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If your company licenses software as a service (SaaS) through a website or application, you should consider having a EULA in place. Otherwise, you expose it to licensee liabilities, property rights losses, and other legal issues. Don’t let a poorly worded document upend your business’s profitability.

Instead, draft the perfect document the first time around. The article outlined below describes everything you need to know about EULAs:

What Is A EULA?

A EULA, also known as a software license , is a legally binding agreement between a licensor and licensee regarding the terms of a software product purchase. It’s an acronym that stands for End User License Agreement . EULAs are different from other agreements, such as terms of service (ToS) agreements.

Instead, they describe what licensee end users are permitted to do with your software. Software downloads generally involve the user reading through the EULA and agree to the terms before downloading it. Your company’s EULA sets limitations and restrictions regarding how, when, and where they will use it.

You can utilize the agreements to protect your competitive advantages and trade secrets by specifically outlining prohibited behavior, such as reverse engineering.

Here is an article that also describes EULAs.

Purpose of a EULA

Before installing your software or web application, the end-user must agree to the terms and conditions outlined in your EULA. Beyond acceptance of the terms, what is the purpose of a EULA?

The purpose of a EULA is to:

  1. Limit damages liabilities : It’s unreasonable to take responsibility for all user actions. As such, EULAs will limit the liability you assume if circumstances beyond your control result in licensee damages.
  2. Retain distribution control and rights : Users can use your software or website, but you can limit their distribution rights. For instance, you can ban third-party downloads or specify that the license is for commercial or personal use.
  3. Maintain termination rights : Reducing your legal exposure sometimes means that you need to rescind licenses. Contain a termination clause in your EULAs to account for revocations for any reason at any time.
  4. Mitigate software abuse : The final purpose of a EULA is to limit the amount of abuse that your software experiences. Unfortunately, licensees can replicate and redistribute your propriety program without this clause. You can also prevent other illegal activities, such as spamming and hacking through your EULA.

You should have a EULA in place if you sell software as a service (SaaS) or website applications. The EULA will serve its purpose as described above. However, there are advantages and disadvantages that your company will want to consider as well.

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Why EULAs Are Important

EULAs are vital because they legally establish a company’s ownership rights of their website and software applications. They also set forth the limitations, stipulations, and conditions for licensing. Companies should settle intellectual property issues before giving third parties access to their offerings.

There are advantages and drawbacks associated with having a EULA. Ensure you consider them carefully before making a decision regarding the type of documentation you wish to use. Technology lawyers can offer you guidance and advice if you have legal questions about EULAs.

Advantages of Having a EULA

The advantages of having a EULA include:

  • Advantage 1 . Grants use authorization to end-users without giving away your intellectual property rights
  • Advantage 2 . Restricts how licensees may use and license your software
  • Advantage 3 : Ability to retract licensing rights for any reason at any time

Disadvantages of Having a EULA

The disadvantages of having a EULA include:

  • Disadvantage 1 . Can become too restrictive on end-users
  • Disadvantage 2 . Challenging to read and understand
  • Disadvantage 3 . Could potentially grant users to engage in invasive activities

If your company still has questions or concerns regarding whether you need a EULA or another contract in its place, technology lawyers will help you understand your options. It’s better to discuss the issue with a legal professional before a problem arises. This strategy supports a solid legal process for companies who want to perform well into the future.

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Examples of When You Need A EULA

Sometimes, it’s much easier to see a real example in action to really understand when you need a EULA. Let’s look at software developers.

Say that an accounting software company allows startups to download their software and engage through the cloud-based version on their website. The company will want to create a EULA that specifies the terms of licensing and how the user may engage with the program continuously.

The software company can specify durations, device installations, number of active users, and more. However, EULAs also ensure that people don’t advantage of your products without an opportunity for you to seek legal redress.

EULA Sample Language

Your EULA should contain specific provisions that protect your company’s rights. While a EULA includes the essential components of a contract, there are a few additional clauses to support your objectives.

