EULAs: TL; DR

Admit it, no one reads or even care to read EULAs or End-User License Agreements. EULA or software
license agreement is the contract between the licensor and purchaser, establishing the purchaser's right to
use the software. The license may define ways under which the copy can be used, in addition to the
automatic rights of the buyer.
EULAs started as a way for companies to limit warranties on goods and disclaim liability. These
documents became widespread in the mid-1980s, when the growing popularity of software programs led
vendors to seek new ways of limiting people's ability to copy their products. Also, many early EULAs
prohibited reverse-engineering to prevent people from creating knockoff products that they would sell
competitively. Eventually, the EULA became the choke-collar that it is today, limiting people's ability to
talk about products, take them apart, and even remove them from their computers.
So let us say that indeed you have read the EULA and you came across some provisions you do not agree
on. How on earth will you manage to proceed if you do not agree with the terms set forth and the product
itself bars you from continuing? Most of the time, we quickly scroll down to the I Hereby Understand
and Accept the Terms, or tick the I Accept button then click Next. Thinking yeah, Ill read it later.
Well, that seems to be the only way to continue installing then later be able to use that product.
Most software is covered by copyright which, along with contract law, patents, and trade secrets, provides
legal basis for its owner to establish exclusive rights. A software vendor delineates the specific terms of
use in a EULA. The user may agree to this contract in writing, interactively, called clickwrap licensing, or
by opening the box containing the software, called shrink wrap licensing. License agreements are usually
not negotiable. Usually, these agreements are contracts of adhesion, as the user may not see the agreement
until after he or she has already purchased the software.
Copyright law grants a copyright owner an exclusive right to distribute copies of the copyrighted work to
the public by sale or other transfer of ownership, or by rental, lease, or lending. This is called distribution
right and differs from the copyright owner's reproduction right which involves making copies of the
copyrighted works. Rather than the right to copy, the distribution right involves the right to transfer
physical copies of the copyrighted work.
Who would want to read several pages long of the terms laid down by the licensor? We all just want to
use the product. That is it. Nobody buys certain software and use it for a different purpose other than what
it is supposed to do. Do we really buy the software or just the license for such?
Software publishers may engage solely in rental or lease of physical media, mandating return of the
subject tangible items at the end of the term. Or they can integrate their software onto physical items that
they then release from their control, setting them into the stream of commerce. In the latter instance, the
end user, while admittedly a licensee of the copyright, is not a licensee of the physical media in his
possession. Instead, he is the owner of those physical media having the licensed works. As such, he is
clothed with full rights under the first-sale doctrine. No improvement in software distribution so far has
forced a second look of the established standard.
The first-sale doctrine creates a basic exception to the copyright holder's distribution right. Once the work
is lawfully sold or even transferred gratuitously, the copyright owner's interest in the material object in
which the copyrighted work is embodied is exhausted. The owner of the material object can then dispose
of it as he sees fit. Thus, one who buys a copy of a book is entitled to resell it, rent it, give it away, or
destroy it. However, the owner of the copy of the book will not be able to make new copies of the book
because the first-sale doctrine does not limit copyright owner's reproduction right. The rationale of the
doctrine is to prevent the copyright owner from restraining the free alienability of goods. Without the
doctrine, a possessor of a copy of a copyrighted work would have to negotiate with the copyright owner
every time he wished to dispose of his copy. After the initial transfer of ownership of a legal copy of a
copyrighted work, the first-sale doctrine exhausts copyright holder's right to control how ownership of
that copy can be disposed of. For this reason, this doctrine is also referred to as "exhaustion rule."
Unlike almost all other products, software does not wear out. Buyers of used software get exactly the
same product as first-time buyers. But is this legal? Would the prevention or prohibition of the second
sale of certain software be made properly valid by a certain law or EULA?
Let us first recall the concept of ownership. Art. 428 Paragraph 1 of the Civil Code states that the owner
has the right to enjoy and dispose of a thing, without other limitations than those established by law.
Upon the valid purchase of the software, does the buyer acquire ownership of the thing? Under the RA
8293 Section 181 the copyright is distinct from the property in the material object subject to it.
Consequently, the transfer, assignment or licensing of the copyright shall not itself constitute a transfer of
the material object. Nor shall a transfer or assignment of the sole copy or of one or several copies of the
work imply transfer, assignment or licensing of the copyright. It can be said that what is being purchased
is the physical media containing the copyrighted work and the license to use such copyrighted work. The
copyright still belongs to the author, unless otherwise expressly provided.
RA 8293 Section 177 provides for Copyright or Economic Rights. Subject to the provisions of Chapter
VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent
the following acts: Reproduction of the work or substantial portion of the work; Dramatization,
translation, adaptation, abridgment, arrangement or other transformation of the work; The first public
distribution of the original and each copy of the work by sale or other forms of transfer of ownership;
Rental of the original or a copy of an audiovisual or cinematographic work, a work embodied in a sound
recording, a computer program, a compilation of data and other materials or a musical work in graphic
form, irrespective of the ownership of the original or the copy which is the subject of the rental; Public
display of the original or a copy of the work; Public performance of the work; and other communication
to the public of the work. (Sec. 5, P. D. No. 49a)
With these, it is safe to say that the Copyright owner may restrict the transfer of ownership of his work
once it is out in the public. The copyright owner may in the exercise of his exclusive rights prevent the
second sale of his work. If the restriction or prohibition is put up as a law, there is no question as to its
validity. It is presumed to have undergone the rigorous process as to its constitutionality. While on the
other hand, EULAs, are agreement entered into by the purchaser and the licensor. Usually the only say of
the purchaser in this kind of agreement is whether he accepts the terms or not.
