- Software license agreement
A software license agreement is a contract between the "licensor" and purchaser of the right to use software. The license may define ways under which the copy can be used, in addition to the automatic rights of the buyer including the first sale doctrine and 17 U.S.C. § 117 (freedom to use, archive, re-sale, and backup).
Many form contracts are only contained in digital form, and only presented to a user as a click-through where the user must "accept". As the user may not see the agreement until after he or she has already purchased the software, these documents may be contracts of adhesion. These documents often call themselves end-user licensing agreements (EULAs).
Licensing terms can also be enforced by use of a license manager, which controls where and how the software is able to run.
Software companies often make special agreements with large businesses and government entities that include support contracts and specially drafted warranties.
End-user license agreement
Some EULA form contracts 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 clicking a button labelled "accept". See below.
Many EULAs assert extensive liability limitations. Most commonly, a EULA will attempt to hold harmless the software licensor in the event that the software causes damage to the user's computer or data, but some software also proposes limitations on whether the licensor can be held liable for damage that arises through improper use of the software (for example, incorrectly using tax preparation software and incurring penalties as a result). One case upholding such limitations on consequential damages is M.A. Mortenson Co. v. Timberline Software Corp., et al. Some EULAs also claim restrictions on venue and applicable law in the event that a legal dispute arises.
Some copyright owners use EULAs in an effort to circumvent limitations the applicable copyright law places on their copyrights (such as the limitations in sections 107-122 of the United States Copyright Act), or to expand the scope of control over the work into areas for which copyright protection is denied by law (such as attempting to charge for, regulate or prevent private performances of a work beyond a certain number of performances or beyond a certain period of time). Such EULAs are, in essence, efforts to gain control, by contract, over matters upon which copyright law precludes control.
In disputes of this nature, cases are often appealed and different circuit courts of appeal sometimes disagree about these clauses. This provides an opportunity for the U.S. Supreme Court to intervene, which it has usually done in a scope-limited and cautious manner, providing little in the way of precedent or settled law.
Comparison with free software licenses
A free software license grants users of that software the rights to modify and redistribute the creative works and software, both of which are forbidden by the defaults of copyright, and generally not granted with proprietary software. These licenses typically include a disclaimer of warranty. Copyleft also include a key addition provision, that must be accepted in order to copy or modify the software, that requires that user to provide source code for the work, and to distribute his or her modifications under the same license.
Shrink-wrap and click-wrap licenses
The term shrink-wrap license refers colloquially to any software license agreement which is enclosed within a software package and is inaccessible to the customer until after purchase. Typically, the license agreement is printed on paper included inside the boxed software. It may also be presented to the user on-screen during installation, in which case the license is sometimes referred to as a click-wrap license. The inability of the customer to review the license agreement before purchasing the software has caused such licenses to run afoul of legal challenges in some cases.
Whether shrink-wrap licenses are legally binding differs between jurisdictions, though a majority of jurisdictions hold such licenses to be enforceable. At particular issue is the difference in opinion between the courts in Klocek v. Gateway and Brower v. Gateway. Both cases involved a shrink-wrapped license document provided by the online vendor of a computer system. The terms of the shrink-wrapped license were not provided at the time of purchase, but were rather included with the shipped product as a printed document. The license required the customer to return the product within a limited time frame if the license was not agreed to. In Brower, the Supreme Court of New York ruled that the terms of the shrink-wrapped license document were enforceable because the customer's assent was evident by its failure to return the merchandise within the 30 days specified by the document. The U.S. District Court of Kansas in Klocek ruled that the contract of sale was complete at the time of the transaction, and the additional shipped terms contained in a document similar to that in Brower did not constitute a contract, because the customer never agreed to them when the contract of sale was completed.
Further, in ProCD v. Zeidenberg, the license was ruled enforceable because it was necessary for the customer to assent to the terms of the agreement by clicking on an "I Agree" button in order to install the software. In Specht v. Netscape Communications Corp., however, the licensee was able to download and install the software without first being required to review and positively assent to the terms of the agreement, and so the license was held to be unenforceable.
Click-wrap license agreements refer to website based contract formation (see iLan Systems, Inc. v. Netscout Service Level Corp.). A common example of this occurs where a user must affirmatively assent to license terms of a website, by clicking "yes" on a pop-up, in order to access website features. This is therefore analogous to shrink-wrap licenses, where a buyer implied agrees to license terms by first removing the software package's shrink-wrap and then utilizing the software itself. In both types of analysis, focus is on the actions of end user and asks whether there is an explicit or implicit acceptance of the additional licensing terms.
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. One well-known case which upheld such a disclaimer is Mortenson v. Timberline.
The distributor of software may provide patent rights along with distributed software.
Forms often prohibit users from reverse engineering. This may also serve to make it difficult to develop third-party software which interoperates with the licensed software, thus increasing the value of the publisher's solutions through decreased customer choice. In the United States, EULA provisions can preempt the reverse engineering rights implied by fair use, c.f. Bowers v. Baystate Technologies.
Some licenses purport to prohibit a user's right to release data on the performance of the software.
Enforceability of EULAs in the United States
The enforceability of an EULA depends on several factors, one of them being the court in which the case is heard. Some courts that have addressed the validity of the shrinkwrap license agreements have found some EULAs 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, Vault Corp. v. Quaid Software Ltd.. Other courts have determined that the shrinkwrap license agreement is valid and enforceable: see ProCD, Inc. v. Zeidenberg, Microsoft v. Harmony Computers, Novell v. Network Trade Center, and Ariz. Cartridge Remanufacturers Ass'n v. Lexmark Int'l, Inc. may have some bearing as well. No court has ruled on the validity of EULAs generally; decisions are limited to particular provisions and terms.
The 7th Circuit and 8th Circuit subscribe to the "licensed and not sold" argument, while most other circuits do not. In addition, the contracts' enforceability depends on whether the state has passed the 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 has 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 8th Circuit case of Davidson & Associates v. Jung determined that such clauses are enforceable, following the Federal Circuit decision of Baystate v. Bowers.
- Clickwrap license
- Free software license
- Glossary of legal terms in technology
- License manager
- License-free software
- List of software licenses
- Product activation
- Shrink wrap contract
- Software Asset Management
- Software license
- Breach of Contract
- ^ Examples include Microsoft .NET Framework redistributable EULA
- ^ 939 F.2d 91 (3rd Cir., 1991)
- ^ 847 F.2d 255 (5th Cir., 1988)
- ^ 86 F.3d 1447 (7th Cir., 1996)
- ^ 846 F. Supp. 208 (E.D.N.Y., 1994)
- ^ 25 F.Supp.2d 1218 (D. Utah, 1997)
- ^ 421 F.3d 981 (9th Cir., 2005)
- ^ 422 F. 3d 630 (8th Cir., 2005)
- ^ 302 F.3d 1334 (Fed. Cir., 2002)
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