Software license agreement
Encyclopedia
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 (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.
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.
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.
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.
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.
. 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.
—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
.
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
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 (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
License manager
A license manager is a software management tool used by software vendors or by end-user organizations to control where and how software products are able to run. License managers protect software vendors from losses due to software piracy and enable end-user organizations to enforce compliance with...
, 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
Consequential damages
Consequential damages, otherwise known as special damages, is one of the damages, the other being direct damages, that may be awarded to plaintiff in a civil action who claims that terms of an agreement were not honored....
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
Precedent
In common law legal systems, a precedent or authority is a principle or rule established in a legal case that a court or other judicial body may apply when deciding subsequent cases with similar issues or facts...
or settled law.
Comparison with free software licenses
A free softwareFree software
Free software, software libre or libre software is software that can be used, studied, and modified without restriction, and which can be copied and redistributed in modified or unmodified form either without restriction, or with restrictions that only ensure that further recipients can also do...
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
Proprietary software
Proprietary software is computer software licensed under exclusive legal right of the copyright holder. The licensee is given the right to use the software under certain conditions, while restricted from other uses, such as modification, further distribution, or reverse engineering.Complementary...
. These licenses typically include a disclaimer of warranty
Warranty
In business and legal transactions, a warranty is an assurance by one party to the other party that specific facts or conditions are true or will happen; the other party is permitted to rely on that assurance and seek some type of remedy if it is not true or followed.In real estate transactions, a...
. Copyleft
Copyleft
Copyleft is a play on the word copyright to describe the practice of using copyright law to offer the right to distribute copies and modified versions of a work and requiring that the same rights be preserved in modified versions of the work...
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
Source code
In computer science, source code is text written using the format and syntax of the programming language that it is being written in. Such a language is specially designed to facilitate the work of computer programmers, who specify the actions to be performed by a computer mostly by writing source...
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
ProCD v. Zeidenberg
ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 , is a United States contract case involving a "shrink wrap license". One issue presented to the court was whether a shrink wrap license was valid and enforceable. Judge Easterbrook wrote the opinion for the court and found such a license was valid and...
, 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.
Specht v. Netscape Communications Corp.
Specht v. Netscape, 306 F.3d 17 , is a case in the United States Court of Appeals for the Second Circuit regarding the enforceability of browse-wrap software licenses...
, 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.
Product liability
Most licenses for software sold at retail disclaim (as far as local laws permit) any warrantyWarranty
In business and legal transactions, a warranty is an assurance by one party to the other party that specific facts or conditions are true or will happen; the other party is permitted to rely on that assurance and seek some type of remedy if it is not true or followed.In real estate transactions, a...
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.
Patent
The distributor of software may provide patent rights along with distributed software.Reverse engineering
Forms often prohibit users from reverse engineeringReverse engineering
Reverse engineering is the process of discovering the technological principles of a device, object, or system through analysis of its structure, function, and operation...
. 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
Vendor lock-in
In economics, vendor lock-in, also known as proprietary lock-in or customer lock-in, makes a customer dependent on a vendor for products and services, unable to use another vendor without substantial switching costs...
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
Bowers v. Baystate Technologies
Bowers v. Baystate Technologies was a U.S. Court of Appeals Federal Circuit case involving Harold L. Bowers and Baystate Technologies over patent infringement, copyright infringement, and breach of contract...
.
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.Uniform Commercial Code
The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
—see, for instance, Step-Saver Data Systems, Inc. v. Wyse Technology
Step-Saver Data Systems, Inc. v. Wyse Technology
Step-Saver Data Systems, Inc. v. Wyse Technology was a case in the U.S. Court of Appeals for the Third Circuit primarily concerned with the enforceability of box-top licenses and end user license agreements and their place in U.S. contract law...
, 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
Microsoft Corp. v. Harmony Comps. & Elecs., Inc.
Microsoft Corp. v. Harmony Comps. & Elecs., Inc. was an Eastern New York District Court decision regarding copyright infringement and breach of license agreement. Microsoft Corp. filed the lawsuit against Harmony Comps. & Elecs., Inc...
