End-user license agreement

The source code (or compiled binaries in the form of object code)^[1] of a computer program is protected by copyright law that vests the owner with the exclusive right to copy the code. The underlying ideas or algorithms are not protected by copyright law, but are often treated as a trade secret and concealed by such methods as non-disclosure agreements.^[2] Software copyright has been recognized since the mid-1970s and is vested in the company that makes the software, not the employees or contractors who wrote it.^[3][4]

The tendency to license proprietary software—to sell the right of use of the software^[5] rather than a copy of the software—dates from the time period before the existence, then the scope of software copyright protection was clear. These licenses have continued in use after software copyright was recognized in the courts, and are considered to grant the company extra protection compared to copyright law.^[6] Virtually all proprietary software is not sold as a copy but rather as a license with associated EULA.^[7]

Initially, end-user license agreement (EULAs) were printed on either the shrinkwrap packaging encasing the product (shrink wrap contract) or a piece of paper. The license often stipulated that a customer agreed if they did not return the product within a specified interval.^[8] After the advent of the internet, EULAs are more often found in clickwrap format where the user only needs to click an agree button.^[9] Without the constraints of having to print the license, the length of the agreements ballooned.^[9] Another type of license, browserwrap, intuits the user's consent after they simply visit a website and are made aware of the terms of use.^[10]

EULAs are often written in vague language, and do not inform the customer of the limitations on the agreement's enforceability.^[11] Most EULAs have been designed so that it is very difficult to read and understand them, but easy to agree to the licensing terms without reading them.^[6][8] Regardless of how easy it is to access, very few consumers read any part of the license agreement.^[12][13] Most assume the terms are unobjectionable or barely notice agreeing while installing the software.^[14] Companies take advantage of consumers' inattention to insert provisions into EULAs.^[15] Many assert that the purchaser is an adult and takes responsibility for minors' use of the product, to relieve the vendor of the issue of contracting with a minor and liability from minors' use of the product.^[16]

EULAs, almost always offered on a take-it-or-leave-it basis as a non-negotiable condition for using the software,^[17][11] are very far from the prototypical contract where both parties fully understand the terms and agree of their own free will.^[18] Proponents argue that the contracts streamline purchases and that savings for the company could be passed to the consumer.^[9] Enterprises buying software for a large number of employees often negotiate the licensing agreement with the vendor.^[19]

According to one study, economic competition from different software services leads to EULAs more favorable to the customer.^[11]

According to United States federal law, a company can restrict the parties to which it sells but it cannot prevent a buyer from reselling the product. Software licensing agreements usually prohibit resale, enabling the company to maximize revenue.^[20] Proprietary software is usually offered under a restrictive license that bans copying and reuse and often limits the purchaser to using the software on one computer.^[21][22] Source code is rarely available. Derivative software works and reverse engineering are usually explicitly prohibited.^[22] The issue of reuse is particularly important in the copyright law of English-speaking countries.^[5]

Many EULAs allow the vendor to collect information about the user and use it in unrestricted ways.^[23]

Some EULAs restrict the ability of users to exercise copyright over derivative work made using the software, such as creative creations in the virtual worlds of video games.^[24][25] Although most video game EULAs assert that the developer holds the copyright on any user-generated content, this is contested by users and has not been tested in the court system.^[26] Legal scholar Anthony Michael Catton suggests that user-generated content should be considered jointly authored by the video game developers and the users.^[27]

Some companies do allow video footage of their games to be distributed online, even for profit.^[28]

Traditionally, software was distributed in the form of binary object code that could not be understood or modified by the user,^[1] but could be downloaded and run. The user bought a perpetual license to use a particular version of the software.^[29] Software as service (SaaS) vendors—who have the majority market share in application software as of 2023^[update][30]—rarely offer perpetual licenses.^[31] SaaS licenses are usually temporary and charged on a pay-per-usage or subscription basis,^[32] although other revenue models such as freemium are also used.^[33] Even if the user purchases a perpetual license, it is common for EULAs to allow unilateral termination by the vendor for any number of vague reasons or none at all.^[34][35] Furthermore, many EULAs allow the vendor to change the terms at any time and the customer must choose between agreeing or ceasing use of the product, without getting a refund.^[36][37] EULAs are also applicable to in-app purchases and microtransactions. As a result, players could lose access to purchased content if the vendor decides to terminate their license and withdraw the content.^[38]

Most EULAs disclaim any liability for harms caused by the product,^[39] and prevent the purchaser from accessing the court system to seek a remedy.^[40]

There has been substantial debate on to what extent EULAs can be considered binding.^[41][42] Many EULAs contain stipulations that are illegal and therefore unenforceable.^[5][43] Software vendors keep these unenforceable provisions in the agreements, perhaps because users rarely resort to the legal system to challenge them.^[43]

Under the New Digital Content Directive effective since 2022 in the European Union, EULAs are only enforceable to the extent that they do not breach reasonable consumer expectations. The gap between expectations and the content of EULAs is especially wide when it comes to restrictions on copying and transferring ownership of digital content.^[44] In Germany, EULAs are only valid if known to the customer before purchase.^[45]

The United Kingdom's National Consumer Council undertook a study published in 2008 which found issues with the way 17 major IT businesses had been using EULA's and asked the Office of Fair Trading to undertake an investigation.^[46] As of 2020, the enforceability of EULAs and provisions granting copyright of all derivative works to the developer has not been judicially tested in United Kingdom.^[26]

Before the 1996 ProCD, Inc. v. Zeidenberg in the United States, shrinkwrap licenses were not held to be binding, but since then they often have been.^[41] In some shrinkwrap cases the customer was found not to have consented to the EULA and was therefore not bound by it.^[47] Clickwrap has been found generally to be enforceable^[48]—even when the license terms are provided after the sale.^[49] The enforceability of browserwrap is lower, but has been enforced in some cases where it can be proven that the user was presented with the terms of use and continued to use the website.^[50]

EULAs are primarily legal documents with IT terminology. As such, knowledge in several different domains may be necessary to produce a satisfactory translation.^[51]

There have been numerous attempts to make fun of EULAs not being read.^[7] Some EULAs bury a contract offering payment to a reader who notices the clause.^[52] As an April Fool's Day joke, Gamestation added a clause stating that users who placed an order on April 1, 2010, agreed to irrevocably give their soul to the company, which 7,500 users agreed to. Although there was a checkbox to exempt out of the "immortal soul" clause, few users checked it and thus Gamestation concluded that 88% of their users did not read the agreement.^[53] During the installation of version 4 of the Advanced Query Tool the installer measured the elapsed time between the appearance and the acceptance of the end-user license agreements to calculate the average reading speed. If the agreements were accepted fast enough, a popup congratulated the users for reading several hundred words per second.^[54] South Park parodied this in the episode "HumancentiPad", where Kyle had neglected to read the terms of service for his last iTunes update and therefore inadvertently agreed to have Apple employees experiment upon him.^[55]

• YouTube Video: The Clickwrap and The Biggest Lie on the Internet
• Accessible editorial on enforceability of various EULA-type licenses in the United States from 2002..