The Myth of the EULA

Go to any geek-infested corner of the Internet and you'll find a discussion of half-truths surrounding the legality, use, and avoidance of software licensing (often referred to as end-user license agreements ["EULA"], despite this being only one type of license).  Most of them are entertaining and creative, but carry little to no weight in the real world.

Ultimately, this does much more harm than good.  Open source and capital-F Free licenses rely on the same legal mechanisms for enforcement.  There is plenty of room for debate on whether the morality of "copyleft" (where you are granted rights in exchange for agreeing to disclose changes and allow similar use by others) stands superior to more permissive licenses (that grant rights but do not impose the copyleft obligations) or to proprietary licenses (that some view as used primarily to restrict rights).  However, the legal mechanics are the same.

Many individual licenses contain provisions that are invalid, unenforceable, illegal, or some combination of the three.  There are serious problems with some software licenses and the concessions individual users and customers must make with some high-profile applications and online services, and shifts in legal thinking may pave the way for a more balanced approach in the future.  For a time, courts were rejecting binding arbitration clauses left and right (although the pendulum seems to have swung the other way lately).  But the legal weight of individual agreements or provisions within them says nothing of the software license agreement as a tool.

What is a license?

A license is at its most basic a promise not to engage in retribution. In almost all cases, that's litigation:  if you follow the expectations outlined by the licensor, you will not be sued.  A license is one way of granting revocable permission for others to do something. Licenses are everywhere.  Most of them aren't written agreements.

Every time you step onto someone else's property, the owner has licensed your presence.  There are some fundamental statutory and common law obligations and powers associated with that.  Tickets, like to movies and plane rides, are fundamentally licenses entitling you to limited access.

Contractual licenses happen all the time, from picking up cell phone or satellite TV to all sorts of varied economic activities.  Software licenses aren't actually all that unusual or different.  They're contracts like any other.

Why do people say that EULAs have never been tested in court?

This is my favorite delusion and the most laughably false.  There are hundreds of published cases on software license disputes and thousands upon thousands more on contractual licenses on other commercial transactions. Of the countless cases in this field, not one of them has ever categorically declared that software is not subject to license.  That would be an earth-shattering and truly incongruous decision, since huge segments of modern society are built on the legal construct of licensing.

I am aware of no court, no case opinion, and no successful argument that simply dismisses a case for the inclusion of a software license agreement.  Were that the case, there would be no need to explore the contents and specifics of the license, which is indeed what happens.  Some major cases (sorry for the lack of context in this post, but it got long! Perhaps another time...):

Step-Saver Data Systems, Inc. v. Wyse, 939 F.2d 91 (3rd Cir. 1991)
ProCD, Inc. v. Zeidenberg, 86 F.3d 1447 (7th Cir. 1996)
Softman v. Adobe, 171 F. Supp.2d 1075 (C.D. Cal. 2001)
Jacobsen v. Katzer, 535 F.3d 1373 (N.D. Cal 2008)

One-way contracts aren't contracts!

This is the most creative set of acrobatics--people who sit their kids down at the computer to click "I agree", or people who open the files to replace the license text with a funny joke, or who insist that they didn't sign anything in ink, so it must not matter.  None of this matters.

Contracts are negotiable only in a general sense; there is no requirement that any one party be willing to change his or her initial offer.  The most common business examples are standard form contracts, used for everything from cell phone service contracts to sales of entire corporations.  They are pre-written, often non-negotiable sets of terms.  Your options are to accept the offer, reject the offer, or convince the other party to negotiate.  Software licenses are standard form contracts.

If you wish to negotiate a revised EULA, you may certainly obtain a paper copy, redline it, and send it back to the company.  But be prepared for it to be ignored.  They have no reason to negotiate.

The other issue is one of acceptance.  A signature in writing is not required (under the Uniform Commercial Code, simple oral acceptance is sufficient to create a binding contract in sales of under $500).

Acceptance by performance is a legally permissible and extremely common method of obtaining consent--walking onto a sports venue is automatically accepting many of their terms and policies.  Purchasing something from a retailer is acceptance of their store policies.  Causing a pet or child to complete the transaction is still holding them out as your agent--you can't have your 9-year old hand over a credit card at Prada, wear the shoes for four months, and then tell the credit card company that you didn't authorize the purchase.  Clicking that "I agree" button in software is a deliberate act of performance that binds you to any and all of the lawful, enforceable, valid terms in that agreement.

And before you get any bright ideas, the reason you can't revise the EULA and end it with "by not responding, you accept these terms" is because such an offer only works for the party granting rights.  You cannot write to Target and tell them that you intend to buy a set of plates but that you are also taking matching flatware unless they respond with a counteroffer.  It doesn't work with software licenses, either.

What's the difference between lawful, valid, and enforceable provisions?

Since software licenses are valid contracts and even owning a legitimate copy of the software commits you to the license terms, there are two ways out:  either shield yourself with someone else (e.g., it's your employer's software license, your friend's, your mom's, etc. so they have to be sued), which is not perfect because the person you shift blame to can turn around and sue you, or to get the license term that you violated thrown out.  If you find yourself sued for copyright infringement by a software publisher for something you provably did and can't deflect liability to someone else, your only option is to find a way to argue that the term in question shouldn't be allowed.  Contractual provisions aren't permitted if they are unlawful, invalid, or unenforceable.  So which is which?

An unlawful provision is one that is contrary to established law. This pretty easy in broad strokes: you can't have a contract agreeing to kill someone, because a contract can't incite you to illegal conduct.  Unlawful provisions are void ab initio (from the outset)--neither of you can be required to comply, and if you choose to do your end, you can never compel the other person to hold up theirs.  Bottom line: don't pay assassins up front. You'll need that money for the attempted murder charges and you can't sue to get it back from the guy you hired.

An invalid provision is one that does not break any laws per se, but suffers from some defect in the formation of a contract.  These are things like making an illusory promise, entering with "unclean hands", missing terms, and other circumstances that make the agreement incomplete or tainted in some way.  Invalid provisions are void (neither party can be forced to comply) or voidable, meaning that party A can choose not to comply, but party B must comply if A does.  Fraud is a classic example of voidability: if A and B enter into an agreement and B lies about something material, A can either walk away entirely or choose to continue with the contract.  If A continues, B has no choice but to continue as well--B would need to find another way out if s/he also wanted to bail.

An unenforceable provision is one that may be lawful and validly agreed to, but that a court will not enforce.  Often, unenforceable provisions are either impossible or impractical to perform, but not always--provisions can be rejected for being unconscionable, which is to say that the terms are grossly unfair to one party (even though contracts are not required to be fair, there is a limit).  Unenforceable provisions are usually unenforceable by either party, but in some cases a term will only be unenforceable for one party.

Validity and enforceability are closely related.  In a nutshell, validity has to do with whether a contract has been properly formed while enforceability looks more at whether the act must be done.  You can legally and validly agree to give up your right to sue a company, but its inclusion in a software licensing agreement might be unenforceable because of the power imbalance between the customer and the company and the tenuous relationship between your right to sue and anything to do with using software.