Licensing, Lawyers and the EULA Generator

Written By: Jonathan under Categories: copyleft, copyright, law and Tags: Tags: , , , , , ,   , It has 1 Comments and It was posted on Oct 7, 2010

Software, as a matter of principle, is usually licensed but not sold; this is what the recent ruling in 42:07-cv-01189-RAJ Vernor v. Autodesk was all about. Therefore, usually, when a person sells (or licenses) software, the end user signs or accepts an End User License Agreement (EULA) which includes the array of rights and duties attached to the software itself.

Copyright laws limit the rights to create copies or distribute software without the original author’s permission, and the EULA is the permission to hold the end-user’s copy of the software. Without the EULA, any action performed may infringe on the author’s copyright. However, both clause 12 to the Israeli Copyright Act and clause 106 to the US Copyright Act do not limit the use of software, solely its copying and distribution. The court ruled in Vernor that the author may limit consumer right and therefore software developers may limit the way that their end-users will use software or interact with other components.

However, most software developers prefer to use EULAs in order to allow the use of the software and not sell copies, so that they could redefine the rights attached to it. For example, clause 24 to the Israeli copyright act allows modifying copies of software for security purposes and court also acknowledged that consumer rights may overcome eulas (MAI Systems Corp. v. Peak Computer, Inc., 991 F. 2d 511 – Court of Appeals, 9th Circuit).

While the courts were not supportive in acknowledging the consent to these agreements in all cases (Specht v. Netscape Communications Corp., 150 F. Supp. 2d 585 (S.D.N.Y.2001)), it is quite obvious that they govern the ability to distribute, but not use, the software (CV 07-3106 SJO UMG v. Augusto). Meaning that the need of a software license is meant to define what exactly is the relationship between the developer and the end-user and rearrange the rights attached to the copyright laws.

Out of this need, to provide end uses with a clear and simple license, lawyers earn a good living. Every software developer has a simple choice: should he pay a few thousand dollars to a lawyer who will draft a document in non-readable legalese, or release the software without any license and hope for the best. The licenses, usually, contain liability limiting clauses (and see, for example, clauses 15 to 18 to the Windows XP EULA which limit Microsoft’s liability to any damage and for any cause).

EULA should come in any place where code is conveyed, but not for web-based services, where a copy of the work is not distributed. Therefore, the difference between EULAs and Terms of Service, which are an agreement regarding the use of the service, should be acknowledged.

Now, after understanding this, we can relate to the subject matter. This week, binpress launched its beta service. Binpress is a commerce platform for web applications and allows web developers, and any other person who wrote a script, plug-in, code or service to upload the code and sell it to others. Amongst other this, it allows the developers to create their own software licenses and save the costs in drafting a license by using the generator, picking what rights apply to the end-user and what don’t (decent disclosure: I wrote the modular license agreement). For example, the developer could pick whether the person who bought the software may distribute it to other people (a developer license), the term of the license, the ability to chose how many cores and websites may use the software (for example). Eran Galperin wrote a comprehensive post about binpress’ licensing mechanism you should read.

In brief, the system is quite similar to the Creative Commons license generator, by allowing the user to pick what license he wants for his software and what rights are attached to it. The difference is that binpress’ license is commercial and for web applications.

Then why should I, as a lawyer, cooperate with a system that may take away money I could charge my clients for EULAs and allow my future potential clients to write licenses by themselves? Theoretically, any person which develops applications could choose binpress as his marketplace and save the cost (and see also my Hebrew post on Freemium by lawyers); well, the answer is double: first, is that the system is dedicated to web applications which are sold by binpress. Meaning that whoever develops large-scale software, commercial distributions or software containing more than a mere conveying of code (like validation keys) would still have to find a lawyer to draft an agreement. The second is simpler: I believe that this system does not prevent lawyers from earning money, it just makes their living more efficient.

Most licenses you read are generic and written in a way that no human could grasp or read, they were written by chewing hundreds of requests and demands time after time and served to developers without any understanding. In contrast, large systems with legal questions of privacy, open source and real legal problems would still need legal consultation and will avoid using this systems.

Therefore, the generator does not harm my earnings, it does not replace my legal work, it just allows the end-user to pick an educated pick between paying a few thousand dollars when he doesn’t need and tailoring the agreement for him. When it’s a developer who sells a few copies every day for a dollar or two, it’s not right to pay that much for legal counsel.

[Originally in Hebrew]