SaaS Attorney Drafting Subscription Agreements

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SaaS Attorney Andrew S Bosin LLC drafts just about every type of SaaS Agreement, License or Contract whether you are a startup, vendor, licensee, provider, customer, developer or enterprise company.

Located in New Jersey near New York City Andrew can help you with all of your SaaS contract and licensing legal needs.

As an owner of a SaaS company that he built with partners Andrew performed every possible legal function that needed to occur in a Delaware C Corporation. As such, Andrew fully understands your SaaS startup legal needs.

 Andrew drafts and negotiates SaaS Subscription Agreements, Software Licensing Agreements, SaaS Vendor and Service Provider Contracts and Agreements, SaaS Contracts, Value-Added Re-Seller Agreements, End User Licensing Agreements (EULAs), Partner and Channel Agreements, Saas Licensing Agreements, Software License Agreements, technology transactions, technology agreements, technology license agreements, technology licensing agreements, technology contracts,  Software Contracts, Mobile App Agreements, Mobile App Development Contracts, Mobile Application Licensing Agreements, Internet Contracts, Software Application Development Agreements & Website Legal Agreements including terms of use, terms and conditions and terms of service agreements and privacy policy agreements. 

What To Be Aware of In Negotiating SaaS Agreements

If you are negotiating a SaaS Agreement there is certain language and provisions you need to be aware of.

The Agreement with Customers Needs To Be Clear and Unambiguous

While there are many issues that need to be addressed in an agreement between a SaaS vendor and its customers none is more important than the language that deals with protecting the vendor’s intellectual property. You need to make sure when you are contracting with customers that your SaaS company’s intellectual property is well defined in the agreement and that it is protected from theft, misuse and misappropriation. The last thing you need to have happen is a customer reverse engineering or stealing your intellectual property.

What are the differences between SaaS Software and Traditional Software

From 50,000 feet the biggest difference between a SaaS offering and traditional software is how you use it and how you access it. Traditional software is typically installed on a local network on a company’s servers. Once the vendor installs the software or gives the customer the ability to install the software on its network there is not much more for the vendor to do during the term of the agreement that the customer uses the software.  Typically, a software customer gets a license to use the software for as long as the agreement remains in effect with the software vendor.

Contrast typical local network installed software with a SaaS application or product. A SaaS product is cloud based and the customer remotely accesses the vendor’s software via the internet. With SaaS, no software is installed on the customer’s servers.

Another difference is Service. Traditional software typically has no service attached to it. The customer uses the software “as-is” with no changes being made to it. A SaaS product is all about the service. Typically, enterprise clients will want the vendor to customize the SaaS software on the front and back ends to make it fit or conform to the strategies of their companies. Enterprise clients will also demand robust Service Level Agreements (SLA).

Another difference between SaaS and traditional software is the price. With traditional software the customer usually pays a one time fee while a SaaS user will most likely pay a monthly fee to access the software. 

Pricing Plans

SaaS Vendors typically offer a SaaS service on a subscription basis with the annual plan as the most popular choice. SaaS vendors usually shy away from offering their services on a monthly basis.

The User’s Right To Access The Software

Don’t assume if you are the SaaS customer that the vendor is going to permit let’s say all 1,000 of your employees to access its SaaS Service. That’s why it’s a good idea before entering into an agreement that you ask the vendor how many users can use the Service in total and how many can sign in at any given time to use the service.

Service Level Agreements (SLA)

An integral part of the SaaS Agreement is the Service Level Agreement. If you are a vendor the larger the client especially enterprise level they will demand a robust service level agreement.

The crux of a Service Level Agreement is the vendor’s guarantee of a minimum performance standard in connection with the availability of the SaaS service. An SLA should guarantee at a minimum that the SaaS service will be up and running 99.5% of the time, taking into consideration the Service being down for routine maintenance and upgrades.You should also have the Agreement say how the performance standard will be calculated.

A SaaS Customer should have the right to export its own data?

Just because the SaaS agreements says that the customer owns all of its data don’t be so sure that that you can export or retrieve this data if the contract ends, is terminated or if the vendor goes out of business. It is critical that the agreement contains language setting forth that the customer can export its data from the SaaS provider’s servers. This language must also include how often and in what type of format you may access your data. You should agree on a data format for exporting in the contract as you don’t want any issues to arise when and if you need your data. The agreement should also state that the vendor will assist the customer in exporting its data. Sometimes the vendor might want to charge the customer a fee to export the data.

