An End User License Agreement, or EULA for short, is a set of conditions under which a licensor gives a licensee permission to use a piece of intellectual property in the form of proprietary software. The licensor is the person or business that designed or developed the software. The licensee is the person paying to use the product.

What Is Included in an EULA?

Usually, during installation or set-up of the software, the licensee will be asked via pop-up window to check a box indicating agreement to the terms of use of the software. The terms describe how the software can be used by the licensee. The terms also include statements outlining the licensor's liability limits in case the application causes damage to the licensee's data or hardware.

Why Is the EULA Important?

While an EULA is not a binding contract in and of itself, any time a user downloads or installs software developed by someone else, they are using a tool protected under copyright laws. The EULA provides a legal way for the licensee to buy or rent the use of the product within specified limits. The company that developed the software earns money by allowing others to use the product within the parameters they control. In this way, the licensor can keep the licensee from making changes to the product or copies of it for free distribution.

If a software creator doesn't include an EULA, then the content is similar to an open-source tool, freely available for sharing. Taking it a step further, any future versions of the software must be free too.

The EULA can be used defensively as well. It stops another party from copying the code and using it for their own ends without compensating the owner of the copyrighted work. This applies to the program itself as well as any mobile applications or web versions. A Non-Disclosure Agreement (NDA) can be added as another layer of protection.

What Are Some Other Names for an EULA?

The EULA is also known as a:

  • Licensing agreement
  • Software license agreement
  • Browse-wrap agreement
  • Shrink-wrap license
  • Click-wrap license
  • Licensed application end-user agreement

What Are the Components of an EULA?

While the EULA will vary from product to product, every EULA should include some basic components.

  • Disclaimer of Warranties: Informs the licensee that this software is being delivered "as is" and the licensor is not responsible for problems that may come from its use
  • Governing Law: Identifies which state's laws apply if a conflict arises
  • Infringement Acknowledgement: Assigns responsibility for any violation of copyright law to the licensee
  • Licensor: Name, address, and other relevant contact information for the person or business who designed or developed the program
  • Licensee: Name, address, and other relevant contact information for the user who is requesting access to the software
  • License Granting: Any limitations on the permissions granted to the licensee
  • Limitations of Liability: Spells out whether the licensor is responsible for damages related to the use of the product
  • Maintenance and Support: What support will be provided to the licensee and whether it will be delivered by phone, in person, on what schedule, and how often
  • Software: Title of the software program being licensed
  • Termination: What violations of the agreement give the creator the ability to cancel the agreement
  • Use Restrictions: Limitations on the how the licensee can legally use the software
  • Start Date: When the licensee becomes bound to the terms and conditions in the EULA, such as at the opening of the package's seal, upon download, or at the checking of a box
  • Site Licenses: Whether the software can be installed on more than one computer or device under this license

What Is the Downside of an EULA?

Because they are often lengthy, hard to understand, and full of legal jargon, most people do not read the EULA before agreeing to its terms. The problem is so wide-spread that the animated series "South Park" even made fun of it in an episode. However, the consequences for the user can be very serious, as illustrated by the guide from the U.S. Computer Emergency Readiness Team (US-CERT). Computer viruses, phishing scams, identity theft, and other technical issues have all been linked to EULAs.

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