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This page considers end user licence agreements (EULAs)
in relation to intellectual property.
It covers -
It complements the discussion of online contracts
and warranties in the
Consumers guide elsewhere on this site.
Delivery of much content in digital formats, whether online
or via physical media such as CD-ROMs,
has seen intellectual property owners resort to end user
licence agreements (aka EULAs) that seek to bind consumers
to conditions regarding use of that content.
Those conditions often encompass -
of the content
of the content
of the content (or of a copy) to another consumer
EULA may be backed by ECMS
(aka DRM) technology, with for example online validation
of a copy, attempts to disable electronic copying and
even printing, unique identification of content and automatic
'reporting home' via the net.
The EULA may involve a hardcopy statement or a written
contract that is sighted by the user prior to accessing
the content or purchasing the content. It may instead
take the form of click-wrap or shrink-wrap (discussed
in more detail here),
with consumers taken in some instances to assent to conditions
merely by opening a physical package or by clicking an
Some EULAs are benign and may be quite informal. Others
have attracted concerns for a range of reasons.
EULAs regarding content from particular rights owners
have thus been criticised as seeking to use contract law
to remove rights that are statutorily provided for consumers
under copyright law. A leading example is the attempt
in some EULAs to void fair use (fair dealing) provisions.
There have also been attempts to comprehensively limit
liability, evading consumer protection provisions in some
jurisdictions. Restrictions may implicitly be anti-competitive
and contravene legislation such as Australia's Trade
Practices Act 1974 (TPA).
Critics have frequently noted
that the wording of EULAs may be difficult to understand
for anyone but a specialist in the jurisdiction of origin
and that the formatting of the EULA (often expressed as
closely-spaced upper case type in fine print) inhibits
The following paragraphs consider use of 'wraps', discuss
particular issues and consider the legal basis of some
EULA claims. The latter is of importance given debate
about whether particular restrictions are inconsistent
with intellectual property law (or other law) and would
thus not be recognised by an Australian court.
As noted in discussion elsewhere
on this site, publishers, software developers and retailers
have sought to bound use of their services and products
- or merely reduce liability - through a range of a mechanisms
that include -
are seeking to use those mechanisms to protect intellectual
property accessed online or in media such as CDs.
In considering those mechanisms it is important to recognise
that contracts can be formed in Australian and overseas
law without a witnessed signature, and indeed without
any writing. It is also important to recognise that aspects
of agreements, online or offline, may be found by courts
to be unenforceable.
Shrinkrap emerged in the 1980s alongside
personal computers, with a recognition that hardware/software
developers and their agents could reduce costs and uncertainty
by offering a 'take it or leave it' licence.
The consumer signals acceptance of that licence, which
might include a warranty
of problematical value, by opening the plastic used to
seal a box containing software and documentation or by
breaking a seal on the oyster case housing a CD-ROM. The
detailed licence terms however might be inside the plastic
and thus unreadable until the seal is broken.
In principle some jurisdictions have held that it is necessary
to go further and actually install software or view/listen
to the contents of the disk. In practice, as highlighted
in exploration of consumer protection issues, many dealers
have ignored such subtleties and simply refuse to issue
refunds once the wrapper has been breached unless satisfied
that the disk was defective when it left their hands.
Clickwrap appeared with the development
of net-based electronic commerce, with publishers and
others placing content behind firewalls for delivery over
the web or by email.
Access to that intellectual property - which might be
an audio file, a software upgrade for installation on
a consumer's hard drive, an image file or text published
by an online legal publisher or newspaper - is dependent
on the user being alerted that there is a licence and
then signalling consent by clicking an onscreen button
(usually marked 'I Agree' or 'Agree'), rather than removing
a polyethylene shroud.
Clickwrap has become one of the foundations of electronic
commerce, experienced if you want to read the New
York Times online, participate in online auction
spaces such as eBay or simply accept the latest software
upgrade from dominant vendors such as Adobe and Apple.
It is consistent with Australian and overseas legislation
such as the Electronic Transactions Act 1999
(Cth), discussed here.
Browsewrap is more contentious, involving
assertions that merely visiting a web site binds the visitor
to a licence set by the site operator.
Typically content on that site features a link to a separate
page that features a licence agreement that purports to
bind everyone viewing the content. In contrast to clickwrap,
the viewer is not required to signal assent to the terms
of that licence by clicking a button.
