Creating an Effective End User Licensing Agreement (EULA)

November 05, 2019 5:30 pm.

Effective End User Licensing Agreement (EULA)

End user licensing agreements (EULAs) are a crucial document for those who create and distribute software or other forms of technology that will be used by individuals or businesses. It is simply not enough for a developer to find and use an online end user licensing agreement. Additionally, it is not in the best interest of the developer to find a EULA related to their particular technology and copy it to use as their own. When found online as a template or copied from a similar technology development practice, the developer will most likely not have an effective document that will protect them. In this article, you’re going to learn some basic information about the creation of an effective end user licensing agreement (EULA).

Related: Creating Software Licensing Agreements That Work

What Is the Purpose of an End User Agreement?

Before we talk about how to create a EULA, it’s important to understand its purpose. An end user licensing agreement is a contract between the developer (whether an individual or a business) and the end user related to how the described software or other technology may be used. The end user is the individual or the business that uses the software or technology. Since it is a legally binding contract, it outlines the rights and obligations of those who are a party to the contract.

Depending on how the software or technology is delivered for utilization, the presentation of the EULA for acceptance by the end user may differ. For example, online services or any sort generally present the agreement to the end user for acceptance before the end user receives access to the service or site. When software was more commonly delivered via CD, the EULA appeared during the installation process. The end user still needed to agree to its terms before using the software. For other forms of technology, such as medical equipment or even biomedical equipment, the EULA may be presented through digital means, such as through an online contract management system, or even in person. Regardless of how it is delivered, the end user doesn’t receive the right to use the technology until they accept the agreement.

Effective EULAs Include Certain Provisions

Although an end user licensing agreement is a contract, it isn’t quite the same as most business contracts. Generally, business contracts focus on explaining the terms and conditions of the relationship between the parties. Business contracts clearly outline the services or goods to be provided, the price, the obligations of each parties, the rights of each party, and so on.

An end user licensing agreement is still a contract that can be used by businesses. However, it is more about explaining the limitations on the use of the technology and the limitation of liability of the creator. Effective EULAs should address:

  • License granting. This is a clause that explains that the end user is being granted a license to use the technology. There are several types of licenses. An effective EULA explains exactly which type of license is granted.
  • Restrictions of use. Restrictions of use explain how the technology should not be used. Let’s use a website with forums of some sort as an example. Let’s say it is members only. When new users sign up, they must accept the EULA before accessing the members’ only area. One of the restrictions of use may be no spamming other users. Another restriction may be no bullying or harassing other users.
  • Related agreements. If there are other documents that are referenced in the EULA, they are found under this clause. For example, if the EULA is for medical equipment, this clause may address user manuals or maintenance agreements.
  • Infringement. An infringement clause explains whether the end user can transfer the agreement (and their license) of the technology to a third-party. It may also specifically address the consequences of infringement. Not only is this a common clause in an effective EULA, it is a complete necessity since the document affects the intellectual property rights of the creator of the technology.
  • Termination of the EULA. A termination clause explains which actions necessitate the termination of the EULA as well as whether there are remedies for the termination. It also explains the procedures that one or both parties may take to terminate their agreement.
  • Limitations and warranties. Limitations and warranties create the heart of the agreement. An effective EULA protects the creator of the intellectual property. Limitations and warranties may create a specific time period in which the technology is warrantied. For example, the purpose of certain technology may come with a one-year warranty if the end user follows the prescribed use of the technology. There are generally other limitations as well. One of the most common limitations is a limitation of the liability of the creator of the technology. They may also limit the end user’s rights. For example, the EULA may limit whether the end user can reverse engineer the technology.

Specific Laws May Impact the Creation of a EULA

Depending on the industry, there may be specific state and federal laws that your business is required to adhere to in order to remain in business or offer services or goods. Because these agreements may be impacted by both federal and state law, they should be drafted specifically with your business and its technology in mind. If you have multiple creations, each should have their own EULA that covers the specific limitations of the end user and the technology.

The best option for creating an effective end user license agreement (EULA) is to work with a lawyer experienced in both contracts and technology. With more than 30 years of experience handling contracts and how they relate to technology, Susan Larsen wants to help you create an effective EULA that suits your needs. To schedule your consultation, call Larsen Law now at 303-520-6030.