Things to Consider in an End-User License Agreement

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An End-User license agreement (EULA) is an agreement between a user and a vendor. It outlines what the user can and can’t do with the software they have acquired. With a EULA, a software company allows you the right to use the software. Ownership of the IP rests with the software company only. The terms of service dictate the use of software. Any activity not in the EULA constitutes a breach of contract. The software developer may revoke your license in case of a breach.

Things to Consider in an End-User License Agreement

A EULA identifies the copyright ownership of the software developer. It reduces the user to a mere licensee. The terms of service limit the rights of the user to use and transfer the software. An end-user license agreement is an implied contract. It becomes enforceable the moment an end-user loads the software. General EULA formats base their terms on the lines of the IP act of their country.

There are two major types of licenses:

Perpetual License:

A perpetual license allows the end-user access to the software for as long as he wants. This agreement does not cover any upgrades that might arise in the future. If your business needs constant updates, then perpetual licensing is not for you

Renewable License:

These types of licenses are renewed after a fixed period. Most companies run into trouble in these types of licenses because the rules for conditional use keep changing. Stay abreast of the changes in the usage terms can help avoid many of the problems

Common Software Mistakes:

The onus of proving the validity of license rests on the user in a court of law. You should ensure that your licenses with the vendor are valid and suitable documents are available for them. Even then, there are some things you need to watch out for

Centralizing Purchases:

The authority to purchase and load the software should be centralized. One reason for this centralization is to have documentation for all the purchases made. The other, and the more important one, is that centralized purchases ensure uniformity in the software license agreement terms.

Tracking the Use of the Software:

Employees should not be allowed open access to the software loaded on their systems. Administrator controls prevent any possibility of non-compliance or breach of the terms of the license.

Tracking Due Dates:

Tracking when your licenses are due to expire can help you during an audit. If you don’t have a central repository system that tracks the license period, it becomes difficult to prove compliance during a review.
If you are the copyright owner, and you have developed a commercial software that you want to lease, you have to keep some things in mind.

An end user license agreement should conform to the laws of the land concerning fair use of the IP. The ultimate goal is to earn revenue from licensing, which means you need to restrict access to the software. It is not rationally possible to prevent piracy. One important thing is to make the users accept your terms of service before installing it. When users accept your terms before installation, it protects your commercial interests if the user chooses not to go ahead with the purchase.

Representations and warranties define an EULA. The end-user accepting your terms of service (ToS) does not preclude you from abiding by specific rules. If there is any variance in the software performance as against the representations made, courts may set aside your license agreement in a suit against you. A EULA follows the format of any typical legal agreement. However, since EULA deals with IP, jurisdiction for dispute resolution is essential. You need to specify the jurisdiction for any arbitration in the agreement you draft. The place of the dispute will be the jurisdiction if nothing is mentioned in the license agreement, which puts you at a disadvantage.

Since you’re dealing with IP license, a user might lay claim to future upgrades unless specifically mentioned. To preclude your user from instituting a claim, you need to state the addenda that would accompany a software license agreement. If you choose to allow upgrades to the software, you do not have to represent the due dates for any updates or other addenda. The clause that allows upgrades must be modified to allow you the creative time to come up with upgrades without users heckling you for resolving bugs.

Users generally accept the terms of the software license without reading them. When a dispute arises because of the performance (or non-performance) of the software, iron-clad terms will come to your defense. It will be your stand to prove that the original intent of developing the software is how the software is performing under the circumstances.

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