, 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
United States Court of Appeals for the Seventh Circuit
The United States Court of Appeals for the Seventh Circuit is a federal court with appellate jurisdiction over the courts in the following districts:* Central District of Illinois* Northern District of Illinois...
and 8th Circuit
United States Court of Appeals for the Eighth Circuit
The United States Court of Appeals for the Eighth Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* Eastern District of Arkansas* Western District of Arkansas...
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
Uniform Computer Information Transactions Act
Uniform Computer Information Transactions Act was an attempt to introduce a Uniform Act for US States to follow. As a model law, it only specifies a set of guidelines, and each of the States should decide if to pass it or not, separately. UCITA has been drafted by National Conference of...
(UCITA) or Anti-UCITA (UCITA Bomb Shelter) laws. In Anti-UCITA states, the Uniform Commercial Code
Uniform Commercial Code
The Uniform Commercial Code , first published in 1952, is one of a number of uniform acts that have been promulgated in conjunction with efforts to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.The goal of harmonizing state law is...
(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
Encryption
In cryptography, encryption is the process of transforming information using an algorithm to make it unreadable to anyone except those possessing special knowledge, usually referred to as a key. The result of the process is encrypted information...
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
Digital Millennium Copyright Act
The Digital Millennium Copyright Act is a United States copyright law that implements two 1996 treaties of the World Intellectual Property Organization . It criminalizes production and dissemination of technology, devices, or services intended to circumvent measures that control access to...
(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
United States Court of Appeals for the Eighth Circuit
The United States Court of Appeals for the Eighth Circuit is a federal court with appellate jurisdiction over the district courts in the following districts:* Eastern District of Arkansas* Western District of Arkansas...
case of Davidson & Associates v. Jung
Bnetd
bnetd is a software package that was reverse engineered from Blizzard Entertainment's Battle.net online multiplayer gaming service, providing near-complete emulation. The software allows users to create and play games on their own servers, instead of Battle.net servers...
determined that such clauses are enforceable, following the Federal Circuit decision of Baystate v. Bowers
Bowers v. Baystate Technologies
Bowers v. Baystate Technologies was a U.S. Court of Appeals Federal Circuit case involving Harold L. Bowers and Baystate Technologies over patent infringement, copyright infringement, and breach of contract...
.
See also
- AbandonwareAbandonwareAbandonware are discontinued products for which no product support is available, or whose copyright ownership may be unclear for various reasons...
- Clickwrap licenseClickwrapA clickwrap agreement is a common type of agreement often used in connection with software licenses. Such forms of agreement are mostly found on the Internet, as part of the installation process of many software packages, or in other circumstances where agreement is sought using electronic media...
- Free software license
- Glossary of legal terms in technology
- License managerLicense managerA license manager is a software management tool used by software vendors or by end-user organizations to control where and how software products are able to run. License managers protect software vendors from losses due to software piracy and enable end-user organizations to enforce compliance with...
- License-free software
- List of software licenses
- Product activationProduct activationProduct activation is a license validation procedure required by some proprietary computer software programs. In one form, product activation refers to a method invented by Ric Richardson and patented by Uniloc where a software application hashes hardware serial numbers and an ID number specific...
- Shrink wrap contractShrink wrap contractShrink wrap contracts are license agreements or other terms and conditions of a contractual nature which can only be read and accepted by the consumer after opening the product. The term describes the shrinkwrap plastic wrapping used to coat software boxes, though these contracts are not limited...
- Software Asset ManagementSoftware Asset ManagementSoftware asset management is a business practice that involves managing and optimizing the purchase, deployment, maintenance, utilization, and disposal of software applications within an organization...
- Software license
- Terms of Use
- Breach of ContractBreach of contractBreach of contract is a legal cause of action in which a binding agreement or bargained-for exchange is not honored by one or more of the parties to the contract by non-performance or interference with the other party's performance....