Legal · SaaS license

What's the difference between terms of service and EULA?

Richard Pridham Investor, President & CEO at Retina Labs

May 5th, 2015

What's the difference between a Terms of Service and an End User License Agreement and when is one more appropriate than the other?

Which of these agreements would a SaaS-based software subscription provider need? ToS or EULA? Is making the agreement available on the company's web site so users can view it sufficient or must it be formally accepted and signed by the client (i.e. the one who pays for the service)? What about users within the customer organization who use the service? Do they need to accept it on first login?

Thanks

Mike Taylor Web Developer

May 5th, 2015

I've attempted to find concrete answers on this topic as well.  In general, I think a the ToS is used for SaaS apps - since it is a service, provided as an on-going subscription.  An EULA is usually used where the software is installed on a computer, and usually limited to a fixed number of devices or users, possibly over a fixed time duration.

You may find the topics on Wikipedia to be useful:
http://en.wikipedia.org/wiki/Terms_of_service
http://en.wikipedia.org/wiki/End-user_license_agreement

I think that it matter's less what what you call the document, and more that the document covers the legal agreement that you intend create between the users and your company.  I use the click-wrap method, and enforce it on all users, using language that covers both the purchaser and all users.






Richard Pridham Investor, President & CEO at Retina Labs

May 7th, 2015

Thanks Eric. BTW: as per Andrew Westberg's advice above, I visited your site. Looks interesting. I'll probably reach out to get a demo. A couple of areas I'd like to explore with your service is a) integrating with our SaaS platform and b) our marketing automation/CRM system.

Andrew Westberg Nike+ Running App Android Developer at Nike

May 6th, 2015

I'm not affiliated with them in any way, but a startup company in my city has a SaaS platform for managing these agreements and ensuring legal compliance. http://www.pactsafe.com/

Eric Prugh Co-founder & COO at PactSafe

May 7th, 2015

Hi Richard! If you're keen to read more about how to ensure a clickwrap is enforceable, we recently published a blog post on this topic: https://www.pactsafe.com/blog/what-is-a-website-terms-of-use

There's also links for more on what a clickwrap & browsewrap agreement are to help explain that further.

Steven Rubenstein

May 6th, 2015

You are not really "licensing" the software. EULA generally refers to software. So ToS is a more appropriate fit for a hosted service.

As for ensuring that users agree to the ToS, in general a company is agreeing on behalf of its users. But if your ToS ha any provisions that affect individual users -- such as privacy, legal, security, etc., then you can ask them to review and agree to it. Of course, no one will actually read it anyway.

If you are going to require they agree to it, make sure you store in your database the date and time they did. Otherwise it is meaningless. Recording their IP address is also useful if you truly need to prove later on that it was them.


Ed Lavalette

May 7th, 2015

EULA typically applies to the agreement that covers the use of your software.

TOS is a complete set of terms that covers use of your website or other service, which might include licensing terms.

For a SaaS solution, a TOS is probably more applicable and as noted by Stephen, a click though should be sufficient as long as you log it and I would go even further to show this information in the users profile for added evidence.

Richard Pridham Investor, President & CEO at Retina Labs

May 7th, 2015

Thanks everyone! This really helps.

Antoine: If the "service" in question is 100% browser-based and does not require any software to be installed on the device, does that mean a EULA is not necessary?

Just to clarify, when you say "click-wrap" agreement, is this simply clicking a box that you've read and accepted the agreement?

Antone Johnson Social/Digital Media/Mobile Startup Lawyer, Advisor, Board member, Commentator

May 7th, 2015

EULA is meant to cover a software application; Terms of Service govern a website (including mobile Web) and underlying services. Either can be binding in "click-wrap" or "browse-wrap" form under US law. Both apply to every end user. The EULA applies to anyone who downloads and uses the software. Unless otherwise specified, TOS applies to everyone visiting the site, which often contains both public and private areas. In neither case are they necessarily registered or paying customers.

Beyond those generalizations, things get product-specific in a hurry. SaaS blurs the line in many cases by providing a proprietary service, the front end of which may be nothing but a website. Using Dropbox as an example, the cloud storage service accessed through a Web browser is covered by TOS (and Privacy Policy, another key component) - but if you download and install their application on your computer, that app should be covered by a EULA. That doesn't mean the TOS doesn't still apply, though, as long as you're still using the service one way or another. A customer's relationship with Dropbox may well be governed by the TOS, Privacy Policy, desktop app EULA, and mobile app EULA. (Apple requires iOS developers to provide one; if the developer doesn't supply it, Apple will use its own standard form by default.) In practice, the EULAs tend to be very boilerplate, mostly protecting the developer with agreements not to pirate the software, decompile or reverse engineer it, etc.

The second part of this question is specific to enterprise licensing. Again using Dropbox as an example, you can read and download its separate TOS for a Business account. In theory, at least under US law, virtually all terms and contracts could be approved using "click-wrap" agreements. In practice, while small business agreements are often done with an online click-through, larger enterprise deals are far more likely to be documented by a comprehensive license/services agreement. (This may be in addition to, not instead of, the EULA or TOS.) That agreement requires signature by a person with authority to enter into contracts on behalf of the customer business entity (corporation, etc.).

Disclaimer: I'm a California licensed attorney, but this is legal information, not advice. Laws can vary dramatically between jurisdictions.

Eric Prugh Co-founder & COO at PactSafe

May 8th, 2015

Sounds great, Richard! Let me know how I can help - eric [at] pactsafe.com.