As a tech business, you operate in a fast-moving digital world where software is one of the most valuable and business critical assets you own. Regardless of whether you’re offering a mobile app, enterprise software, or cloud-based subscription services, you’ll need a robust and tailored legal agreement to govern how users can access and use your software.
An end user licence agreement (EULA) is a specific type of software contract that sets out the terms on which you grant users rights to use your software. It will help protect your intellectual property (IP) rights, set clear expectations on what users can expect, limit your liability where things go wrong, ensure users comply with your rules and don’t misuse your software assets - which can help to safeguard its value.
Here our commercial solicitors explore some key legal considerations surrounding the use of EULAs and why you need a robust agreement to safeguard your software.
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What is an End User Licence Agreement (EULA)?
Put simply, a EULA is a legal contract between the software owner (the licensor) and the person or business using the software (the licensee). The EULA grants users a licence to use the software under specific conditions - making sure the software provider retains and protects ownership of their IP rights in the software product.
EULAs differ from broader software licence agreements which can often be quite heavily negotiated between businesses to cover detailed commercial terms e.g. pricing, installation, and support. Instead EULAs will typically be standardised, non-negotiable agreements.
The term ‘EULA’ and what it means can cause some confusion, since it can be referred to in a wide sense.
Some typical examples of EULA use include:
- EULAs can be used where the end-users (such as individual employees who are using the software) aren’t direct customers of the software owner.
- If a software owner distributes its software via a third party (such as a reseller), it could also require the reseller’s customer to sign a EULA to impose licence restrictions on their use of the software.
- EULAs are often used for mobile applications, whereby software is downloaded via an app store. In this case, end users will often need to sign a EULA before downloading an
Does your business need a EULA?
EULAs can be used in both business-to-business (B2B) and business-to-consumer (B2C) software licensing scenarios. So, the way they need to be drafted will depend on whether they’re aimed at business users or individual consumers.
If you license software to businesses, your EULA might include stricter liability limitations, restrictions on sublicensing, and provisions covering multiple users within the business organisation.
It’s critical for you to carefully understand your business model, how you’re distributing the software in practice and who can use it - to make sure your document is drafted correctly. You’ll also need to consider important issues around whether the EULA will be a standalone contract or accompanied with other contracts.
Types of EULAs and key drafting considerations
There are different types of EULAs, which can be used depending on how users accept the terms, including:
- Click-wrap agreements - where users must actively click to accept the terms before using the software. This is the most enforceable format, as users explicitly need to agree to the terms.
- Browse-wrap agreements - where the terms are available to users, but they don’t have to actively accept them. Instead, continued use of the software is deemed to indicate agreement. These can be harder to enforce so raise risks.
- Shrink-wrap agreements - where the terms are included in the software’s packaging or displayed during installation. The user is considered to have accepted them by opening the package or installing the software.
Many businesses choose click-wrap agreements to ensure users have clearly agreed to the terms, which can help with enforceability in the event of disputes. Other types of EULAs may pose enforceability challenges, particularly when dealing with consumer users.
Some key drafting considerations to keep in mind:
- You’ll need to carefully control the distribution and use of your software. Your EULA should allow users to access your software under clearly defined conditions but ensure you retain full ownership and control. Care needs to be taken to identify the licensee, to avoid commercial disputes over the scope of the licence and who is entitled to use it. If a group company licence is granted, this should be specified.
- You can also add in disclaimers to manage expectations on what the software will and won’t do.
- Preventing software misuse is critical. Your EULA should include strict restrictions on modifying, copying, redistributing, or reverse-engineering the software. Including penalties and enforcement provisions may help deter users from misusing your software.
- Termination rights are key to allow you to revoke the licence if users breach the terms.
- Limiting liability is essential to protect your business from financial risk. Software disputes can be time-consuming and damaging to your reputation, but the way these terms are drafted will differ depending on your user base.
- If the EULA applies to end users who aren’t the direct customers of the software, then it’s important to consider issues around rights to enforce the terms.
- Consumer facing EULAs must comply with UK consumer law rules.
- Remuneration terms should be considered carefully - as it’ll depend on the circumstances and structure of the EULA. For example, a EULA with employees will be unlikely to include payment terms e.g., where the employer has paid for the licence under a separate software licence agreement).
A commercial lawyer can guide you on each of these issues and their implications for your specific agreement.
Essential clauses to include in your EULA
Although the structure of a EULA will vary (i.e. depending on your business model and the type of software you provide and to who) most agreements will include the following key clauses:
- Granting a licence – Carefully define the software and lay out the licence parameters of use.
- Permitted and prohibited uses – Set out exactly what users are allowed to do with the software and impose restrictions to prevent misuse. E.g., your EULA should prohibit users from modifying, sublicensing, or reverse-engineering the software.
- Intellectual property rights – Make clear that your business retains full ownership of the software and include provisions to protect your IP rights.
- Limitations of liability – Protect yourself against financial risk by setting clear limitations on your liability provisions. Note consumer EULAs must comply with consumer law, and this can impact how you draft liability terms.
- Termination rights – Define when you can revoke a user’s licence, such as for non-payment or a breach of the terms.
- Data protection compliance – If your software involves the processing of personal data, you may need a data processing agreement or terms that reference how you comply with UK GDPR rules when handling personal data.
- Maintenance and support – You should clarify whether you will provide software updates, security patches, or customer support. If your software is provided on a subscription basis, you should set expectations for any ongoing maintenance.
But remember that the types of clauses and the way they need to be drafted will depend on your audience e.g. whether you’re operating on a B2B or B2C basis.
Why the right EULA matters for your business
There’s no one-size-fits-all EULA. The terms should be tailored to your product and business model – what works for a cloud-based SaaS platform will differ from a mobile app or downloadable consumer software. Enterprise vendors and B2C providers also have different priorities.
Some EULAs come with legal complexities. For instance, if your app is distributed through Apple’s App Store or Google Play, your terms need to align with their platform rules. Ensuring enforceability in cases like this can be a challenge, particularly with certain formats.
Your EULA should evolve with your software and accurately reflect what you offer. Given the legal and commercial considerations, you should take advice from a commercial solicitor is to makes sure you have the right agreement that supports your business goals, manages risk, and stands up in practice.
A well-structured EULA isn’t just a formality – it really can safeguard your software and your business. If it doesn’t meet legal standards or misses key protections, it could expose your business to avoidable issues.
If you need help creating a legally sound EULA, our specialist technology and commercial solicitors can help you draft a tailored agreement that protects the value of the software you’ve worked hard to build.
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