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What are EULAs?

End-user licensing is the effort by which producers of software, websites, mobile applications, and consumer products with embedded software (including the so-called Internet of things) attempt to define their legal relationships with the consumers or users of their products. In this discussion, the producers are licensors, and the consumers or end-users are the licensees. The texts that embody these legal terms can broadly be considered license agreements, but they go under many different names:

  • end-user license agreements or EULAs
  • terms of use or TOUs
  • terms of service or TOS
  • terms of agreement
  • software license agreements
  • and others

The Responsible End-User Licensing lab (REUL Lab) typically uses the term end-user license agreement or EULA to refer to all such agreements. Privacy policies are subject to different legal standards in some respects, and so REUL Lab considers them as a separate but closely related category.

EULAs often address various legal issues that consumers could reasonably expect in a product transaction:

  • Acknowledgments of the producer’s copyrights, patents, and trademarks in the product.
  • Limitations on the end-user’s use of the product.
  • Limitations on the producer’s liability and risks associated with the consumer’s use of the product.
  • Limitations on the producer’s warranties to the end-user licensee.

But EULAs sometimes also include possibly objectionable terms:

  • Transferring ownership or very broad licenses from the end-user to the producer to works that the end-user creates. For example, a website hosting end-user photos might claim a license to be able to use and modify those photos without compensating the end-users who created them.
  • Limiting the consumer’s right to write a review of the product or make other statements about it (sometimes called a DeWitt or gagwrap clause).
  • Limiting the consumer’s right to make fair use under the Copyright Act of materials available in or on the product.
  • Requiring that disputes between producer and consumer must be adjudicated in the producer’s ‘hometown,’ which may be cost-prohibitive for many consumers.
  • Requiring that disputes between producer and consumer must be resolved by arbitration or under other terms that may be favorable to the producer.

Producers of websites and products generally wish end-users to be bound by the terms of their EULAs; in other words, producers want the EULAs to be legally enforceable contracts. Some critics have argued this is a problem on several grounds: First, it is received wisdom that few consumers actually read EULAs because of their length, complexity, the way in which they are presented, or some combination of these factors. There is actually comparatively little empirical research on this topic, but the research that exists supports this view. Second, the consumer has no means of negotiating the terms. Even at the grocery store, a consumer has the option to ask if she may have a bruised melon at a discounted price. EULAs represent take-it-or-leave-it propositions. Finally, it is not always clear to the consumer that the EULA is meant to be contract.

This last concern arises from the various extents to which sites make their EULAs apparent to consumers and obtain consumer assent to the terms. The approach that is most like asking the consumer to say “I agree” is the click-through license, also sometimes called a clickwrap agreement. In this approach, the consumer is presented with a screen, dialog box, or other automated prompt that requires her to click a button or icon on the screen that says “I accept” or “I agree.” A display of the EULA or link to it accompanies the prompt. If the consumer clicks on “I accept” or “I agree,” she gains access to the product. Otherwise, she cannot make use of it. A variation of the click-wrap, called a scrollwrap by at least one court,  requires the consumer to view at least a portion of the actual text of the agreement or even to scroll down through it before she can click “I agree.”

A slightly different approach is to put a link to the EULA next to a button or icon on which the end-user must click to use the product. (What one court refers to as sign-on-wrap.) For example, on a real estate search website, a link to the EULA below the “Search” button might say, “By clicking ‘search’ I agree to be bound by the terms of use.” This approach puts the end-user on notice of the terms without requiring her to acknowledge explicitly that she agrees to or accepts them.

Finally, in what is commonly called a browsewrap license, the licensor places a link to the EULA elsewhere on the web page. For example, many websites place a “terms of use” link at the bottom of each page. In this case, a consumer may or may not ever become aware of the terms and is never required to assent or agree explicitly to them.

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