SaaS suppliers must protect themselves in their SaaS agreement against a third party claiming compensation for breaches of their rights as a result of customers uploading illegal content onto the supplier hosted website.
Service Providers and ISPs
SaaS suppliers are service providers not internet service providers (ISP)s. SaaS suppliers publish content on the Internet on the websites they are hosting for customers. ISPs simply transmit information on behalf of customers i.e. telecommunications companies like AOL and BT and are acting as “mere conduits“.
SaaS suppliers do not check content prior to it being uploaded by customers onto the hosted websites and once uploaded it is not usually monitored by the SaaS supplier. The following legal problems can arise when a third party claims that the content on the website breaches their rights.
Breaches of Intellectual Property Rights (IPR)
The SaaS supplier will be liable as the publisher of the website if any content on the website breaches the copyright or trademark of a third party. Common examples arise when customers:
- upload content, pictures, colour schemes and fonts copied from other websites, books, newspapers
- use third party software applications on the website, without authorisation
- display trademarks or logos of clients, competitors or third parties on the website, without the owner’s permission
Similarly, the SaaS supplier as publisher is liable for any defamatory comments made on the website. Such comments could be via a hyperlink or information published on the website by the customer, its clients or third parties. For example sales text may include negative and untrue comments about the poor services of a named competitor.
Breaches of Other Laws
Many SaaS agreements cover e-recruitment or HCM (human capital management). The content on such websites must comply with mandatory local employment law and non-discrimination laws. This is particularly important in the text of a job description for applicants. For example an advertisement for a white, British, female, lawyer between the ages of 25 and 35 would be illegal.
Liability for Illegal Content
The SaaS supplier will be liable for any of the above examples of illegal content being published on a customer website, unless Regulation 19 of the E-Commerce Regulations 2002 applies. This sates that the SaaS supplier is not liable for illegal content
- if the SaaS supplier does not have actual knowledge of the illegal information, or
- upon obtaining knowledge or awareness it acts expeditiously to remove or disable access to the information.
It is therefore essential that the above liabilities are excluded in your SaaS agreement and that the SaaS supplier ensures that it has the contractual right in the SaaS agreement to apply the Regulation 19 exception.
Irene Bodle is an IT lawyer specialising in SaaS agreements with over 10 years experience in the IT sector. If you require assistance with any SaaS, ASP, software on demand contracts or any IT legal issues contact me:
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