Understanding EULAs

Some are more restrictive than others, but all serve a simple purpose

After writing several columns about Windows Product Activation (WPA) in Windows XP and Office XP for in the Windows 2000 Pro UPDATE electronic newsletter, I received a huge amount of email. One thing I realized as a result of this feedback is that very few people understand or care about the End User License Agreement (EULA) that they agree to when they install an OS or software application.

Taking License
The most important thing to remember about a software purchase is this: You aren't buying the software, you're buying a license to use the software. The EULA outlines the terms and agreements that pertain to how you use the license. In most cases, licenses are perpetual-use; that is, the license doesn't define a date at which you can't use the software anymore. Many of the concerns readers share with me have to do with their ability to install Microsoft software in the future, when the company might no longer support it. I believe that this case has been overstated. Microsoft would have to rewrite XP's EULA to limit future use of the software; the current EULA provides no mechanism for Microsoft to unilaterally deprive anyone of his or her licensed software. (Volume license agreements have special conditions in their EULAs; so if you've signed up for one of the new renewable software licensing plans, all bets are off.)

The current product EULA always describes how and where you can use the software. If you violate the EULA, you give up the right to use the software. And the EULA for a software product can vary, depending on how you acquire the software. For example, when you buy a retail boxed copy of Win2K Professional, the EULA includes a specific right to transfer the software to a different computer. This right doesn't mean you can maintain multiple copies of the software—the basic grant of license limits you to a single installation. The right does, however, let you decide to install the software on any one computer.

The situation is different when you buy a computer that comes with an OS that's BIOS-locked to that computer. In that case, you've exchanged the software's discounted price for the right to move the OS's license to another computer. So, users who try to use a BIOS-locked copy of an OS on a different computer—even if they've removed the OS from the original computer—are in violation of the EULA (or would be, if they could actually do an installation from the BIOS-locked version), and likely don't realize it. Readers have reported that recent BIOS-locked OS copies just exit the install, without even a courtesy message, when you attempt to install them on a different computer.

But even the retail-box licenses contain some pretty severe restrictions. For example, your retail-box license of the Win2K OS allows only one third-party transfer. In other words, you can resell the software only once. This restriction means that if you sell the computer on which you've installed the software to a friend and your friend wants to resell the machine with the software installed a month later, that second sale is technically in violation of the OS EULA.

Some exceptions exist to Microsoft's application software one-system, one-license model. Both Office XP and Office 2000 contain the following sentence in their EULA: "The primary user of the computer on which the Software Product is installed may make a second copy for his or her exclusive use on a portable computer." So you can actually have two installations of the software on one license, as long as one of those installations is on a notebook computer. This exception doesn't mean that you can share the license between two users; you need to be the primary user of both the desktop and notebook computers.

EULAs and CALs
A couple of years ago, a small furor broke out over the fact that the Win2K Pro and Windows NT Workstation license restricted user access to a maximum of 10 users for file and print or Web server access. No one pointed out that this number constituted 10 more users who could attach—free of charge—to a Win2K Pro or NT Workstation system license than could attach to a server license. All versions of Win2K Server or NT Server have always required a Client Access License (CAL) for any nonconsole access (Win2K has a special exception that allows server administration through the Win2K Server Terminal Services client for up to two users).

Microsoft's OS EULA is straightforward but can become convoluted when you examine the Win2K Server EULA, which includes the requirements for client licensing. Licensing requirements for server CALs, application server CALs, and Terminal Services CALs can get complicated and require concentration when you make your purchases, but they aren't directly functions of the EULA.

The Facts of Business Life
When you consent to a Microsoft EULA, you also agree to the "Consent to Use of Data" clause. This clause states "You agree that Microsoft and its affiliates may collect and use technical information you provide as a part of the support services related to the Product. Microsoft agrees not to use this information in a form that personally identifies you." If you're convinced that Microsoft is on a mission to collect information about you, this clause might make you panic. But before you do, ask your lawyers about it; I'm sure they'll tell you that if the EULA is enforceable and binding on you, it's just as binding on Microsoft. And just how fast do you think various states' attorneys general would jump on Microsoft if the company violated its own EULA? Given the public's sensitivity to the topic of privacy, do you really believe that Microsoft would risk more lawsuits just to get your personal data?

Before you pillory Microsoft for its EULA, look at some of the EULAs from other companies' software. Some of these agreements contain interesting clauses relating to use of the software. Many confusing clauses are just the result of bad editing; for example, software application EULA lets you use your single copy of the software on a networked machine only if you buy a license for every machine on the network. I'm fairly sure that's not what the EULA means, but that's what it states. If you were to take time to read the EULA for every application you have installed, you would find some very obscure licensing restrictions, some of which you might even be unwittingly violating.

Every software and OS vendor has a EULA—and some EULAs are more restrictive than others. WPA has brought many of these restrictions to light. However, the limitations WPA places on how and where you can use the software aren't new. What is new is the active enforcement of restrictions that have always existed. Few vendors have found easy ways to prevent software piracy. Protecting intellectual property is a difficult thing to do, particularly outside the United States. So why take Microsoft to task for attempting to protect its software assets? Would your business want to do any less for its property?

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