Anyone involved with software licensing is familiar with the “integration clause” – usually a provision titled “Entire Agreement” toward the end of the document. Though such clauses purport to make what the agreement says the “entire agreement,” that does not always happen.
An end user license agreement (“EULA”) that was the subject of a recent software dispute had integration language that said this:
This Agreement sets forth the entire understanding and agreement between You and [the software provider] and may be amended only in a writing signed by both parties. . . . You acknowledge that You have read this Agreement, understand it and agree to be bound by its terms and conditions. You further agree that it is the complete and exclusive statement of the agreement between You and [the software provider] regarding the Software, which supersedes any proposal or prior agreement or additional license text accompanying the Software oral or written, and any other communications between You and [the software provider] relating to the subject matter of this Agreement.
The provision appears to lock out any “parol evidence” – information from outside the agreement to prove what the terms and conditions of the software license were. Despite this language, a court found that it should consider outside evidence about the scope of the license.
Plaintiff software provider sued defendant licensee for copyright infringement, claiming the term of the license was for only 2.5 years but that defendant continued using the software beyond that time. (The defendant was the CIA. While intriguing, government-as-defendant did not affect the outcome.) Defendant moved for summary judgment, arguing it had a perpetual license. The court denied the summary judgment motion.
Defendant claimed this provision in the EULA gave it a perpetual license:
Term. This license is effective until terminated. You may terminate it by destroying the Software and accompanying documentation and all copies thereof. This license will also terminate if You fail to comply with any term or provision of this Agreement. You agree upon such termination to destroy the Software and accompanying documentation and all copies thereof.
Defendant asserted that this text unambiguously described a perpetual license, and that the integration clause discussed above established the agreement was fully integrated, thus precluding any evidence extrinsic to the EULA concerning how long of a license defendant had. Plaintiff, however, saw it differently, pointing out how the EULA failed to mention key terms including the licensee’s identity, which software was being purchased, how many licenses were provided, what price would be paid, and where or when the software would be delivered for use.
Simply stated, plaintiff argued that though the EULA said it was the entire agreement, it really wasn’t.
The court agreed. It held that “[t]he presence of an integration clause raises a strong presumption the contract is a fully integrated agreement unless, as in the present circumstance, the document is obviously incomplete.” (Emphasis added.) “Parol evidence ‘must be admissible on the issue of the extent to which a written agreement is integrated for, … the writing cannot prove its own integration.’” In this case, the purported “entire agreement” lacked critical information. And since “extrinsic evidence as to the license purchase is crucial to complete the agreement reached,” it was appropriate to look outside the agreement for whether there was a 2.5 year license or a perpetual license.
The court also held that the term language of the EULA could describe either a term license or a perpetual one. A 2.5 year license (i.e., the type of license plaintiff asserted) would be “effective until terminated,” in the same way that a perpetual license would be subject to that termination. Because of these factual issues, and the open door for parol evidence despite the integration clause, the court denied defendant’s summary judgment motion.
Kofax, Inc. v. United States, 2013 WL 4040870 (Fed. Cl. August 8, 2013)