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Key Contractual Provisions Of A End User License Agreement

Copyright is that intangible property built on the concoction of originality, fixation and minimal creativity, further it is protected with the compound of rights granted with it such as reproduction, adaptation, translation and communication to the public. The kind of work which can be protected under Copyright Act are musical compositions, paintings, sculptures, photograph, drama, films, books, software's etc and the list is not exhaustive.

The Copyrights can be given temporarily to use it for commercial and/or non-commercial purpose which is called 'Licensing' and the rights can also be completely transferred which is termed as 'Assignment'. Assignment means transfer of ownership whereas Licensing means grant of certain rights for specific time period and in some cases I it can be perpetual subject to certain clauses. Here, we are discussing about securing the rights of Copyright owner and also the end user/purchaser/subscriber/consumer in case of 'End User License Agreement'.

To secure the rights it is always recommended to have a License Agreement in place. In a License Agreement, the owner of Copyright is called "Licensor" and the entity seeking rights is called "Licensee", the agreement is drafted in a way to secure the interest of both parties to the agreement. Therefore, to secure the interest of both parties, the agreement consists of different clauses and provisions explaining in detail:
  1. Scope and application of the agreement
  2. Roles and responsibilities of parties
  3. Limitations and permission of use
  4. Management and operation and other vital clauses.

This article articulates the key contractual provisions of End User License Agreement. There can be two types of EULA, first is in which the user reads the terms and conditions and agrees or disagrees with it; second method is where some act of the user such as installation of the software, copying or use of the software can be implied as acceptance of the terms and conditions of the agreement, even though the enforceability of such agreements is questioned by courts time to time. [1]

Clauses are listed below:
  • Licensor
  • Duration
  • Grant of license
  • License Limitations
  • Ownership and Confidentiality
  • Copyright Infringement
  • Warranty Disclaimers
  • Indemnification
  • Limitation of liability
  • Maintenance and Support
  • Termination
  • Governing law and Jurisdiction

  1. Licensor

    It is important to explicitly mention the name of the entity with whom the user is entering into the contract, to identify the owner and controller of the software. The owner is referred as "Licensor" and the licensee here is referred as "You", user of the software.
     
  2. Duration

    The term of the license is important. Now a days most of the websites, apps have these monthly subscriptions, for example Netflix has its plan for month and for year. The period starts from the day the subscription amount is paid. [2]
     
  3. Grant of License

    Generally, the license granted is non-transferable, non-exclusive, non-assignable to restrict unauthorised use of the software. Scope of agreement is well defined here and whether the software is for personal or commercial use is specified in the agreement. Some softwares also provide separate packages and features for personal and business use.

    It is to be noted that the copyright license provided under Indian Copyrights Act, 1957 is different from that of provided under EULA and the same is very well established by ITAT, Bangalore Bench, Bangalore in case of Infosys Limited Vs. Deputy Commissioner of Income Tax, International Taxation Circle-1 (2) [3] tribunal affirmed that EULA doesn't transfer or assign the copyright of the software, the license granted under EULA is not a license granted under section 30 of Copyright Act. Rather it is license which imposes certain limitations on the usage of the software.
     
  4. License Limitations

    This clause prohibits the end user from including third party or from establishing any relation with third party by selling, licensing, renting, leasing, sharing, distributing. It also prohibits the end user from altering, reverse engineering, modifying, disassembling, decompiling whole or even a part of the software and/or discard, evade, disable the protection mechanism. [4]

    In the case of Dassault Engineering Analysis Centre of Excellence Private Limited vs. The Commissioner of Income Tax and Ors. [5] the tribunal avowed that the violation of the limitations of assignment or license will constitute infringement of copyright. It is interesting to note that in the same case the tribunal also observed that the act of copying or adaptation will not amount to infringement if it is done by "Lawful possessor of copy" and lawful possessor can be an "assignee, an exclusive licensee or a licensee of the programme".

    This observation of tribunal was rightly queried by Supreme Court in the case of Engineering Analysis Centre of Excellence Private Limited Vs. The Commissioner of Income Tax and Ors.,[6] Supreme Court averred that when a license is granted under EULA the end user does not get the right to use the copyright embedded therein. Further, Supreme Court quotes the extract from Copinger and Skone James on Copyright (14th Edition) (1999) which tribunal also referred in the Dassault case but missed this, "the ownership of copyright in a work is different from the ownership of the physical material in which the copyrighted work may happen to be embedded".

    Therefore, it is of utmost importance for the end user to understand this clause to avoid stepping on the copyrights of the Licensor and similarly it is important for Licensor to know what act of the end user would amount to copyright infringement.
     
  5. Ownership and Confidentiality

    This clause speaks about the title of the software, and that the title, right and interest of the software will rest with the Licensor. No rights of Intellectual Property associated to this software is transferred to the end user through this agreement.

    The confidentiality is better kept as unilateral clause. The licensor gets right to automatically collect the information and this right is granted once the end user installs and/or download the software, by such acts the end users consent to the privacy policy of the licensor. Similarly, the end user is also expected to maintain confidentiality by limiting the access of the software in accordance to the agreement.
     