Contracts of Adhesion is a type of contract, a legally binding agreement between two parties to do a
certain thing, in which one side has all the bargaining power and uses it to write the contract primarily to
his or her advantage. Courts carefully scrutinize adhesion contracts and sometimes void certain provisions
because of the possibility of unequal bargaining power, unfairness, and unconscionability. Factoring into
such decisions include the nature of the assent, the possibility of unfair surprise, lack of notice, unequal
bargaining power, and substantive unfairness. Courts often use the doctrine of reasonable expectations
as a justification for invalidating parts or all of an adhesion contract: the weaker party will not be held to
adhere to contract terms that are beyond what the weaker party would have reasonably expected from the
contract, even if what he or she reasonably expected was outside the strict letter of agreement.
License agreements do not override applicable copyright law or contract law. Provisions that conflict may
not be enforceable. Some vendors say that software licensing is not a sale, and that limitations of
copyright like the first-sale doctrine do not apply. That when it comes to software or anything carrying a
license to use, no one has the right to sell that license again once they have bought it.
In the case of Vernor v. Autodesk, in which Timothy Vernor made his living from selling items including
software on eBay. Autodesk sold their flagship product, AutoCAD, under the terms of a shrinkwrap
license that, amongst other restrictions, purported to forbid resale of the software. AutoCAD was sold in
sealed boxes for a fixed price with no-recurring fees or expirations for use. Vernor had picked up some
old copies of AutoCAD from an architect's office sale, complete with their serial numbers, and he put
them up on eBay noting that they were not currently installed on any computer. The first sale protections
don't apply to Vernor, because he didn't buy the software from a legitimate owner. That, in turn, is
because the architecture firm had only "licensed" the software, and that license could indeed allow a
software company to prevent resale, lending, and even removal from the Western Hemisphere.
The US jurisprudence on the matter holds that a software user is a licensee rather than an owner of a copy
where the copyright owner specifies that the user is granted a license; significantly restricts the users
ability to transfer the software; and imposes notable use restrictions.
But in UsedSoft GmbH v Oracle International Corp. (Judgment in Case C-128/11), an EU ruling. It was
held that an author of software cannot oppose the resale of his used licenses allowing the use of his
programs downloaded from the internet. The exclusive right of distribution of a copy of a computer
program covered by such a license is exhausted on its first sale. That once a software company sells a
copy of its computer program, it loses its exclusive rights to distribution. It makes no difference whether
the copy of the computer program was made available by means of a download from the right holders
website or by means of a material medium such as a CD-ROM or DVD.
When a copyright owner distributes its software, it is free to grant a license extending only to specified
uses, while excluding others. Moreover, any such license does not require a bilateral contract. A simple,
unilateral statement by the copyright owner of the scope of its license suffices. In most cases, use beyond
the scope of that license constitutes actionable copyright infringement under existing copyright law. To
the extent that any such use beyond the scope of the unilateral license is not copyright infringement.
One common nature of end-user license agreements is that they often contain legalese which is too wordy
and too lengthy for the end-users to allot time to read them thoroughly. This often leads to the end-users
ignorance of what is the scope of their rights regarding the product that they have.
I submit that EULAs are binding. If it contains provisions that prohibit second sale, so be it. No, EULAs
do not intentionally make the terms too long just to mask unreasonable and sometimes unjustifiable
provisions to render its end-users liable, but instead to clearly map out the rights of the copyright owner.
As if the Intellectual Property Law is insufficient, EULAs are merely suppletory at best.
We are living in a fast paced world. One must constantly adapt or else you will be left ignorant. Take for
instance, software or computer games. The only thing we know about them, is to use them. Everything
else is assumed. Computer games sometimes use DRM or digital rights manage technologies to limit the
number of systems the game can be installed on by requiring authentication with an online server. Most
games with this restriction allow three or five installs, although some allow an installation to be
'recovered' when the game is uninstalled. DRM is a class of technologies that are used by hardware
manufacturers, publishers, copyright holders, and individuals with the intent to control the use of digital
content and devices after sale. They are the owner so they have the exclusive right to do so and which the
end-user has to comply to. These are mostly found or given as a precaution in the EULAs.
Copyright Law notwithstanding the differences between different countries set the rules as to what the
buyer may or may not do without permission from the publisher. Software publishers, felt this did not
give them enough control, so they replace the SALE of software with a USER AGREEMENT, which
implied some sort of rental, or license to use the software. These are contracts between the vendor and the
end-user, so they leave the vendor free to determine the users rights and obligations, or for that matter,
anything else they wish. In a way it would seem that software producers have attempted to nullify the
provisions in copyright law. Not necessarily so, they are just reinforcing their rights. Specific rights. The
EULAs are contracts entered into between the user and vendor, and as such must be shown the respect
due.
References:
http://en.wikipedia.org/wiki/Software_license_agreement
http://en.wikipedia.org/wiki/First_sale_doctrine
http://en.wikipedia.org/wiki/Proprietary_software
http://www.lawphil.net/statutes/repacts/ra1997/ra_8293_1997.html
http://www.lawphil.net/statutes/repacts/ra2013/ra_10372_2013.html
http://www.law.cornell.edu/wex/adhesion_contract_contract_of_adhesion
http://www.computerweekly.com/opinion/EU-court-legalises-second-hand-software
http://en.wikipedia.org/wiki/Vernor_v._Autodesk,_Inc.#The_ruling
http://curia.europa.eu/jcms/upload/docs/application/pdf/2012-07/cp120094en.pdf
https://www.eff.org/wp/dangerous-terms-users-guide-eulas
http://arstechnica.com/tech-policy/2010/09/the-end-of-used-major-ruling-upholds-tough-software-
licenses/
http://www.makeuseof.com/tag/is-buying-second-hand-software-legal/
http://cyber.law.harvard.edu/openlaw/DVD/research/metamorphosis.html