1. the software is conveyed in a "User Product", and
2. that conveyance occurs as part of a transaction in which the right of possession and use of that product is transferred to the recipient.
A "User Product" is defined as 'either (1) a “consumer product”, which means any tangible personal property which is normally used for personal, family, or household purposes, or (2) anything designed or sold for incorporation into a dwelling'.
In other words, it only covers software that is installed on actual physical hardware when that hardware is sold (or rented, etc) to the consumer.
For a sale of a service, it is completely out of scope.
This is probably the most misunderstood clause in GPLv3, with people thinking that it some sort of general anti-DRM clause. Almost everybody, for example, thinks that it is why you can't have GPLv3 code on the Apple app store, but because it only applies to conveyances that are part of the transaction by which you acquire your iPhone or iPad it in fact does not apply to software purchased later from the app store. Apple's app store DRM is perfectly compatible with GPLv3.
The incompatibility between the app store and GPL is that the license agreement for the app store says you won't redistribute the app or reverse engineer it. GPL does not allow adding additional license restrictions like that, and so you can't satisfy both the app store license and GPL.
1. the software is conveyed in a "User Product", and
2. that conveyance occurs as part of a transaction in which the right of possession and use of that product is transferred to the recipient.
A "User Product" is defined as 'either (1) a “consumer product”, which means any tangible personal property which is normally used for personal, family, or household purposes, or (2) anything designed or sold for incorporation into a dwelling'.
In other words, it only covers software that is installed on actual physical hardware when that hardware is sold (or rented, etc) to the consumer.
For a sale of a service, it is completely out of scope.
This is probably the most misunderstood clause in GPLv3, with people thinking that it some sort of general anti-DRM clause. Almost everybody, for example, thinks that it is why you can't have GPLv3 code on the Apple app store, but because it only applies to conveyances that are part of the transaction by which you acquire your iPhone or iPad it in fact does not apply to software purchased later from the app store. Apple's app store DRM is perfectly compatible with GPLv3.
The incompatibility between the app store and GPL is that the license agreement for the app store says you won't redistribute the app or reverse engineer it. GPL does not allow adding additional license restrictions like that, and so you can't satisfy both the app store license and GPL.