End User License Agreement vs Terms of Service – When does each apply?

This post aims to clear confusion surrounding two technology law terms:  Terms of Service (ToS) and End User License Agreement (EULA).  Often, clients use these terms interchangeably even though the terms refer to different business models.  Determining which term applies to your business will assist you when searching for legal counsel and  to understand your own business model.

End User License Agreement

An End User License Agreement addresses the license of copyrighted software to your users.  This agreement is used when users are installing or accessing computer code, such as on their phone/mobile device or computer.  Since users are installing/accessing code, the End User License Agreement provides users a copyright license to the code and, therein, aims to protect your rights to that code.

Example:  a mobile application, downloaded from an app store and installed on a user’s device.

Terms of Service 

A Terms of Service agreement addresses the provision of services to your users.  This agreement  is used when users are provided a service, typically accessed through a website, but users do not install or access code – Software as a Service.  While some label the provision of services as a “license” this is not always ideal as “license” is a term evoking copyright and installing/accessing computer code.  Rather, the user is provided with “access” or a “subscription” to the services (or similar language).

Example:  a SAAS service accessed from a website through a user account.

But… 

There may be instances where you combine these two documents, licensing code and providing a service.  For example, an application (installed code) that connects to your cloud service to retrieve data (the service).  Additionally, you may have a mobile application and web service that accomplish the same thing but exist separately and, in this case, both agreement types are required.

In Sum:

Understanding the differences between End User License Agreements and Terms of Service should assist you with understanding your business model (am I selling software, a service, or both?) and your legal needs.