Depending on the architecture of a site and design
characteristics the viewer may not immediately be aware
that there is a licence for a site (eg may browse several
pages without recognising the link or encountering the
licence statement). The visitor might surf the site and/or
download content without having to explicitly agree to
the licence terms or even read those terms. The visitor
might, of course, be a robot rather than a human (for
example a bot that is systematically spidering sites on
the web for inclusion in a search engine) and thus unable
to make sense of restrictions on linking.
As noted below, that has resulted in arguments that browse-wrap
licences are unenforceable because it cannot be shown
that the user was aware of and positively assented to
specific features of the licence.
Licencing of intellectual property or other assets is
not innately wicked and enthusiasts for open
source use mechanisms such as GPL. Proponents of EULAs
justify them as an accepted and necessary business practice
that is consistent with copyright law and with contract
and trade practices law.
Most critics of EULAs have recognised that justification
but instead expressed concern about use of licence agreements
in ways that appear to restrict rights that are recognised
in law or that feature provisions contrary to law (eg
a requirement that you sell your children).
Concern centres on efforts to substantially reduce or
eliminate statutory defences to copyright infringement
(eg rights of unauthorised copying for the purposes of
scholarship, reporting and criticism) and on the opacity
of some licences, which one critic characterised as "unread,
unreadable and often unenforceable". It also encompasses
questions about privacy,
with some EULAs involving waiver by consumers - on an
informed basis or otherwise - of statutory protection
Click, shrink or browse EULAs can purport to -
decompilation and reverse engineering, contrary to statutory
allowance for decompilation in certain circumstances
any and all copying, including statements as sweeping
as "You may not reproduce this site for any purpose
particular uses, for example claim to prohibit use of
software or data in the provision of commercial services
by the user or by a third party
'export' of the content from the consumer's country
use of the intellectual property to specific classes
of users, for example bona fide students who
have purchased an 'educational' version of software
any citation of or linking
to an online resource that is not behind a firewall
the IP rights owner/agent to install and use backdoors
in operating systems or discrete copy protection software
to "enforce" the rights, at any time, without
notice and without liability
rental of disks and associated documentation (a restriction
consistent with enactments that address the inadequacy
of 'first sale' provisions) and prohibit lending through
statements such as "You may not rent, lease, sublicense,
or lend the Software", although it would be quite
permissible to lend a book to a friend
periodic scanning of the contents of a personal computer
and reporting back to an IP rights owner such as Microsoft
transfer of the licence to a third party (ie stop you
selling 'your' copy of the software, audio file or other
intellectual property, a restriction that EULA proponents
note is consistent with offline prohibitions on a user
selling 'their' rental car or leased home improvement
editing or making derivative works.
typically also feature, or are associated with, warranties
that seek to strongly protect the intellectual property
owner and agents from action by the end user or third
parties but often do not guarantee that the user will
receive something that is 'fit for purpose'.
They generally specify the jurisdiction in which any dispute
will be resolved. Some specify a particular court (which
may be located overseas and in practice is thus unavailable
to many consumers) or arbitration
They may not be readily intelligible by many users and
it has become a commonplace that many consumers simply
ignore the legalese, click to signal agreement with unread
terms & conditions, and hope for the best.
The Australian Digital Alliance, in a submission to the
Copyright Law Review Committee, commented that
very large proportion of licence agreements purport
to override copyright exceptions or otherwise allow
control of information that is contrary to public policy
(such as controlling access to public domain material
or inhibiting freedom or expression). Some licence agreements
provide for usage conditions that are superior to those
offered by the Copyright Act. These agreements are typically
a function of the superior bargaining position of a
particular agency or consortium and are not normally
available to smaller institutions or consumers. The
capacity of vendors and licenses to make these kinds
of agreements should not be affected.
Most electronic licence agreements feature terms unilaterally
dictated by the vendor, where the licensee has no opportunity
to negotiate. ... Licence agreements (especially those
backed by technology) are increasingly supplanting the
Government's role in deciding information policy. They
threaten to make the public benefit aspects of the Copyright
Act redundant. If the legal primacy of licence is confirmed,
vendors of copyright material will have no disincentive
to insist upon ever greater control of access to and
use of information.
