Can a software license validly restrict place of use, or impose restrictions on the type or purpose of use

Question

This question is inspired in part by Open Source License restrictions and recent sanctions against Russia and in particular by this answer

Can a software license impose restrictions on the place where the software is to be used, so that a court would enforce those restrictions. Fopr example, could the license include text such as:

This software is licensed for use only in the state of Texas?

Similarly, can a license impose limitations on the purpose of use, such as:

• This software is licensed for non-commercial use only;
• This software is licensed for non-law-enforcement use only;
• This license does not authorize use by any government or governmental agency;
• This software is licensed for use only by individuals or corms with gross revenues of $5,000,000 or less.

Assume that the would-be user has acquired a copy of the software lawfully, and only subsequently decides to use it in a way that the license purports to forbid. Assume further that the dev who created the software still holds the copyright, and sues the would-be user to enforce such a condition. Would courts enforce such a license restriction?

I understand thsat such a restriction would make the software not "open source" as the OSI uses that term, nor 'free" as the FSF uses that term. Indeed the software might be clearly proprietary. I am only interested (for this question) in whether such terms can be enforced in any software license.

I would strongly prefer answers that cite case law, statute law, or other authoritative sources (in that order). I am most interested in answers for US, UK, or EU law (in that order), but I am interested in answers for any jurisdiction for which reliable sources are available.

Answer 1

Yes

A software license is just a contract and parties to a contract are free to agree whatever terms they wish under the doctrine of freedom to contract.

Government can restrict what terms can be used in a contract either in general (e.g. for being against public policy) or specifically (e.g. by requiring wages be paid in money). None of the terms you mention fall foul of any restrictions I know of.

Answer 2

Yes, this appears to be legal and is a common practice in the industry however I can't speak for all the possibilities you listed. A couple of years ago VMWare announced new licensing polices relating to how many physical cores are valid with a license. This is something that Oracle has been know for doing with its database platform for decades.

https://news.vmware.com/company/cpu-pricing-model-update-feb-2020

While we will still be using a per-CPU approach, now, for any software offering that we license on a per-CPU basis, we will require one license for up to 32 physical cores. If a CPU has more than 32 cores, additional CPU licenses will be required. A FAQ related to this change is below.

Another example is non-commercial versus commercial use as there are plenty of examples of software that is free for personal use but expected to get a paid license for commercial use. And some cases where the price just increases based on the use. This also applies to development versus production licenses.

In the past I have also seen licenses that change based on amount of business that is involved, being a non-profit or academic among other factors.

As for your first example only for use in the state of Texas such restrictions could be valid based on various export restrictions that may apply to the software.

Answer 3

Yes.

This software is licensed for use only by individuals or corms with gross revenues of $5,000,000 or less.

Game engines like unity/unreal have something like that. Unreal's current includes modified form (From https://www.unrealengine.com/en-US/faq ) - ' This license is free to use and incurs 5% royalties when you monetize your game or other interactive off-the-shelf product and your lifetime gross revenues from that product exceed $1,000,000 USD. ' as

Similarly, can a license impose limitations on the purpose of use, such as:

Yes. https://www.apple.com/legal/internet-services/itunes/us/terms.html says

You also agree that you will not use these products for any purposes prohibited by United States law, including, without limitation, the development, design, manufacture, or production of nuclear, missile, or chemical or biological weapons. also, https://aws.amazon.com/ru/service-terms/ section 42.10

42.10. Acceptable Use; Safety-Critical Systems. Your use of the Lumberyard Materials must comply with the AWS Acceptable Use Policy. The Lumberyard Materials are not intended for use with life-critical or safety-critical systems, such as use in operation of medical equipment, automated transportation systems, autonomous vehicles, aircraft or air traffic control, nuclear facilities, manned spacecraft, or military use in connection with live combat. However, this restriction will not apply in the event of the occurrence (certified by the United States Centers for Disease Control or successor body) of a widespread viral infection transmitted via bites or contact with bodily fluids that causes human corpses to reanimate and seek to consume living human flesh, blood, brain or nerve tissue and is likely to result in the fall of organized civilization.

Yes, maybe amazon's lawyeres thought it's funny.

FAR manager (windows console 2-panel manager, something like Norton Commander) have special non-commercial licenese for people from xUSSR countries. You can see it at https://github.com/eggoez/far/blob/master/License.xUSSR.txt (in Russian) Basically you need to be citizen of one of xUSSR countries (not CIS!), you also need to knew about this license and knew name of current day of week in Russian

Answer 4

Yes. I once worked for a company distributing Nexpert Object, and they had a clause prohibiting use in nuclear reactors and medical applications. I got the impression that this was a get out of jail free card. If someone were to use their product in a reactor, and there was a core meltdown, they could argue that the customer had violated the license conditions. The ban on medical applications may have been intended to protect them from the FDA,

Answer 5

Yes

It may be perfectly possible to use it in other countries, and there may be no working countermeasures to stop it. However you'll still be breaking the licensing conditions.

I have a personal example of this. About 20 years ago, my company was doing a project for Ford, who used ClearCase for revision control. Because Ford's development teams are scattered all over the world but they still use a common code base wherever possible (good practise to avoid reinventing the wheel), the whole world had access to the ClearCase servers.

We (in the UK) had some issues getting ourselves set up, so our chief engineer called Rational (the owners of ClearCase) for tech support. He got an answer, which was good, but then the tech support guy asked him, "By the way, who gave you access to this? because Ford have only paid us for a license for US users." Which meant that every local Ford office around the world, and every Ford subsidiary (Jaguar Land Rover, Aston Martin, Volvo, Visteon, etc.), with literally thousands of users, had been breaking the licensing conditions since basically day 1 of Ford using ClearCase. Looking on the Rational website, they did indeed mention that they could do separate licensing for large organisations for continent-wide or global licenses.

Not many days later, there was a global email (and in this case "global" does genuinely mean the entire globe!) to all Ford engineers saying that there was an issue with ClearCase and no-one should worry, but you shouldn't call Rational for tech support and if you had any problems then contact someone in Ford.

A few weeks after that, we got another email saying the situation was resolved. There was no blow-back for our team, I guess because there was no way we could have known about this. We never did find out exactly how much it cost Ford to upgrade their license.

Answer 6

No.

It's common practice for commercial software providers to claim they're entitled to do this, but to my knowledge there is no provision under copyright law that entitles them to do so (*). A license is not a contract, but a grant of permissions to do something that would be forbidden by the law without the permissions of the rights holder. Copyright law governs things like copying, preparation of derivative works, public performance, etc. It does not govern possession, transfer (see also: first sale), private enjoyment, etc. of a legally obtained copy of a covered work. In particular, no activity prohibited by copyright law is necessary in order to make use of a piece of software one has legally obtained. Someone who has legally obtained a copy of a copyright-covered work is under no obligation to "agree to a license" (or enter into a contract) with the copyright holder if they have no desire to do anything they need such permissions for.

(*) One arguable objection to this is the DMCA's prohibition on "circumvention of technological measures" and whether it's possible to make any practical use of the software without doing so. This is a topic with lots of complex technological and legal facets and likely-unresolved interpretation of the law, so for the purpose of my answer, I'm sticking to software in a more classical sense where there is no technological measure attempting to prevent use without entering into a contract with the copyright holder.