agreements (EULAs) accompany shrink wrapped software that is presented to a user sometimes on paper or more usually electronically, during the installation procedure. The user has the choice of accepting or rejecting the agreement. The installation of the software is conditional to the user accepting the agreement and thereby agreeing to abide by its terms.

Some computer companies view the EULAs more as an elaborate liability disclaimer than a real contract. It is not uncommon for a user to be unable to read the license agreement before proceeding with starting up a computer they have just bought (which the computer might require on an on-screen message), because no printed copy of the license is included. Users almost invariably click on "Accept" without reading the license.

EULAs often can contain very restrictive terms that are surprising. For example, the version 7 of a popular image-viewing application ACDSee prohibits its use for viewing pornographic materials in the EULA (section 3.4 - Use Restrictions).

It is unclear whether EULAs are enforceable in the United States.

Copyright

For the license to take legal effect, the licenser must be able to present proof of that the presumed licensee has been willing to sign away the copy owner rights granted under copyright: The international copyright treaty, Article 4, equals computer programs with literary works. Thus, computer programs are automatically placed under copyright, the latter which grants the copy owner normal rights use, and others fair use the computer material. The signing away of ones legal rights can normally only be done by a properly signed paper contract, or under some circumstances, orally if supported by witnesses or recordings, or, in even more restricted use, via electronic signatures issued by the local government, as a person charged with violating a license agreement otherwise can merely claim not knowing who opened the box or clicked the agreement box in the install software, and it is not possible for the licenser to provide proof of whom is the purported licencee, nor has the person charged any obligation to provide such proof. In addition, legal rights can only be signed away if local law admits it; so a properly signed paper contract may not be enough to abrogate copy owners rights, unless there are special legal provisions admitting it.

The amendment of the United States Code, Chapter 17, codified as 17 USC 117, permits the owner of a copy of a computer program to make copies necessary for the use or backup of a computer program.

Until 117 was enacted, the very act of copying computer software from a storage device into temporary memory may have been prohibited in the United States. Typically, a proprietary software license agreement will interpret 117 in plain English. For example: "You may use the software on one computer, and you may make an additional copy to be used only for backup or archival purposes. You may not otherwise copy, modify [...] the software."

However, a growing number of such licenses are using a loophole in 117 that exploits a distinction between the "owner" of a copy and one who merely "possesses" a copy by purporting to create a rental agreement in which the publisher of the software retains ownership of the medium on which the software is shipped.

Product liability

Most licenses for software sold at retail disclaim (as far as local laws permit) any warranty on the performance of the software and limit liability for any damages to the purchase price of the software

Patent

Some countries, such as the United States, allow the patenting of a generic computer that runs a novel algorithm. A software license agreement may grant limited non-exclusive rights under applicable patents that the publisher holds.

Trade secret

Some software license agreements prohibit users from reverse engineering the software. Publishers claim to use this to protect their trade secrets embodied in the software, but some have a different motive, namely making it much more difficult to create third-party software that interoperates with the licensed software.

Other licenses prohibit users from releasing data on the performance of the software.

Enforceability

The forceability of an EULA depends on several factors, one of them being the court in which the case is heard. Most courts that have addressed the validity of the shrinkwrap license agreements have found them to be invalid, characterizing them as contracts of adhesion, unconscionable, and/or unacceptable pursuant to the U.C.C. —see, for instance, Step-Saver Data Systems, Inc. v. Wyse Technology (939 F.2d 91), Vault Corp. v. Quaid Software Ltd. (at harvard.edu) and Rich, Mass Market Software and the Shrinkwrap License (23 Colo. Law 1321.17). A minority of courts have determined that the shrinkwrap license agreement is valid and enforceable: see ProCD, Inc. v. Zeidenberg (at findlaw.com), Microsoft v. Harmony Computers (846 F. Supp. 208, 212, E.D.N.Y. 1994), Novell v. Network Trade Center (at harvard.edu), and Arizona Cartridge Remanufacturers Association Inc. v. Lexmark International Inc. may have some bearing as well.

The 7th Circuit and 8th Circuit subscribe to the "license" and "not sold" arguments, while most other circuits do not. In addition, the contracts' enforceability depends on whether the state has passed Uniform Computer Information Transactions Act (UCITA) or Anti-UCITA (UCITA Bomb Shelter) laws. In Anti-UCITA states, the Uniform Commercial Code (UCC) has been amended to either specifically define software as a good (thus making it fall under the UCC), or to disallow contracts which specify that the terms of contract are subject to the laws of a state that's passed UCITA.

Recently, publishers have begun to encrypt their software packages to make it impossible for a user to install the software without either agreeing to the license agreement or violating the Digital Millennium Copyright Act (DMCA) and foreign counterparts.

The DMCA specifically provides for reverse engineering of software for interoperability purposes, so there was some controversy as to whether software license agreement clauses which restrict this are enforceable. The case of Blizzard v. BnetD (at eff.org) is an illustration of this controversy.

Abandonware

Abandonware is computer software which is no longer being sold or supported by its copyright holder. Alternatively, the term is also used for software which is still available, but on which further support and development has been deliberately discontinued. Although copyright and a licence may still exist, it is no longer actively protected, represented and supported.