Special protection for consumers of mass-market products
may be warranted but there must be a more general response
from Government to preserve the role of the Copyright
Act as the prime instrument of Australia's information
Current legal protection against 'unfair contracts'
is not sufficient. It only serves to protect against
highly unreasonable contracts rather than, for example,
countering a general contractual practice which runs
counter to public policy.
The most obvious solution to unfair copyright contracts
is to make them invalid to the extent that are inconsistent
with the copyright law.
have suggested that on occasion angst is attributable
to misunderstanding of licencing and more broadly of intellectual
property or to perceptions that digital = special.
It is clear that some people mistakenly believe that purchase
of a disk gives them unrestricted rights regarding the
content, ie they perceive that they have acquired outright
ownership of the intellectual property rather than merely
a licence to use the intellectual property (with the rights
owners presumably making a living through busking
or by sale of the plastic).
It is also clear that some people conceptualise digital
content using the model of a printed book or gramophone
record, accordingly experiencing discomfort regarding
EULAs that seek to restrict lending, swapping or rental
of electronic content. One student commented to us "if
I can lend my textbooks to a poor friend and rent a video
from the local store each night why can't I lend use of
the software". In practice some people are 'lending'
electronic content, in breach of particular EULAs, on
the basis that they install/uninstall the software or
simply do not get caught.
Finally, it should be noted that some EULAs are more restrictive
than others. Many software developers, for example, allow
a consumer to transfer the software to a third party (along
with print documentation) subject to deletion of the software
from the first consumer's machine and destruction of any
Are clickwrap-based intellectual property restrictions
- and more broady click and shrink agreements - effective?
Australian and overseas law does not prohibit electronic
agreements, which are recognised in statute law and common
law. It similarly does not prohibit click-wrap and shrink-wrap.
As noted above, there is pervasive use of those mechanisms
on the web and in distribution of software, encyclopaedias,
movies and other content on disk.
However, aspects of some licences are likely to be unenforceable.
There has been very little case law in Australia, including
testing of suggestions that 'take it or leave it' mechanisms
are so onerous as to void any agreement, and so there
is doubt about potential outcomes if action was taken
for breach of the licence.
The enforceability of browse-wrap restrictions is problematical.
Can you be held to restrictions beyond the copyright law
of your jurisdiction if you are unaware of those restrictions
and have been able to use a site without passing through
a gateway that is unlocked by button signalling consent?
Critics have commented that restrictions in some jurisdictions
cannot be enforced, pointing for example to authorisation
of decompilation in specific circumstances under Australian
copyright law and under the 1991 European Union Software
Directive. They have noted that the Copyright Act provides
defences for infringement in relation to copying for purposes
such as scholarship, criticism, news reporting and even
Others have referred to the Australian Trade Practices
Act 1974 and the New Zealand Consumer Guarantees
Act 1993, with expectations that consumers who purchase
from local businesses will be protected from misleading
and deceptive conduct or unreasonable restraint of trade.
Others still have commented that much of the debate about
EULAs is about resource allocation.
Universities, for example, licence legal databases such
as Westlaw or LexisNexis and online journal collections
from a handful of global publishers. Those licences typically
restrict access to registered staff and students, in some
instances to a specified number of students. The institutions
are not permitted to share access with other organisations
(for example municipal libraries) and ordinary members
of the public - because unregistered - do not have access
to the electronic publication, although in the past they
may have been able to graze the stacks at that institution.
Works of interest include Debora Halbert's 2003 'The Open
Source Alternative: Shrink-Wrap, Open Source and Copyright'
in 10 Murdoch University Electronic Journal of Law
4, John Adams' 2004 Digital Age Standard Form Contracts
Under Australian Law: 'Wrap' Agreements, Exclusive Jurisdiction
and Binding Arbitration Clauses' in 13 Pacific Rim
Law & Policy Journal, Graham Greenleaf's article
'IP, phone home: The uneasy relationship between copyright
and privacy' in 32 Hong Kong Law Journal (2002)
2, John Burke's 'Reinventing Contract' article
in 10(2) Murdoch University Electronic Journal of
Law (2003) and submissions to the Australian Copyright
Law Review Committee such as the ADA document noted above
and ALIA's comments
on library licencing.
A selection of EULAs is here.
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