  6. Copyright Infringement

    There is no such established test to assess Copyright Infringement in case of softwares and exactly what act of end user will amount to copyright infringement is subject to the terms and conditions of the license agreement. Supreme Court has well established in the case of Engineering Analysis Centre Case [7] that the once the purchaser violates the terms of the license agreement, he/she becomes liable for copyright infringement.

    Also, Supreme Court stated that the act of making copies, adaptation, making back-up copies for safeguarding the data or even destruction or damage will not be considered as infringement of copyrights if the same is done to utilize the computer programme for which it was provided.
     
  7. Warranty Disclaimer

    This clause conveys that the software is given 'as is' and any problems ascended because of this software will not be a responsibility of the licensor. The performance of software is subject to many other factors such as the computer or laptop configuration, network connection in such cases licensor cannot be held liable.

    Therefore, it is must to specify and also understand as to what warranty the licensor is providing. Some may provide limited warranty-warrantying that the software is free from the defects on the day of delivery whereas, some put in a way that it is given to you (end user) with all faults and defects without warranty which means that the end user is accepting the software as is without any warranty.
     
  8. Indemnification

    There are different stance of licensor and licensee in this clause, the licensor tries to keep away from breach of license which can be a result of some acts of licensee exposing the licensor to the third-party claims. The licensor always tries to keep the indemnification clause as narrow as possible, in some cases the indemnification clause is not incorporated in the agreement. And the licensee attempts to secure themselves from third party lawsuit where licensor infringed the right of third party and the licensee is also held liable in the same. [8]
     
  9. Limitation of liability

    Most of the EULA have this clause in the favour of licensor, where the liability of the licensor is not inclusive of damage to the hardware or loss of the data or even damaged cause by improper use of the software. In any event under tort, contract or otherwise licensor shall not be liable to the end user or even the third party for any damages, losses or expenses incurred under this agreement.

    The limitation of liability clause should be clear enough to understand the liability of each party in case of some errors in the software.[9] Further, the liability is limited to the amount not exceeding to the original price of the software.
     
  10. Maintenance and Support

    Usually under this clause the licensor entails as to what all support and help the entity will be providing the licensee in course of use of the software. This clause also limits the support that the licensor is expected to provide, like in case if the licensee failed to renew the software subscription and loss occurred from the same cannot be attributed as lack of support. Same goes for maintenance, licensee's deficiency on his/her/it part cannot hold licensor liable. Clause effective to same are incorporated in the EULA.
     
  11. Termination

    Either party can terminate the agreement, the licensor can terminate the license agreement with or without notice to the licensee. The licensee can also terminate the agreement anytime. But in the event of termination of the license agreement, the licensee is expected to perform certain acts like:
    1. Stop the use of software immediately
    2. Destroy all copies of software in possession of the licensee.
    Few clauses survive even after the termination of the agreement like ownership, indemnification, disclaimer, jurisdiction. [10]
     
  12. Governing law and Jurisdiction

    This clause is like the same in any other contract or agreement, where both the parties consent to one or two jurisdictions (subject to occurrence of the event), and mutually accept the application the UN Convention on contracts for International Sale of Goods or otherwise. Further, the parties may agree to state and/or federal laws as governing laws.

Conclusion:
All in all, it can be concluded that EULA's primary object is to protect the rights of the Copyright owner from getting infringed. Also, the key take away will be that:
  1. Violation of terms and condition of EULA can make one liable of infringement of copyright
  2. Ownership in copyright is different from ownership in physical material in which the copyrighted work is used
  3. Making copies or adaptation solely to keep the data safe and away from destruction cannot be labelled as Copyright Infringement.
End-Notes:
  1. higherlogicdownload.s3.amazonaws, https://higherlogicdownload.s3.amazonaws.com/AIPLA/c96234c2-048c-430b-ba69-5ad97a647c4b/UploadedImages/ip_transactions_-_forms_microsite_docs/02_Annotated_End_user_License_Agreement_FINAL.pdf (last visited May 31, 2022
  2. Kalpana Borjha, End User License Agreement and Key Terms In Eula, lexforti, (May 31, 2022, 12:08 PM), https://lexforti.com/legal-news/end-user-license-agreement-and-key-terms-in-eula/
  3. Infosys Limited Vs. Deputy Commissioner of Income Tax, International Taxation Circle-1 (2), MANU/IL/0278/2021
  4. https://www.priorilegal.com/legal-forms-and-documents/end-user-license-agreement
  5. Dassault Engineering Analysis Centre of Excellence Private Limited vs. The Commissioner of Income Tax and Ors., MANU/AR/0002/2010
  6. Engineering Analysis Centre of Excellence Private Limited Vs. The Commissioner of Income Tax and Ors., MANU/SC/0137/2021
  7. Id.
  8. Stephen F. Pinson, Negotiating Software Contractsó Successfully Negotiating an Indemnification Section, 36 The Licensing Journal 1, 1-2 (2016).
  9. Knut Helge Kirkhus, What is an End User License Agreement (EULA) and its key terms?, iPleader Blog (June 1, 2022, 10:22 PM), https://blog.ipleaders.in/end-user-license-agreement-key-terms/.
  10. Supra note at 4.

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