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Copyright (c) 2002 Doug Winter.
This document is released under the Creative Commons Attribution license. You are free to copy, modify and distribute this work as long as you give me credit. The full license text is available at: http://creativecommons.org/licenses/by/1.0/.
This is a question that I have seen often enough on mailing lists to actually do some research. Standard disclaimers apply: IANAL, YMMV, YADA. This is written for a technical, non-lawyerly audience.
What I have discovered is that it's not nearly as clear cut as I expected and hoped it to be. The law resembles old code - many, many exceptions have been found and handled, so it's full of surprising exceptions and special cases. If you are expecting a simple answer, then I'm afraid I have to disappoint you.
Various areas of law are relevant to this debate, notably contract and copyright law. Unfortunately law isn't quite the same everywhere in the world. What I present here is US biased, which personally I find aggravating since I am more interested in UK law. However, it's US law that is most often discussed, and US law that is most easily located online. I'd be interested to hear any opinions or facts about how UK law differs - mail me.
EULA stands for "End User Licence Agreement". This is a generic name for a document of some form that often accompanies software products.
Whether it does indeed constitute a Licence Agreement will depend on the detail of the situation. Companies prefer to licence their software rather than sell it to you because it provides them with more control over the use and distribution of the software.
For modern software EULAs take four common forms (the cheesy names come from the literature):
Legislation hasn't been passed determining what constitutes a software sale and what consititutes distrubution under contract (although some legislative bodies now appear to be giving it a shot). This means that existing legislation designed for other kinds of product, and case law, based on precedent, will be used in court to determine a decision.
Case law hasn't produced any definitive judgements, although there are a number of indicative ones that are frustratingly non-specific. When judges rule on case law they aren't trying to make new laws, they are trying to determine how the facts of the matter in hand relate to existing law.
This makes their judgements necessarily narrow, but it also means your particular case probably diverges from the case law in important aspects. If you are going to claim that case XYZ proves something, I suggest you read the judgement in full, because it probably doesn't.
Copyright is a recent principle (1709 with the Statute of Anne in fact) that gives the author of a creative work more rights over their work than other people. These rights can be bought and sold, and often are.
These rights cover:
- Duplication of the work
- Public performance of the work
- Renting or Lending works to the public
- Broadcasting the work
- Adapting the work
Depending on where you are, these will function a bit differently, and last for different lengths of time. In the UK, for example, renting and lending by public libraries is handled by the Public Lending Right scheme, wheras in the US this is covered by the Doctrine of First Sale.
The rights provided by copyright law are generally good enough for those who publish music and books. Many software authors, however, consider themselves to require further rights in respect to their work. They attempt to gain these rights by establishing (or at least trying to establish) a contract with those who obtain their work, so that the terms of this contract then govern the use and distribution of the work.
First Sale is a historic user protection in copyright law in the United States. The doctrine basically says that purchasers of tangible products containing copyrighted information, such as books or music CDs, may dispose of those works in any way they wish. For example they may sell them, give them away, loan them, or rent them.
In most jurisidictions authors get "Moral Rights" that are inalienable (cannot be transferred). These are the rights to be acknowledged as the author of the work, to remain anonymous and various other things. Although these rights can't be transferred, you can "waive" them, which means you agree not to sue someone under them.
However, some jurisidictions base their copyright law on explicity moral grounds - France for example has extremely protective moral rights, which change the character of copyright law (well, as far as I understand it).
The facts of a specific case will be relevant in deciding whether an enforcable contract exists between the vendor and the user. This is a really important point, for those of you who want an easy answer: courts will interpret these issues based on existing legislation and case law in a fact-based manner. The specific detail will really matter.
Generally a "licence" is something that gives you more rights than you would otherwise have. Since EULAs actually take rights away, I feel they should more properly be called contracts, so that's what I'll call them.
Incidentally, I've used British English in this document - where "licence" is a noun, and "to license" is a verb.
There are three basic requirements for contract formation under English Common Law:
- The parties must have reached agreement
- They must intend to be legally bound
- Both parties must provide valuable consideration
Another point that is relevant is Method of Acceptance. For some of the EULA forms above, the method by which one signals acceptance is an unusual form of making a contract - your bank would not often ask you to open a box to signify acceptance of their loan terms.
In the United States, the Uniform Commercial Code has superseded Common Law for many aspects of contract formation, specifically Article 2: Sale of Goods. It says of method of acceptance:
Unless otherwise unambiguously indicated by the language or circumstances an offer to make a contract shall be construed as inviting acceptance in any manner and by any medium reasonable in the circumstances
This pretty clearly includes opening packets, clicking on buttons or any of the other myriad methods that have been designed for EULA acceptance.
This is a reasonably obvious principle that only those people who are parties to a contract can be bound to it.
This means that you aren't bound by contracts signed by vendors, for example. This means that if a software author wishes to control distribution, they must have direct contractual relationships with every customer.
Note that warranty is an important exception to this - manufacturers of consumer goods are bound by warranty provisions that go beyond privity of contract. These generally don't apply to software, however, and for good reason.
A Contract of Adhesion is a contract drafted by one party and offered in a "take it or leave it" form. This is what many of us typically encounter as contracts, and most EULAs are contracts of adhesion.
This differs considerably from the Common Law conception of a contract, where two parties negotiate, making offer and counter-offer until an agreement is reached.
Often there will be a highly asymmetric relationship between the parties to a contract of adhesion - one party will be a large corporation and one will be an individual. Because the individual has no opportunity to make material changes to the contract courts will often rule in favour of the individual if there is any ambiguity.
