4 reasons why ISVs need an End User License Agreement (EULA)

If you’re an Independent Software Vendor (ISV), an End User License Agreement (EULA) is a really important legal document for you to include when distributing your software application.

What is the purpose of an End User License Agreement (EULA)?

Acting as a contract between the software developer or publisher and the end-user, an end user license agreement grants the user a license to use the app and covers a series of important clauses that limit your own obligations as the vendor. For instance, a EULA outlines your terms and conditions, restrictions on usage and limits on the liability of the developer. Before installing or accessing the software, the user must agree to the conditions of the EULA, which means they are limited by the terms you have set.

In this article, we’ll look at four key reasons why your business needs to have a EULA in place:

• Limit your liability for damages
• Maintain control over distribution and use of your software
• Protect your right to terminate licenses
• Restrict abuses of software

Why are EULAs used to sell software?

Of course, as a software vendor, it’s of great importance that you limit your liability. Failing to do so could open your business up to risk and lawsuits – which are frequently time-consuming and expensive to deal with.

1. Limit your liability for damages

For this reason, the limitation of liability is one of the most crucial clauses to include in your End User License Agreement. It will limit the amount and types of damages that one party can recover from another party. It will also let users know that you are not responsible for any damages incurred from using your app – such as damage to the device or data on which the app is run.

It is generally advised that your limitation of liability clause uses language that protects against specific or foreseeable events. This is because broadly worded limitations may not provide protection in cases of willful misconduct or gross negligence!

2. Maintain control over distribution and use of software

An EULA will allow users to use your app, but only within the limits and restrictions that you have set.

So, instead of allowing full ownership of the app, you can maintain total control over the distribution and use of your software. In turn, you are in a stronger position to enforce the terms and conditions that you wish to include, and you can determine exactly how a user will interact with your app.

For example, your license may insist that users only use the software for personal purposes – rather than commercial. This will help you to preserve market share and obtain maximum return on each transaction. It will also safeguard your intellectual property rights.

Essentially, this clause of the EULA lets a user know that a license to use the software is all that is being granted, and that the license must be used according to the terms of the rest of the agreement.

3. Protect your rights to terminate licenses

Alongside acting as a platform for granting licenses, a EULA is also super valuable in protecting your right to revoke licenses. This is because the EULA can include a clause stating that you, as the vendor, have the right to suspend or terminate licenses and associated rights.

This clause is yet another means of preserving full control over your app, whilst also making users aware that they are not guaranteed unlimited or endless access to your licenses. And, if you should choose to terminate a license at any point, the user will be obliged to stop using the app and remove it from their device.

4. Restrict abuses of software

Last but not least, a EULA acts as a means of restricting any abuses of your software. Without this clause, for instance, there is nothing to stop a user from replicating your product and potentially selling it on as their own.

Further, you may wish to use this clause to limit illegal activities, spamming, or reverse engineering – in which your software could be deconstructed to reveal its architecture or design.

This element of the EULA will also provide you with the ability to revoke the granted license, should a user be found in violation of your terms.

Craft the perfect End User Agreement with the help of Law 365

End User License Agreements are essential, particularly if you have a proprietary piece of software that you need to protect and offer rules on usage. As summarised above, an effective EULA provides many advantages for a software vendor, namely that it allows maintained control over the application and legal safeguarding against lawsuits.

Here at Law 365, we’re confident that your users will have the best experience with your software when you provide an EULA tailored by our expert lawyers. To learn more about how Law 365 can protect your business and help you thrive in this modern digital age, book a free, no-obligation call with us today.

Further reading

What is the difference between a EULA and a SaaS Agreement?