Who Owns the Data and Making Sure the Vendor Protects it?

If you are the customer you want to own all of your data that is being served, hosted and maintained by the SaaS vendor. You also want to make sure before you sign any agreement that the vendor has demonstrated that it has taken the proper measures and steps to protect your data which are well known acceptable industry standards.

What is the Duration of the Agreement and how do you terminate?

A SaaS Agreement must clearly state the term/length, how the Agreement gets renewed and how a party can terminate it. Some common language typically seen in SaaS agreements is that if either party does not terminate within 30 days or 60 days of the first term expiring then the agreement will automatically renew for the same time period as the original term.

If you are a customer and about to enter into a SaaS vendor agreement you want to have language that allows you to terminate the agreement if the SaaS application has a defect or stops working properly. If the vendor cannot fix the problem after a reasonable period of time you should have the right to terminate the agreement.

Who maintains the Software

You want to make sure if you’re the SaaS customer that the Agreement says that the vendor is responsible for maintaining the SaaS service which should including fixing bugs, defects and pushing updates.

Data Security Protection

One of the most important clauses in any SaaS agreement is the vendor’s promise to protect the customer’s data in its hosted environment. Data security and the protection of the customer’s data is critical to gaining the trust of the customer. If you are the customer you should ask the vendor what data security measures and protocols have been put in place to protect data?

You should also ask the vendor if their servers are located in multiple regions?

It is also important to find out what redundancies have been built into the vendor’s systems for firewalls and virus protection.

You need to also find out what emergency plan has been put in place by the vendor in the event of a data breach or cyber-attack and how is the customer notified.

The SaaS Agreement Must State That The Vendor Owns All of Its Intellectual Property

As a SaaS vendor you have worked very hard to build your product or application. The last thing you want to have happen is for the customer to steal your IP or try to reverse engineer your code. Or, you don’t want the customer taking the position that modifications it makes to your software belong to them. This is heightened by an enterprise customer using your software. Your application might enable customers to modify the front or back end and it’s not unusual for a customer to claim that they own all of the changes they make to your software.

Andrew also provides legal advice to US based SaaS, software and cloud vendors doing business in Europe and the need for these companies to draft and implement Data Processing Agreements and Privacy Policies to be in compliance with General Data Protection Regulation (GDPR) EU law. SaaS vendors about to embark on getting customers in Europe need to create and implement the proper safeguards and data security and privacy measures and protocols when processing personal information to protect the personal data of residents located in the EU.

Warranties

In most agreements with non-enterprise type customers the SaaS vendor offers very little in the way of Warranties. Some vendors offer no warranties and the agreement states that the SaaS service is being offered “as-is” with no warranties whatsoever.

Offering no warranties is not going to happen with an enterprise customer. Besides a Service Level Agreement a SaaS vendor could offer a no-virus warranty in the agreement with its customers.

Vendors can also offer a Warranty of Subscription Service Functionality which essentially means that the SaaS Service will function according to specifications or any documentation the vendor provides to the customer. Some agreements say, “the SaaS Service will achieve in all material respects the functionality described in the Documentation applicable to such Subscription or Application and that the functionality of the SaaS Service will not decrease materially during the term of the agreement.”

If it’s an enterprise customer they are going to demand language in the agreement that says if the SaaS Service does not function according to the documentation provided by the vendor then the customer can: (i) terminate the agreement unless the vendor can fix the problem within a specified amount of time; or (ii) receive a monetary credit until the problem is fixed. 

Limitations of Liability

In most agreements with non-enterprise type customers the customer typically signs the agreement with very few changes. Truth be told, most smaller customers don’t have the money or don’t want to expend funds to hire a lawyer to review a SaaS vendor agreement. So, if your company is not enterprise level you can expect that the SaaS vendor will accept almost no liability in its agreement. If something goes wrong and you lose data or your business suffers losses you might not be able to recover any damages from the vendor.

