scott a. thomas robert h. wright. the “eula problem” best practice is to negotiate a master...

Scott A. ThomasRobert H. Wright

The “EULA Problem”

Best practice is to negotiate a master license agreement with your software vendors.

What happens when your vendor won’t negotiate?• Small purchase

• No real money on the table

• Vendor has a policy that they don’t negotiate

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

The Next 60 Minutes

What is a EULA?• Definition and related terms

• Sources

• Enforceability

What’s Wrong with a EULA?• Creates disorganization

• Nefarious and/or wonky terms

A Modest Approach

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

What is a EULA?

“EULA” is shorthand for “end user license agreement”.

A EULA is an agreement between the licensor of a software solution and the purchaser/licensee.

Also commonly referred to as:• Click-through/click-wrap

• Shrink wrap

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

Where Do EULAs Come From?

Resellers• Your reseller agreement governs the “service” of

buying the software, not the licensing of the software itself.

Small, Niche Providers• Solutions are generally inexpensive and vendors

are typically understaffed.

Rogue Spend• How many folks in your enterprise are buying

software with their credit card?

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

Are EULAs Enforceable?

Doesn’t an agreement require a physical signature?• No – ESIGN and UETA mandate that “no

contract or agreement can be denied … simply for having an electronic signature.

Ultimately, enforceability depends on court in which case is heard.• Some jurisdictions find EULAs to be

unconscionable; others find them completely acceptable.

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

Key Learning

No court has ruled on the validity of a EULA in general; decisions are generally limited to particular provisions of a EULA

What does this mean for you?• Even if your EULA has a particularly offensive

clause, it’s likely much of the agreement is going to stick.

• Also validates the need for a severability clause in your own drafting.

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

iTunes – Giving Peace a Chance

Apple’s iTunes EULA expressly forbids users from creating missiles and biological, chemical, or nuclear weapons.

Sure that last U2 album was bad, but it wasn’t THAT bad.

Takeaway: EULAs are typically boilerplate and include terms which aren’t relevant/applicable.

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

PC Pitstop – Rewarding Literacy

PC Pitstop once had the following clause in their EULA:• “A special consideration which may include

financial compensation will be awarded to a limited number of authorized licensees to reach this section of the license agreement and contact PC Pitstop at consideration@pcpitstop.com

Takeaway: Very few people read EULAs!

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

Facebook – We Own You

At one time, the following was included in Facebook’s Statement of Rights and Responsibilities:• “You grant us a non-exclusive, transferable, sub-

licensable, royalty-free, worldwide license to use any IP content that you post on or in connection with Facebook.”

Takeaway: If you’re interacting with a solution, you’re probably giving away rights

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

Dropbox – Data Loss Happens

The following is from Dropbox’s Terms of Service: • You, and not Dropbox, are responsible for

maintaining and protecting all of your stuff. Dropbox will not be liable for any loss or corruption of your stuff, or for any costs of expenses associated with backing up or restoring any of your stuff.”

Takeaway: EULAs aren’t fair!

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

Summary

EULAs are enforceable against licensees.

EULAs are typically created from “boilerplate” templates with very little thoughtfulness by licensors.

Even so, very few people ever take time to consider these terms.

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

A Modest Proposal

Step 1 – Understand how EULAs are getting into your enterprise.• Educate employees on proper IT procurement

processes and the reason behind those processes.

Step 2 – Create a EULA policy.• For some deals, moving forward under a EULA

is your only option.

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

A Modest Proposal

Step 3 – Develop a framework through which to analyze EULA terms.• There are standard, bad EULA terms and then

there are REALLY bad EULA Terms.

Step 4 – Educate executives on the risks associated with moving forward under a EULA.• A “red, yellow, green” risk matrix is a really

good way to do this.

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

A Modest Proposal

Step 5 – Stay organized so that you can move off the EULA in the future.• As spend increases, so too does a licensor’s

willingness to negotiate terms.

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em

Questions?

EULAs: Can’t Live With ‘Em, Can’t Live Without ‘Em