In the US the Uniform Commercial Code has superseded Common Law. It doesn't appear to have made major changes to these principles, although it is clearer on some points (for example, acceptance, where it states that pretty much anything is acceptable as a method of acceptance) and introduces some new terms, for example a "meeting of minds" as a test for whether a contract has been formed.
All of these are from US courts, because these are the ones I have found references to and that are best documented online. My summaries are necessarily brief, and therefore incomplete. Also, I'm not a lawyer, so I might have grasped the wrong end of the stick completely. This is not to say that lawyers (or indeed judges) are somehow immune to wrong-end-of-stick-grabbing, however. Use your own judgement, and if these issues really matter to you, get a lawyer.
Many of the judges in these cases gave long and thoughtful consideration to the issues at hand, and their written opinions contain much detail. I would suggest reading them in full if you really want to understand the issues involved.
You can find the court opinion here: Step-Saver Court Opinion
Step-Saver (a systems integrator) purchased some software from The Software Link (TSL). The software came with a shrinkwrap licence that disclaimed any warranty for the software. Later, some users sued Step-Saver because their systems (that included TSL software) didn't work. Step-Saver sued TSL for indemnity.
On appeal, it was found that the shrinkwrap licence did not apply to the contract between the parties. This was in part because the two parties were already acting as if the shrinkwrap did not apply (the shrinkwrap also limited transfer, but Step-Saver had purchased the software specifically for the purpose of selling it on, and TSL knew this).
You can find a third party case brief here: Harmony.
Harmony sold DOS and Windows without a licence from Microsoft. Microsoft sued, on the grounds that they are not entitled to sell the software. Harmony was selling bundled licences stand-alone. Harmony claimed that they bought from a licenced dealer, and that the first sale doctrine protects subsequent sales. Microsoft contended that they never sell their products, only licence them, therefore First Sale does not apply.
The judgement was in favour of Microsoft, but this was at least partially because Harmony was also found to be selling counterfeit software. The judges did not analyse whether the software was sold or licenced.
You can find the court opinion here: ProCD Court Opinion.
Matthew Zeidenberg bought a CDROM telephone directory from ProCD, and then resold the information online using his company Silken Mountain. Although the information is not copyright ProCD the software to extract the data from the CD was and the shrinkwrap licence forbade this activity.
The court decided that the shrinkwrap licence applied. It drew parallels with the purchase of other items, such as airline tickets and insurance, for which conditions are applied subsequent to purchase. For example, the conditions on the back of an airline ticket are not seen before purchase.
You can find a copy of the court opinion here: Gateway Opinion.
"A customer picks up the phone, orders a computer, and gives a credit card number. Presently a box arrives, containing the computer and a list of terms, said to govern unless the customer returns the computer within 30 days. Are these terms effective as the parties' contract, or is the contract term-free because the order-taker did not read any terms over the phone and elicit the customer's assent?"
The Judge ruled that Gateway were the offeror in the contract and Hill were the offeree. Following ProCD, the judge ruled that the contract wasn't formed until Hill received the packaging and was able to inspect it for additional terms that might be included.
You can find a court opinion here: Hotmail Opinion.
You can find a copy of the court opinion here: Vault Opinion.
Vault Corp wrote some copy-protection software. Quaid wrote some software to copy software protected by Vault's software. Vault sued, claiming (1) that Quaid violated copyright law in the way they had analysed Vault's software and (2) that they were contributory to the infringement of others who used Quaid's software.
It was ruled that Quaid were within their rights in the use of the software - it is necessary to take a copy of software from disk into memory in order to use it, and this copy is specifically authorised by Congress. The fact that the purpose that Quaid loaded the software into memory is different from what Vault intended is not relevant.
It was also held that Quaid could not be responsible for the actions of their customers, because they had to know they would use it for copyright infringing purposes. Since you can make your own backup copies, and this is legal, they did not know that their customers would break the law.
You can find a copy of the court opinion here: Specht in PDF.
Netscape offered some software called "SmartDownload" from their website. On the download page there was a link to some text claiming to be a licence for the use of the software. At issue in the case was whether the arbitration clause in this text was binding on the users who downloaded the software.
This form of licence was characterised as a "browsewrap" licence - the user didn't have to confirm assent. Without some form of assent, there is no contract between the parties, therefore the "licence" isn't valid. Also the language with which the user was invited to peruse the licence was not forceful enough to satisfy the judges that the download was only available under those terms.
You can find the court opinion here: Mortensen.
You can find a copy of the court opinion here: Klocek.
You can find a copy of the court opinion here: Pollstar.
You can find a copy of the court opinion here: Softman.
Softman were selling Adobe products in a manner that Adobe didn't like. Adobe claimed this broke the software EULA. At issue is whether SoftMan were bound by the EULA (they had no direct contractual relationship with Adobe).
The court found that SoftMan were not bound by the EULA, because they did not assent to it's terms. The grounds for this was that the EULA was presented during software installation - since SoftMan never installed the software (they just sold it), they had never assented to the EULA.
So, are clickwraps legal? It must be clear by now that the answer is "it depends". If you want to ensure you have a contract with someone and getting a signature on a piece of paper is untenable, it seems the most certain way to achieve this is to use something like the "browsewrap" form. Make certain that they agree to your terms, and unambiguously accept them.
Many people (myself included) find the idea of distributing software under contract objectionable. However the emerging suggestion that software should be subject to standard warranty provisions (that go beyond privity of contract) means that before long all software, including free software, will be distributed under contract. This makes these issues particularly relevant.
In any case, remember than not only am I not a lawyer, I am most certainly not your lawyer. If you really care about this, get one.