A EULA allows you to allocate rights over the content on your platform. This allows you to achieve the right balance between preserving control over the content, and granting your user maximum flexibility to deal with the content as he/she wishes. You may also pre-empt disputes by using the EULA to address issues that may arise in these situations, such as liabilities and resolution methods.
Hence, the EULA plays an important role in your overall marketing plan, affecting
(i) what product you are making and
(ii) how you interact with the customer.
Depending on your product, different issues may feature prominently in your EULA:
Social Networking Platforms
Allocation of Rights
These platforms are dominated by user-generated content, be it public profiles for employers or photo albums for friends. In your EULA, you may attribute all relevant intellectual property (IP) rights to the user. This may be important if you do not want to deter potential customers who are concerned about losing control over their works.
However, just like in Part 2 above, it is necessary for you to hold some rights to properly administer your platform. The EULA can thus stipulate that the user has granted you a license to use the content. Depending on your technical and operational requirements, the license may be made on varying terms. However, most licenses are stipulated as non-exclusive, transferrable, sub-licensable and royalty-free. This grants you (and your third-party providers, if any) maximum flexibility when dealing with the content. Generally, the license ends when the user deletes the relevant content or his/her account.
The effect of such a license is to grant you the necessary IP rights to ensure the proper functioning of the platform, yet at the same time keep the user in control of whether to keep his/her content or not.
Social networking platforms are an easy place for incidents involving defamation, harassment and fraud to occur. As a platform provider, such inter-user disputes are beyond your realistic and viable control. It is wise to exclude, or at least limit your liability for losses arising from such claims. In Singapore, disaffected users have alternative courses of action against their fellow users. These include:
- Approaching the Community Disputes Resolution Tribunal (for harassment),
- Lodging a Magistrate’s Complaint (for criminal matters),
- Pursuing a civil claim (to obtain monetary compensation)
There is also the possibility of disputes between you and the user. Most EULAs indemnify the provider against all forms of losses arising from or in connection to any form of usage. Examples of events that could lead to losses include:
- Service disruptions,
- Breach of security,
- User’s reliance on platform content.
However, it is important to note that the prevailing laws of the relevant jurisdiction may not allow the exclusion or limitation of liability, so the indemnity clauses may not be effective. You may include proviso stating that for such situations, your liability will be limited to the fullest extent permitted by the applicable law.
Forum for Dispute Resolution
Your EULA should stipulate the forum for resolving disputes with the user, such as arbitration, litigation (appropriate jurisdiction be stated), and small claims courts. Note that, the EULA’s clauses may still be subject to construction before a competent court of law. Hence, any clause, including stipulating the appropriate forum, must be expressed clearly and fairly to ensure its effectiveness.
The EULA should also state the particular jurisdiction governing its terms – this is usually the jurisdiction where the provider company is incorporated. The courts of this jurisdiction will determine the validity of any clauses in dispute.
Software and Games
Protecting IP Rights
These platforms are usually technically complex and you should protect your works against any potential violation of your IP rights. These can include a user copying the source code of your product, reverse-engineering it, or creating derivative works based on it.
You may use the EULA to expressly reserve all your IP rights to the platform, granting the user a license to use the platform only on certain terms. Unlike the license granted from user to provider, the licenses granted from provider to user are usually much narrower in scope. Non-transferability and no-sub-licensing are common features.
The express reservation of specific rights may be important given the rate of technological development, which could become too fast for the law to keep up. It is advisable to pre-empt scenarios that could potentially arise from your product’s novel features, and then stipulate each party’s rights and liabilities in that situation.
For example, there has been significant controversy regarding the “ownership” of virtual property in MMORPGs. The virtual content appearing within a game is technically just audio-visual representations brought about by the gaming provider’s software and servers. However, gamers may spend significant amounts of effort on developing their in-game characters and items – even trading these virtual property for real money. Hence, it may also be argued that the gamers hold some form of property right over their virtual property.
By making everything clear in writing, the EULA is a good way to ensure that your customer understands your fee structure, payment procedures and guidelines. This may include the presence of any automatic recurring payment, hidden costs, etc. You may also use the opportunity to disclaim responsibility for taxes and other third-party fees that are incidental to platform usage. These can include mobile carrier fees, credit fees and monetary transaction fees.
Remember that not everything in the EULA must be drafted against the user. To encourage customer confidence and trust, you may provide for compliance with certain processes. This is especially important in relation to procedures prior to changing the fee structure or terminating a user access due to non-payment. For example, in the event of a user’s failure to pay, Adobe will “make reasonable effort” to notify the user, at least 30 days prior to termination, instructions on how to retrieve his/her content. eBay stipulates a 14-day notice period for changes in chargeable fees.
A key concern for marketplaces that bring together sellers and buyers is the presence of inter-user disputes. These include missing goods, defective goods, misrepresentation, non-payment, and other transactional frauds.
As the platform provider, you may indemnify yourself against losses incurred by a user while using the platform, especially losses arising from the actions of other users. However, the flexibility of a EULA means that you may still create exceptions for schemes of reimbursement, such as eBay’s “Money Back Guarantee”. This can boost customer confidence in your platform, boosting usage and revenue in the long term. Alternatively, you may reserve the discretion to mediate in any inter-user dispute, but at the same time exclude any obligation to do so.
Cross Border Transaction Issues
International sellers and buyers are bound by all applicable laws and regulations governing the transaction. A EULA may specify additional terms to facilitate the sale, depending on how the platform works. For instance, eBay’s EULA authorises the automatically translate user content into languages, but does not guarantee the accuracy and availability of the translation.
The EULA may also relief the provider of all responsibility to satisfy the recipient country’s customs policies. This means the buyer must check and ensure that the item may be lawfully imported to his/her country.
Termination of User Account
The EULA should stipulate the means of termination, as well as the implications.
The user should have the discretion to stop using the platform, upon which the agreement is deemed to be terminated. Both you and the user are also free from most of the EULA’s terms – as in a typical contract, certain clauses in a EULA may survive post-termination. These clauses typically relate to disclaimers, indemnity and dispute resolution.
Most providers reserve the right to terminate the EULA and/or the user’s access to the platform in its sole discretion, for any reason, at any time and without notice. However, your EULA may provide a list of circumstances which may lead to such termination. This facilitates trust and transparency, while also giving your customer a better understanding of the agreement. The list may include user violation of certain important terms (to be specified), or user engagement in illegal activities while using the platform
Alternatively, you may also design the EULAs such that you may only terminate in specified circumstances. However, this should be done cautiously to ensure that you have considered all possible circumstances.
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