The EULA sample language below can give you a better understanding of how to draft them:

License Grant . Artisan grants Licensee a non-exclusive, non-transferable license to use the Products internally solely to design and layout integrated circuits for manufacture at Foundry’s manufacturing facilities. To the extent elements of the Products are intended to be, and are made, part of any integrated circuits developed using the Products, Artisan further grants Licensee a non-exclusive, non-transferable license to use, import, export, market, offer for sale, sell, and otherwise dispose of such elements solely as part of any such integrated circuits. There is no charge to Licensee for the licenses granted hereunder.

Limitations . Licensee may not disclose or distribute, except as set forth in Section 2.4, or modify the Products. The manufacture of any integrated circuits containing or based upon any portion of the Products or output from the Products (e.g., memory instances) may occur only at Foundry’s manufacturing facilities. Licensee agrees to ensure that tags identifying the Products as Artisan’s royalty-bearing products will be included in and will not be removed from the integrated circuit database developed using the Products, and further agrees that it shall include, and shall not alter, modify or remove the tagging located at special text layer 63 in the GDSII format. In addition, Licensee shall notify Foundry at the time of submission of a design for manufacturing that Artisan Product(s) have been used in the design. Licensee acknowledges that (a) its receipt of the Products does not guarantee a business relationship with Foundry, (b) a separate agreement between Foundry and Licensee must be in place to cover foundry services to be provided by Foundry to Licensee, and (c) it has entered, or shall enter, into such separate agreement with Foundry based upon its own judgment and expressly disclaims any reliance upon statements made by Artisan to Licensee, if any, with regards to such separate agreement with Foundry. The Products are Confidential Information of Artisan (and/or its licensors) and, except as set forth in Section 2.4, they may not be disclosed to any third parties and they may be used as authorized hereunder only by Licensee’s employees (and its individual independent contractors working on site at Licensee and who are under a written agreement with Licensee sufficient to ensure compliance with this Agreement) with a need to know in order to design and layout integrated circuits using the Products for eventual manufacture at Foundry’s manufacturing facilities. Certain elements of the Products may be provided in files/data formatted for use with or by certain third party tools/products. No license to any third party tools/products is granted to Licensee by Artisan. Licensee must ensure that it has the necessary licenses and rights to use the third party tools/products necessary to utilize the Products. Licensee may not reverse engineer (except to the extent any prohibition on reverse engineering is not allowed in the jurisdiction in which Licensee is located) any of the Products.

Reference :

Security Exchange Commission - Edgar Database, EX-10.1 4 dex101.htm FORM OF END-USER LICENSE AGREEMENT , Viewed June 15, 2021, < https://www.sec.gov/Archives/edgar/data/1048982/000101287003000778/dex101.htm >.

EULAs vs. Software License

The primary difference between EULAs vs. software licenses is that EULAs set the limitations on proper software use over a continuous period. Software licenses govern a specific software use for a definite period. They also generally allow the user to leave a program installed even after the licensing period expires. The end-user won’t receive updates upon termination.

Learn more about the differences by checking out this article .

EULAs vs. Terms of Service

There are differences between EULAs vs. terms of service (ToS). The EULA governs the terms and conditions surrounding how end-users may copy and use your software, including licensing rights. Signing a EULA can also indicate that a user agree with your company’s privacy policy.

TOS agreements are broader in their scope by describing how users must behave. Your ToS may also account for issues, such as payments and dispute resolution. You should not use EULAs and terms of service interchangeably.

Get Legal Help With EULAs

Avoid leaving one of your most critical contracts to chance and templates. Instead, hire a lawyer as you approach the EULA drafting process. They can answer questions and provide recommendations as to how you can structure your agreements.

In addition, if you already have a EULA in place, you can have an attorney in your state update it for current compliance measures. Regardless of how you move forward, always have a legal professional help you through the process.

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