A software license is a type of proprietary or gratiuitious license as well as a memorandum of contract between a producer and a user of computer software — sometimes called an End User License Agreement (EULA) — that specifies the perimeters of the permission granted by the owner to the user.
Software licenses are primarily written to deal with issues of copyright law and product liability law. Sometimes the license touches on issues of patent law, trade secret law, and laws pertaining to access to services. Software licenses generally fall into two categories, proprietary software licenses and free software licenses, depending on the purpose of the license. Free software licenses grant additional rights (such as the ability to copy) and need not be accepted to use the software, while proprietary EULAs seek to restrict the user's actions, and require that the user 'signs-up to' the license.
Software licenses tend to work in conjunction with software source code escrow agreements.
This article deals primarily with the licenses of proprietary software distributed in the United States of America. Open source software licenses are treated in a separate article.
See also: Uniform Computer Information Transactions Act, Legal aspects of computing
EULAs and shrink-wrapping
Most end user license agreements (EULAs) accompany shrink wrapped software that is presented to a user sometimes on paper or more usually electronically, during the installation procedure. The user has the choice of accepting or rejecting the agreement. The installation of the software is conditional to the user accepting the agreement and thereby agreeing to abide by its terms.
Some computer companies view the EULAs more as an elaborate liability disclaimer than a real contract. It is not uncommon for a user to be unable to read the license before proceeding with starting up a computer they have just bought (which the computer might require on an on-screen message), because no printed copy of the license is included. Users almost invariably click on "Accept" without reading the license.
EULAs can often contain very restrictive terms that are often surprising. For example, the version 7 of a popular image-viewing application ACDSee prohibits its use for viewing pornographic materials in the EULA (section 3.4 - Use Restrictions).
It is unclear whether EULA licenses are enforceable in the United States (see shrink wrap contracts).
The amendment of the United States Code, Chapter 17, codified as 17 USC 117 (http://www4.law.cornell.edu/uscode/17/117.html), permits the owner of a copy of a computer program to make copies necessary for the use or backup of a computer program. Until 117 was enacted, the very act of copying computer software from a storage device into temporary memory may have been prohibited in the United States. Typically, a proprietary software license will interpret 117 in plain English. For example: "You may use the software on one computer, and you may make an additional copy to be used only for backup or archival purposes. You may not otherwise copy, modify [...] the software." However, a growing number of such licenses are using a loophole in 117 that exploits a distinction between the "owner" of a copy and one who merely "possesses" a copy by creating a rental agreement in which the publisher of the software retains ownership of the medium on which the software is shipped.
Most licenses for software sold at retail disclaim (as far as local laws permit) any warranty on the performance of the software and limit liability for any damages to the purchase price of the software.
Some countries, such as the United States, allow the patenting of a generic computer that runs a novel algorithm. A software license may grant limited non-exclusive rights under applicable patents that the publisher holds.
Some software licenses prohibit users from reverse engineering the software. Publishers claim to use this to protect their trade secrets embodied in the software, but some have a different motive, namely making it much more difficult to create software that interoperates with the licensed software. Other licenses prohibit users from releasing data on the performance of the software!
Access to network services
Some proprietary software acts as a client for a network application and requires users to give up rights in consideration for access to a service. For example, the license of versions 4.0 and later of the AOL Instant Messenger client software prohibit users who have installed the software from ever accessing the service through third-party software such as Trillian, Gaim, or Everybuddy.
Assuming that publishers follow the correct procedures (such as giving the user the right to return the software for a refund), EULA licenses are generally enforceable. See ProCD v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)
Recently, publishers have begun to encrypt their software packages to make it impossible for a user to install the software without agreeing to the license or violating the Digital Millennium Copyright Act and foreign counterparts.