What are some SaaS legal issues to be aware of in negotiating SaaS Agreements? Call SaaS attorney Andrew S. Bosin for a free consultation at 201-446-9643.
Limitation of Liability
If you are subscribing to use a SaaS application you need to hire the right SaaS Law Firm to make sure the contract is properly negotiated and the SaaS Vendor is going to accept liability for things such as data hacks, data breaches or the unavailability of the SaaS application which if it goes offline could cause your business to suffer damages.
Price vs. Cost
With traditional network enterprise software, your IT department can estimate what it is going to cost to purchase the software, install it on your servers and how much each month it will cost to maintain the software. With SaaS software, because there are so many moving pieces, i.e., number of users, amount of data stored and guaranteed performance minimums, it is best to get in writing from the SaaS provider what your monthly costs are going to be to use the services.
While traditional software typically charges a one-time fee, the subscriber of SaaS software will most likely pay a monthly fee to access the software. And, unlike traditional software, the user of a SaaS application does not own a copy of the software or have a license to use it.
As a SaaS subscriber, you should be able to estimate monthly costs pretty easily. You need to figure out how many users will be able to access the application each month and what that cost will be. And, is it a set number of defined users that can access the services such as 10 employees with their own log in or can 40 random employees, no matter who, have access to the services at any given time?
You also need to find out how much of your company’s data will be hosted, served and stored on the SaaS provider’s servers. You want to also see if you will be charged an overage fee and how much.
Service Level Agreements
An important part of the SaaS Agreement is holding accountable your SaaS vendor to a minimum performance standard which should be written in the SaaS agreement. A good SaaS Contracts Attorney will be able to provide guidance and counsel on this issue.
An example is that the service should have an uptime percentage of 99.5%, meaning the service is guaranteed to be up, available and running live 99.5% of the time. This performance standard is referred to as a Service Level Agreement (SLA). You also need to have the Agreement state how the performance standard will be calculated.
Access To Your Company’s Data
There is some negative to using a SaaS application which is related to control of and access to your data. If the SaaS application is no longer available for whatever reason because the subscriber fails to pay the bill or the SaaS vendor goes out of business the customer will likely no longer have access to the services and will most certainly lose all of its data.
If the SaaS provider files for bankruptcy there is a way around the lack of protection and uncertainty in both the Bankruptcy Code and relevant case law. The agreement between the subscriber and SaaS vendor can still be drafted in such a way that the subscriber still maintains the ability to access the SaaS application provided otherwise by the SaaS vendor.
This is done by drafting software licenses and/or SaaS agreements as licenses to intellectual property to invoke section 365(n) of the Bankruptcy Code. You should be careful to draft the SaaS agreement as a present license grant not contingent on some event happening or a future grant. A present license grant would allow the subscriber to use and access the licensed software and compel the SaaS vendor to provide the software source code, object code, and/or related documentation in the event that the SaaS vendor attempts to reject the SaaS agreement under 365(a).
Andrew S. Bosin is a SaaS Attorney located in New Jersey who represents SaaS startups and companies across the US.
This blog post is not offered as legal advice. If you need SaaS legal advice please call Andrew at 201-446-9643.
Email: andrewbosin@gmail.com.