What is an End User License Agreement (EULA)?

An End User License Agreement usually applies to various forms of software, rather than physical goods, though it can apply to a non-software product as well. It is used for single-sale products, rather than subscriptions. It establishes understanding between, and protection for, the software developer or company, licensor, or vendor and the consumer regarding the use of the software.

The EULA is a contract that gives a person or company the right to use a piece of software in specific ways (usually once they’ve paid for it). Note “use”. EULAs do not grant ownership rights to the software. The creator retains control and ownership rights, as the software is their intellectual property (IP). 

In the physical world, this type of license is akin to use of a state or national park. These spaces are created and protected by governments. People pay a fee to use them for hiking or camping, etc. and agree to abide by the rules. Pick up your garbage, don’t cut down trees, etc. If people break those rules, they lose access to the park and may be fined for damages.

At one time, the EULA was commonly a “shrink-wrap” license. Consumers had to purchase the software, then open the (shrink-wrapped) packaging to get to the software and its printed rules and restrictions for use. 

There have been legal issues tied to this, as consumers couldn’t read the EULA before purchasing the software. 

Today, we tend to use/download software or complete transactions online. We have to agree to the EULA before completing installation. Typically the consumer has to click an “agree” button on-screen. Sometimes there’s a link to the EULA and other terms, and completing your transaction is your consent to those terms and contracts.

As a result of software moving online and users providing digital agreement to terms, the EULA has become known as a “click-wrap” license. However, if the consumer does not agree to it, they can’t use the software or buy the product. We agree to EULAs on computers, phones, tablets, gaming consoles – pretty much anything running or serving software.

The EULA establishes:

• who the creator/owner is
• who the user is
• what rights the creator and the user have regarding the software
• how the user can/cannot use the software
• circumstances under which the user license could be limited or cancelled
• the creator’s recourse if the user violates the EULA
• disclaimers or limits of creator liability

The EULA is usually created by the software creator or distributor. The critical role of the EULA is in protecting the creator’s rights, as well as setting rules and expectations for user behavior and software use.

The EULA lays out what the user can and cannot do with the software. For example, download, install, and play the game? Yes. Copy the game? No. Install updates or fixes provided by the creator? Yes. Modify or reverse engineer the game? No.

The EULA spells out the creator’s rights regarding the software if the user violates its terms. It typically also absolves creators from liability if the software causes harm. The user essentially agrees to use the software at their own risk.

Sometimes EULAs specify how the software has to be used. For example, the user must agree to use all parts of the software, or they must agree to accept automatic updates for it. 

Generally, a EULA includes the following:

• identifies the business
• rules of use and access to the software
• restrictions on use
• applicable copyright license (e.g. proprietary, open source, etc.) and IP rights
• warranty disclaimer and limitation of liability
• conditions for termination of the license

The main goals of EULAs are for the creator/licensor to retain full ownership of their product, and to prevent legal issues from arising. However, if there is a legal issue, the EULA should also help with easier resolution.

A EULA may also contain these or other clauses:

• introductory section, explaining what and who the contract is for
• advisory not to install the software, and how to return it, if you refuse to agree to the terms
• reference to other licenses or agreements that are applicable in conjunction with the EULA when using the software delineation among different forms of access or use, e.g. multiple user/account levels
• conditions of trade or sales among users via the software, and payment facilitation
• consumer privacy rights and data use disclosures
• specific definitions relevant to the software or its use
• governing law, e.g. does only United States law regulate the EULA’s terms?

In short, the creator/licensor of a software product who:

• wants to retain control over their technology
• wants to be protected from possible misuse of the product
• wants to make money from licensing the software

That could be an individual, though in many cases it’s a company.

The EULA can help protect the software creator on two fronts. Primarily in their agreement with the end user, but also in relationships with third parties, like app platforms, through which the software is accessed. Of course, the creator would also have a separate contract with an app platform.

Now that EULAs are typically click- or browse-wrap rather than shrink-wrap agreements, there is somewhat less room for interpretation regarding their enforceability. You have to explicitly agree to the EULA before you can install or use the software. So you can’t really argue that you didn’t know the terms of use before accessing it.

