What is SaaS?

Software as a Service (SaaS) is a delivery model for software where applications are hosted remotely by a service provider and made available to customers over the Internet. SaaS allows users to access software via a subscription rather than purchasing and installing it on individual devices. SaaS applications are typically accessed through a web browser, with the provider managing the software’s security, performance, and maintenance.

What are the key provisions in a SaaS agreement?

SaaS agreements vary widely in length and complexity. A well-drafted SaaS agreement protects the service provider, the client, and any data processed via the platform. Typically, the agreement will contain:

1. A definition of the software and any related services, where the exact nature of the software and the services provided are detailed.
2. The license, which outlines the terms under which the client can use the software. This might include the number of users, the scope of use, data storage restrictions, and any other restrictions.
3. Terms related to functionality, availability, and any software limitations.
4. Payment terms, detailing the subscription fees, payment schedules, and any conditions for fee adjustments.
5. Intellectual property and data ownership terms that specifies the ownership of the software, anything the software creates (such as a report), data ownership, etc.
6. Data security terms that must specify the measures taken to protect client data, including data encryption, security protocols, data breach procedures, and compliance with relevant laws. The terms should clearly establish the differing types of data and related limitations, for example, who can access the various types of data, any limitations on the use of data, etc.
7. Confidentiality terms that require each party to keep the other party’s confidential information confidential.
8. Limited warranties and disclaimers, where the service provider warrants certain aspects of the software (like functionality, or that it is free of viruses, or that the service provider owns the software), and where the service provider disclaims other warranties (for example, disclaiming that the software will be compatible with other non-service-provider software).
9. Indemnification is the obligation to compensate for harm or loss or provide security against legal liability for one’s actions. The clause compensates a party for harm or loss arising from the other party’s actions or failure to act. For example, if someone sued the service provider for something the client input into the software, an infringing picture for example, the client (whose actions caused the lawsuit) would have to indemnify the service provider.
10. Limitations of liability clauses limit the type of damages and amount of damages the parties can be responsible for.
11. Termination provisions explaining the conditions under which the parties may terminate the agreement and the consequences.
12. A purchasing mechanism such as a purchase order.
13. Service levels and support that define performance standards expected from the software and the support provided by the vendor, including response and maintenance times. This is often found in a separate schedule.
14. If the service provider is processing personal, sensitive, or confidential information, an entire exhibit (data processing addendum) that outlines the parties’ responsibilities with respect to such data.

While SaaS agreements are often heavily negotiated and require careful legal and technical consideration, the above provisions are key.

If you need SaaS help, our firm has closed billions of dollars in SaaS agreements. For more information, please contact one of the experienced intellectual property attorneys at Worden Thane P.C.