What is an End User Licence Agreement?

Author: Ian Aldridge, Progressive Legal

Are you selling software as a service or product? Whether it’s a business solution or an entertaining game, having an written End User Licence Agreement (EULA) with your customers is essential.

Not only does this provide your customers with clear expectations for their use of the product, but also acts as valuable legal protection for you and any intellectual property included in your offering. In this article, we discuss the importance of having a written End User Licence Agreement with your customers and what the agreement should include.

What is an end user licence agreement?

An end user licence agreement is a legal contract between the licensor, who owns the rights to the software, and the licensee, who wants to obtain a licence to use or access it. It sets out the terms of usage for either a product or service that is being sold by the licensor.

An EULA exists to outline all rules surrounding permission granted to someone using or accessing a particular piece of software from its licensor.

What should be included in an end user licence agreement?

An EULA will usually contain information about restrictions of use, warranties, indemnity clauses, payment terms and issues related to confidentiality, generally speaking. Furthermore, this contract will also address liabilities of licensors and other important considerations related to intellectual property control and misuse.

An EULA will usually contain the following clauses:

1. Denial of reproduction

This clause is used by software owners to increase the security and protection of their work. Also known as a no-copy clause, it specifically prohibits users from making any copies or reproductions—digitally or otherwise—of the licensed software.

In some cases, this prohibition may even extend to derivatives of the original software product.

2. Free trials

A free trial clause is an agreement between the software supplier and the customer that allows users to try out the product prior to purchase.

This type of clause typically enables users to download and utilise certain features, functions or modules at no cost for a pre-determined amount of time.

3. Indemnity

This clause can provide protection for software owners from the risk of financial loss.

Such clauses typically state that if the software is found to be defective or performs certain services negligently, then any losses suffered by the user of the software are assumed by the owner.

4. Licensor’s warranties

This clause is a legally binding provision that gives the user of the software certain assurances about its performance and quality.

This clause defines and outlines specific kinds of warranty protection that are available to the end user for any malfunction or inaccuracy of the software product. This can also be known as uptime, and dealt with in a separate service level agreement.

5. Privacy

The Privacy clause describes the ways in which users’ personally identifiable information is collected and managed. Software companies must obtain explicit permission from user before gathering data such as names, addresses, email addresses, or other identifying features via terms-of-service agreements.

It also ensures that customer service agents may access the necessary information to resolve any calls they receive while still ensuring the customer’s identity remains confidential. This can also be covered off in a Privacy Policy.

6. Security

This clause defines the copyright and confidential information obligations of the licensor and licensee in relation to the protected software. These clauses typically include provisions regarding data protection, network security, virus prevention and other measures that protect against unauthorised access to or misuse of the software’s copyrighted materials.

It must clearly state that possessing or using a copy of the protected software does not give the user any rights of access, use or modification beyond those expressly granted by the EULA.

7. Termination

This clause outlines the conditions under which either party may decide to terminate the contract. It’s necessary to ensure that all parties are aware of when and why a contract may be terminated in advance, minimising any potential dispute over the issue.

In addition to stating which circumstances lead to termination of the contract, this clause will also generally outline what obligations must be met by both parties before the agreement can officially come to an end.

Key takeaways

A good End User Licence agreement will protect your business from liability and copyright infringement, as well as give you peace of mind that your product is being used as intended.

If you have any questions about whether an End User Licence Agreement is right for your business or how to draft one, our team can help. Give us a call today on 1800 820 083 or request our advice below to get in touch.

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