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. Most often, a software license agreement indicates the terms under which an end-user may utilize the licensed software, in which case the agreement is called an end-user license agreement or EULA. When the software license agreement is between the software licensor and a business or government entity, it is often implemented as a specialized form of contract with many clauses unique to the license and the nature of the software being licensed.
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, without reading it first. The installation of the software is conditional to the user accepting the agreement and thereby agreeing to abide by its terms. Once the user has installed the software, then he/she has the opportunity to read the license agreement in detail.
Many EULAs assert extensive liability limitations. Most commonly, a EULA will hold harmless the software licensor in the event that the software causes damage to the user's computer or data, but some software also includes 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 include 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.
These terms are likely to provide employment security for intellectual-property lawyers for the foreseeable future: in disputes of this nature, cases are often appealed, and different circuit courts of appeal seldom agree, which provides an opportunity for the U.S. Supreme Court to intervene—which in recent decades it has usually done in a scope-limited and cautious manner, providing little in the way of precedent or settled law.
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