This is not the case when the vendor is dealing with an enterprise customer. This type of entity will require the SaaS vendor to assume a substantial amount of liability not only for damages the customer might suffer but also the vendor has to assume the liability for the actions of the third party cloud managed services provider that hosts and serves its SaaS application and also maintains and stores the customer’s data and sensitive information.

Indemnification

In most agreements with non-enterprise type customers the SaaS vendor offers very little in the way of Indemnification. Some vendors offer no indemnification for any damages or losses the customer might incur if there is a data breach or cyber-attack or the customer loses valuable data because something went wrong with the SaaS Service.

In SaaS enterprise agreements, at the very least the Vendor is going to have to indemnify the customer if it is determined by a court that the SaaS service infringes the copyrights, trade secrets, patents or trademarks of any third parties.

Enterprise SaaS customers can be expected to indemnify vendors for their losses as a result of the customer’s gross negligence or intentional misconduct, its use and misuse of the Subscription Service, if the Customer Data or content infringes a third party’s Intellectual Property Rights or if the Customer fails to pay all applicable taxes associated with customer’s use of the Subscription Service. 

Arbitration or Litigation and Choice of Venue

If you are a non-enterprise type company and negotiating a SaaS vendor agreement you need to pay close attention to whether all disputes will be resolved by way of arbitration or litigation. If you have to litigate a dispute with a SaaS vendor in court it could get expensive. Same goes for arbitration in that if you have to fly to arbitrate a claim made the vendor that could get quite costly.

The Vendor Should Be Granted a License To Use The Customer’s Content

If you’re the SaaS vendor you want to make sure that in the agreement the customer gives you a license to use the customer’s content in furtherance of providing the SaaS service. Some sample language would be:

“During the Term, Customer grants Vendor and its agents a non‐exclusive, worldwide, royalty‐free right to use, copy, modify, make available, display, and adapt Customer and User Data to provide the Subscription Service to Customer and its Users. Except as expressly provided herein, the Vendor shall not have any other rights with respect to the Customer or User Data and will not take any action inconsistent with the foregoing acknowledgment.”

Deliverables

What is a “Deliverable.” A deliverable means any copyrightable works, products, discoveries, developments, designs, work-product, deliverables, improvements, inventions, processes, techniques and know-how made, conceived, reduced to practice or learned by the Vendor that result from Professional Services, including in any Order Form and/or Statement of Work and provided to the Customer. In simple terms, a deliverable is any customized work that the Vendor does to its software for the customer.

A vendor must own all of the intellectual property rights associated with any deliverables provided to the customer. In the agreement there must be language stating that the, “Customer acknowledges and agrees that the Vendor owns all of the intellectual property rights in the Deliverables and Documentation including without limitation any pre-existing materials and Confidential Information supplied by Customer for incorporation into such Deliverables and the software used to provide the Deliverables.”

SaaS Customers Should Not Be Permitted To Export The Vendor’s Software From the United States

If you’re a SaaS vendor and concerned that customers might be exporting or removing your software from the United States you want language in your customer agreement that says the following:

“Customer may not remove or export from the United States or allow the export or re-export of the Subscription Service, Software or anything related thereto, or any direct product thereof in violation of any restrictions, laws or regulations of the United States Department of Commerce, the United States Department of Treasury Office of Foreign Assets Control, or any other United States or foreign agency or authority. As defined in FAR section 2.101, the Software and documentation are “commercial items” and according to DFAR section 252.227-7014(a)(1) and (5) are deemed to be “commercial computer software” and “commercial computer software documentation.” Consistent with DFAR section 227.7202 and FAR section 12.212, any use modification, reproduction, release, performance, display, or disclosure of such commercial software or commercial software documentation by the U.S. Government will be governed solely by the terms of this Agreement and will be prohibited except to the extent expressly permitted by the terms of this Agreement.”

Technology Transactions

Andrew guides clients through complex and strategic technology, SaaS, software and intellectual property transactions. Andrew navigates his clients through the maze of legal and commercial issues that occur in connection with the acquisition, development, adoption, monetization and commercialization of new, cutting edge technologies and IP assets in a wide range of innovative industry sectors.

Andrew drafts, reviews, structures and negotiates agreements and provides sophisticated, business advice on the legal and commercial issues that arise in novel technology, software, SaaS and IP-related transactions, software and information technology licensing and procurement, outsourcing arrangements and joint-venture, licensing and distribution deals. 

