Can a EULA trump fair use?

End User License Agreements are so commonplace that most of us just click on the "Agree" button to get rid of the darn things and finish the software installation process. We do so despite the fact that the EULA may have some provisions that are repugnant to us, like the ability to change the terms of the agreement after the software has been installed. Whether EULAs are ultimately enforceable are another matter entirelythe courts have sent mixed messages on that subject.

A recent decision (PDF) by the Ninth Circuit Court of Appeals in the case of Wall Data vs. the Los Angeles County Sheriff’s Department sends a rather unwelcome message: that a software developer’s EULA can trump fair use rights.

The dispute between Wall Data and the LA Sheriff’s Department hinged on RUMBA Mainframe, a terminal emulation program developed by Wall Data. RUMBA is part of the Department’s default desktop image, but the law enforcement agency did not have enough valid licenses to cover the entire installed base. That’s ok, argued the Sheriff’s Department, because none of those copies were usable due it its security setup. Instead, they were more like backup copies permitted under fair use.

Wall Data disputed that and said that its EULA prevented such installations, even if the extra copies were never activated, licensed, or available for use. The RUMBA license specified that the application could be used "on a single Designated Computer for which the software has been activated." According to Wall Data, that means that extra, unused copieseven as backupare prohibited.

A jury found that the LA Sheriff’s Department had in fact violated the EULA, and the US Court of Appeals for the Ninth Circuit upheld that verdict. In its decision, the Appeals Court found that the Sheriff’s Department was not entitled to a fair use defense under Section 107 of the Copyright Act. "In considering the four fair use factorsthe purpose and character of the work, the nature of the use, the amount and substantiality of the portion used, and the effect on the plaintiffs’ marketnone militate in favor of the Sheriff’s Department’s fair use defense," wrote the Court. "We therefore hold that the Sheriff’s Department is not entitled to a fair use defense…"

Interestingly enough, the Ninth Circuit handled a similar case, MAI v. Peak, that also centered on fair use. More importantly, it upheld the view of software developers everywhere that we users only own a license to use the software, and not a copy of the software itself. The Ninth Circuit used that decision as the basis for the Wall Data case, reiterating that in the license vs. ownership debate, "license" is the clear winner in its jurisdiction.

Ultimately, this case could wind up in the Supreme Court. In a similar case (Krause v. Titleserv) (PDF) heard in the Second Circuit, the court decided that if you buy an application, you own a copy, rather than a mere license to use it. As a result, all fair use and other rights outlined in the Copyright Act still apply.

As a result of the more recent Ninth Circuit decision, we’re left with conflicting interpretations of how far a EULA can reach and what effect an overlyrestrictive one can have on our fair use rights. Until the Supreme Court decides to step in and lay down the law, all we’re left with is conflicting interpretations and bad software licenses.