Why is an end user license agreement important for your software

For software developers, an end user license agreement (EULA) is a written contract that needs to be included as part of the distribution of your software.

Its job is to protect the license owner from misuse of their product, limit liability, and set out restrictions for the use of the software.

An EULA is essentially a contract between users and software developers. It sets out conditions, rules, rights, and responsibilities for all parties in the same way terms and conditions or terms of service do.

This contract gives the end user the right to use the software but makes it clear the developer still owns it—after all, if you’ve hired the best app developers to create your product, you want to protect it.

Users are typically asked to agree to the EULA before being able to download and install a software application. This ensures they’re bound in agreement with the terms set out in it before being granted access to the software license.

To put it plainly, if your software is made available for public use, you need an EULA.

We live in an increasingly digital world, and the tech industry is continually expanding and developing. Many businesses in all sectors provide software applications, and software such as client portal solutions are becoming more commonplace.

Most modern companies—and also those thinking of starting a business—must now consider the need for an end user license agreement.

An EULA is not required by law, but you’re likely to face some legal hurdles if you don’t have one.

Although it’s not a requirement, an EULA is legally binding—because it acts as a contract between the developer and the end user, contract law applies.

For businesses seeking software development, outsourcing to an offshore software development team is a common option. Understanding the need for an end-user license agreement and its benefits is essential in these cases. It is important to choose agile project management tools to ensure smooth collaboration between the development team and the business.

There are many reasons why having an EULA is advantageous for software developers. Good program management and strategic planning should include creating one that is effective in all situations.

Here, we look in more depth at five key reasons to include an EULA with your software app.

1. An EULA sets out the restricted use of your app

A clear advantage of having an EULA is that you can set out how your software should and should not be used. Even if your business offers digital storefront software, you need to get a EULA for your customer so they know how to use the software properly without breaking any laws/rules. For example, you’ll probably want to state that it can’t be used for illegal activity or activity that violates copyright law.

In this clause, you’d typically see statements saying the user can’t do the following:

• Use the software in a way in which it’s not intended to be used

• Copy or reproduce it in any way

• Use it for illegal purposes

• Distribute it to third parties

2. Protect your intellectual property

Software developers should ensure their work is used only in the way it was intended, so it’s important to set out restricted use in your EULA. You should also protect your intellectual property.

Software developers may find it helpful to use a standard NDA template to ensure employees and other stakeholders can’t copy, steal or recreate the software for their own use.

In your EULA, write a clause that protects your content and establishes it as yours. You should outline your ownership of this copyrighted property and explicitly state what’s yours and how users may or may not use it.

Your EULA should make clear that the end-user has access to a copy of your software (or a license to use it) but no rights to the software itself.

Below is an example of a copyright clause from Whatsapp that clearly states their ownership rights.

3. Limit your liability

When writing this clause in your EULA, it may be useful to refer to a liability waiver template. You want to protect your business by getting the user to agree that they can’t pursue a legal claim against you in the event of damages or loss.

For software developers, an example would be if a user downloads and installs your software, and this results in their device malfunctioning in some way. Having a clause in your EULA that limits your liability will prevent them from taking legal action against you.

Include a clause that ensures users accept any risk by agreeing to the EULA before downloading and installing your software.

4. Protect your right to terminate licenses

Your EULA should make it clear that you can terminate the agreement at any time without notice if the end user breaches your terms.

For example, if a user takes part in an activity that’s prohibited in the “restricted use” section of your EULA, you as the software provider have the right to terminate their license immediately.

This clause lets users know that they don’t have unlimited or unrestricted access to the license and that you can revoke it at any time given sufficient reason.

5. An EULA can assist in dispute resolution

Including information on dispute resolution in your EULA is also useful. Here, you want to include how disputes between you and your customers will be resolved and which laws/legal system the dispute will be governed by.

The terms stated in your EULA must be agreed to by your end user before they can use your software. Ensure they include comprehensive information that you can rely on to defend your product if a dispute arises.

Ideally, your user should agree to your EULA before they purchase or download the software or app. Whether your business offers video recording software or other software solutions, you need to ensure the users have agreed to your EULA. This can be achieved by displaying it pre-download and ensuring you state that upon downloading it they’re agreeing to your terms.

Your EULA must be easy to find and not hidden in any way. Users should also be able to access it at a later date if they want to refer back to it.

An EULA is an important—even essential—agreement for software developers. While they will differ depending on the product, they should include the following information as standard:

• The licensor. Contact information for the software owner.

• A warranty disclaimer/liability limitations. I.e. the software developer is not responsible for damages or losses resulting from downloading the software.

• Copyright information. The EULA should clearly state ownership information.

• A start date. It should make clear that the agreement is in place from the time the software is downloaded.

• User restrictions. These should set out prohibited or restricted use of the software.

• Termination. State that the licensor has the right to terminate the license if certain terms are breached.

With an effective EULA, you can confidently market your software to end users, knowing your ownership rights are protected, its intended use is clear, and your liability is limited.