Andrew creates strategic and protective intellectual property agreements that can be enforced and defended, allowing his clients to protect, monetize, license and capitalize on their IP assets. Andrew is efficient and focused on achieving his clients’ objectives while performing legal work within an agreed-upon budget.

Andrew has experience in confidentiality and non-confidentiality agreements, employment and consulting contracts, joint ventures, venture capital and financings, intellectual property asset management and technology development agreements.

Andrew helps clients with the following Technology and IP-focused commercial agreements, Licensing and outsourcing agreements, Technology transfer agreements, Consulting and development agreements, Manufacturing, supply and distribution agreements, Sponsorship, marketing and promotional agreements, Entity formation documents, Technology Transfer Agreements, Technology Marketing Agreements, Technology License Agreements, Outsourcing Agreements, Intellectual Property Assignment Agreements and Employee Invention Assignment Agreements, E-Commerce Agreements, trade secret counseling, Settlement and co-existence agreements resolving intellectual property disputes, Non-disclosure arrangements, Data protection and privacy, Internet and website counseling and Social media/digital media. Software, Cloud & Software as-a-Service (SaaS) platforms, services, applications and solutions, Artificial Intelligence, Blockchain, FinTech, IoT, Connected Devices, Big Data and Health Tech.

Whether the client is a start-up business ready to secure proprietary rights on which to build a company or a major corporation managing a significant portfolio of technology, Andrew has the experience to handle any type of IP transaction.

Having the correct licensing and or agreement structure and supporting contractual agreements in place for your SaaS product is, the most critical aspect to ensuring the enterprise value you are creating for your software-based business and that it remains within your company. All too often, ill-advised companies have found themselves with services, licensing and SaaS agreements that require them to support outdated technologies without commensurate income, or, worse, forfeit revenue opportunities and lose control of valuable IP to a customer or a third-party.

Andrew has a deep understanding of how licensing can both positively and negatively impact the partnering potential, valuation and ultimate exit of software companies in a wide range of industries. Andrew routinely assists clients in the creation, acquisition, protection and monetization of intellectual property assets, through licensing and acquisition. Andrew cost effectively develops a licensing plan to maximize your revenues, create a recurring sales model, reduce risks, and quicken your ability to contract with potential customers and partners while protecting the future value of your company and valuable IP assets.

Andrew’s technology law experience includes:

INTELLECTUAL PROPERTY & LICENSING

· Development Licenses

· Source Code Licenses

· Enterprise License 

· SaaS/PaaS

· Software and Mobile App End User Licensing (EULA)

· Escrow Agreement & Release Terms

· Service Level Agreements

· Maintenance/Support/ Upgrade Agreements 

· Data and Storage

· IP Indemnification

TECHNOLOGY DEVELOPMENT AND COMMERCIALIZATION

· Development Agreements

· Protection of Software & Developments

· Assignment of Developments

· Contract Structures for Scalable Business Models

· Intellectual Property Protection

· Ownership of Developments Frameworks

· Nondisclosure/Non-use Frameworks

· Source Code Handling Protocols

· Data Protection

INTELLECTUAL PROPERTY PURCHASES, SALES & TRANSFERS

· Software, SaaS, eCommerce

· Trade Secret/Proprietary Information

· Technology

· Intellectual Property Due Diligence

STRATEGIC & TECHNOLOGY PARTNERSHIPS

· Reseller VAR Agreements

· OEM, Distribution and Supply 

· Joint Ventures

· IP Development Agreements

· Outsourcing Agreements

· IT Managed Services Agreements

· Channel Partner Agreements

ECOMMERCE

· Web Development Agreements

· ASP & Hosting Agreements

· Website Terms & Conditions, Terms of Service and Terms of Use Policy Agreements

· Privacy Policy Agreements

· Online Advertising and Marketing

Andrew helps his clients understand and appropriately prioritize their software protection and licensing efforts. Andrew been instrumental in successful licensing monetization solutions for both early-stage and mature companies. Taking the appropriate steps now could mean the difference between developing IP enterprise value for your business versus the possibility of compromising your valuable assets and increasing company exposure. 

Please reach out to Andrew to get a free price quote at 201-446-9643.

andrew@saas-lawyer.com

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