An EULA does not contain several of the typical requirements that make a contract legally binding. This does not mean that they are not enforceable, however. There can also be a legal question of whether violating a EULA constitutes a breach of contract or a copyright violation.

EULAs are intended to establish users’ responsibilities. They aren’t really given choices. EULAs also lack contract specifics, like addressing identifiable buyers, or specifying a time frame for purchase. They may also be contrary to federal or state laws.

If a user copies and sells the software, for example – a common violation of EULA terms – the creator can seek recourse. The license to use the software can be revoked. The user’s account could be locked down, preventing access. The creator can sue for damages. 

Even if the user’s license to use the software has been revoked, the user could retain access to things created using the software, like images or video, as long as they weren’t solely stored in the now-locked account.

Some terms of EULAs can be of concern in relation to user privacy. Some software includes monitoring for Digital Rights Management (DRM) violations. Or requires the user to agree to automatic monitoring. Both of these require the software to access users’ systems and enable the software to connect with third party networks, commonly without notifying the user. Learn more about Personally Identifiable Information.

Users don’t have a way of knowing how secure those third parties are, how much user data they can access, or what they might do with it. Some EULA agreements enable software from third parties to be downloaded onto users’ devices without requiring separate agreements or consent. Learn more about user consent regarding retargeting.

Some EULA terms preclude users from publicly criticizing the product. This can mean that the user can’t complain publicly if the software doesn’t work or causes damage. 

It could also mean users can’t share results of tests like performance benchmarking. Or even that public discussions about the software, like independent reviews, are not allowed. There is a strong argument to be made that these terms violate free speech rights.

United States federal law allows “reverse engineering” of software and physical products. It is legal to take things apart to learn how they work, and considered “fair use”. However, reverse engineering is commonly forbidden by EULAs.

This means that products can’t be customized to the user’s preference or needs, which could include improved accessibility for those with disabilities. Upgrades, which could spur further innovation and competition, are also not allowed. 

Users may not be able to fix broken software, even bugs the creator introduced. They can’t turn off features or functions they don’t need or want or that cause issues. They can’t make the software work with other software or devices that they own. 

EULAs typically require the software to be used as is, even if that state is broken, outdated, or incompatible. Combined with the warranty disclaimer and limited liability statement, such EULAs are definitely for the creator’s benefit, not the users.

The End User License Agreement can go by several other names:

• License Agreement
• Software License Agreement
• Shrink-wrap / Click-wrap / Browse-wrap License
• Licensed Application End-User Agreement

There are agreements that are similar to the EULA, like Terms of Service (TOS) or Service Level Agreements (SLA). They are often used in conjunction with EULAs. If there is no licensing, then only TOS is needed and not a EULA.

Terms of Service can also have an assortment of other names:

• Terms
• Terms of Use
• Terms and Conditions (T&C)
• User Agreement

An Acceptable Use Policy may be part of the TOS or a separate agreement. There may also be Terms of Sale and/or User Generated Content Policy, depending on what the site, product, or service is for.

Terms of Service are similar to a EULA in that they define how a user is allowed to use a service. But instead of covering software, the TOS covers websites, content, and services.

Terms of Service are the basis of a legally binding contract established between a company and a user. Like a EULA it helps prevent or resolve legal issues stemming from (mis)use of the product. The TOS covers a lot more terms and conditions than a EULA, which is why a EULA will often refer or link to TOS.

Users must typically agree to the TOS before signing up for an account on a website or completing an online purchase. They will typically contain the following:

• what it is, i.e. a contract/agreement
• who it includes, typically a company and any relevant parent or subsidiary or affiliate companies, and the users
• how to register for an account
• what the user can and can’t do with their account
• how users can interact with each other via the site or service
• under what circumstances an account can be terminated
• disclaimers regarding the information posted on the website, or accessed by clicking on any third-party links
• applicable governing law and jurisdiction
• the company’s contact details in case of questions or issues

A Service Level Agreement (SLA) is yet another contract, and it is common to have one along with TOS. SLAs can be even more detailed than a TOS. They define levels of service when customers need consistency and reliability, and guaranteed support and recourse if the service does not meet those first two criteria.

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