What is an end user licence agreement (EULA)?

An end user licence agreement (EULA) is a legally binding document defining the user’s rights and restrictions in using a specific software product.

When a customer or business purchases a piece of software, they’re not actually gaining ownership of the software at all. Instead, they are paying for the right to use the software. Ownership of these software applications remains with the software vendor. To clearly specify terms, conditions, liabilities, restrictions, obligations and more, vendors will gate their software behind an EULA. The end user then must agree to the stipulations outlined in the EULA before they can access the application.

“End user licence agreement” (or, more commonly, the abbreviation “EULA”) is the term most widely used to describe this kind of contract between the licensor of a software product and the licensee. However, there are several other terms that may be used to describe agreements that fulfil essentially the same function. These include the following:

  • Licensing agreement
  • Software licence agreement
  • Licensed application end user agreement
  • Terms and conditions agreement
  • Click-wrap licence
  • Browse-wrap licence
  • Shrink wrap licence

It’s worth recognising that, while many of these terms are used synonymously, some may have a slightly different focus or legal function. In official documentation, using “end user licence agreement” or “EULA” is often the most appropriate approach.

Unlike many physical products, where ownership changes hands once the transaction is finalised, purchasing software constitutes an ongoing relationship between the vendor and the user. This relationship requires setting boundaries. EULAs establish what the user can and cannot do with the software, set the terms of the agreement, clarify liability, provide infringement information, specify disclaimers and address how and when the right to use the application may be terminated.

What are EULA benefits for software vendors?

An effective EULA acts as a shield, protecting the rights of the software vendor. An EULA is a vital layer of defence against copyright infringement, software reverse engineering and misuse of the application. It also allows vendors to limit their own liability and protect their reputation if the user abuses the application or uses it for improper or illegal purposes.

Additionally, the EULA gives vendors the opportunity to disclaim warranties, specifying that the application is provided on an as-is or as-available basis—ensuring that they are not held accountable in the event that certain circumstances prevent the software from fully meeting requirements. Finally, an EULA also protects the vendor’s right to revoke or suspend licences for any reason, and at any time, with or without warning.

What are EULA benefits for customers?

While most EULAs are designed to support the rights of software vendors more fully, they also provide several benefits to the end users themselves. By clearly outlining the end users’ rights and restrictions, the EULA establishes expectations, defines software and maintenance terms, and describes how the software should be used for optimal effectiveness.

End user licensing agreements are usually unique to the vendors and the application they represent. That said, most EULAs consist of certain common elements. Many of these elements take the form of clauses throughout the EULA:

Definitions

EULAs need to be clear, to the point, and accessible. To help ensure that the end user understands what they are agreeing to, EULAs often include a list of definitions of relevant terms used in the agreement. The user may refer to these terms as they read through the EULA.

EULA Components | ServiceNow

Copyright notice

A copyright notice informs that user that the software in question is the intellectual property of the vendor and that any infringement of the established copyright will be met with legal action.

Infringement acknowledgement

This clause directly states that copyright infringement is assigned to the licensee.

Licensor information

The EULA defines who the software vendor is, including such details as name and contact information.

Software information

The name of the software, its version and any other application-relevant information is included in the EULA.

Relevant laws

This section identifies any laws that may relate to the use of the software. The section may also outline possible penalties for failing to follow these laws.

Warranty disclaimer

The warranty disclaimer protects the vendor from liability if any problems arise because of the software.

Maintenance and support

This section of the EULA sets relevant maintenance and support expectations, including whether maintenance or support will be available, how these services will be delivered and with what regularity scheduled maintenance may be performed.

Restrictions for use

The restrictions for use clause defines the legal limitations of how the user may employ the software.

Site licences

This section outlines whether and in what scenarios a user may install the software on multiple devices.

Start date

The EULA must include a start date, establishing when the user becomes bound by the agreement (generally, from the time they either open the software package or initiate the download).

Termination of licensing

This clause defines what violations may result in a termination of licensing, as well as granting the vendor the right to terminate or revoke the software licence for any other reason.

Licence granting

This section officially grants permission for the licensee to use the software, dependent upon their signing of the document.

An end user licence agreement is a legal document; as such, it needs to follow certain established formats and protocols to be legally enforceable. Many organisations will choose to hire an EULA lawyer to help create the licence agreement, or to at least review the completed agreement before publication.

Identify the business and the user

Because the EULA is a contract, a vital function is to identify the relevant parties. Clearly establish who the licensor and licensee both are, so that they may be legally held responsible for fulfilling their terms.

Disclose the copyright

A major aspect of software usage is the type of copyright or intellectual property licence that applies to it. An open-source application, for example, would allow the user to perform certain actions that would be prohibited under closed-source software. Disclosing the copyright tells the end user what to expect.

Establish and define the rules of behaviour

Perhaps the most important job of the EULA is to set ground rules for users to follow. Clearly state how the software should be used and what restrictions will apply.

Outline all relevant conditions and other details

The EULA must also include details on the relevant conditions of software usage, such as the conditions that may result in the licence being terminated or revoked.

Clearly state any disclaimers and limitations of liability

Finally, the EULA must address any disclaimers and limitations of liability that may be necessary to further protect the vendor.

ServiceNow ITAM solutions help customers to keep track of important software data, including EULAs, which provide essential details such as maintenance and support information, how the software can be used, who or what devices can use the software, and what constitutes a user violation. This enables users to effectively manage the software life cycle and strategically optimise the software estate to reduce risk and maintain compliance.

Additionally, ServiceNow takes things further, with the License Workbench. License Workbench helps to ensure full compliance, keeping detailed records of the number of available licence rights, and comparing that to the number of rights being consumed. This not only allows organisations to identify important trends, but also provides them with essential oversight for identifying and acting on any publishers who are not in full compliance.

Strategically manage the software life cycle

Managing rights and restrictions doesn’t need to be difficult; see how ServiceNow can optimise your approach to EULA.

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