The following legal issues should be included in any SaaS agreement, whether you are a SaaS supplier or a SaaS customer.
Access to the software should be limited to the term of the SaaS agreement. Once the SaaS agreement expires or terminates the software licence should automatically terminate.
If the SaaS customer is a global entity, specify which companies or entities may access the SaaS software, in which territories and the number of users. Identify the specific purposes for which the software may be accessed. Name any third parties who will be permitted access to the SaaS software i.e. outsourcing providers or clients of the SaaS customer.
Intellectual Property Rights – IPR
The SaaS supplier should retain ownership of all IPR in the software and services it provides. The SaaS customer should retain ownership of all IPR in its systems and data. The SaaS agreement should specifically state that the source code remains owned by the SaaS supplier. The SaaS customer should grant the SaaS supplier the right to use its IPRs for the term of the SaaS agreement i.e. display its logos and copyrighted information.
Applicable Law, Jurisdiction & Language
State which law applies to the SaaS agreement and which courts will deal with any disputes arising from it. In international SaaS agreements make sure that you specify in which language the dispute will be dealt with, and if the SaaS agreement is in more than one language, which language prevails if there is a discrepancy between the two versions.
Return of Data
At the end of the SssS agreement the SaaS customer’s data should be returned. The format in which the data is to be returned and payment for this service should be agreed in advance. Additionally the parties can agree that the Saas supplier will provide assistance in transferring SaaS customer data to a new supplier – in return for payment for this service.
The SaaS supplier is the data processor and the SaaS customer is the data controller. Under UK data protection law different rules apply to the data controller and the data processor. The SaaS supplier is obliged to process data in accordance with the SaaS customer’s instructions and should protect itself against claims from third parties that such processing was illegal. Likewise, the SaaS customer will also need to protect itself against claims from third parties caused by the SaaS supplier not processing data in accordance with its instructions or the terms of the SaaS agreement.
Service Level Agreement (SLA)
This sets out the hosting, support and maintenance services being provided to the SaaS customer by the SaaS supplier. The SLA should specify where the data centre is located, who is operating it, what security, backup and disaster recovery procedures are in place. Support hours and support services for dealing with hosting problems and software problems should be identified and documented and the procedure for dealing with with upgrades and maintenance to the software should be specified. The particular details will depend on the amount being paid for the hosting, support and maintenance and the purpose for which the software is being used.
Specify who the owner of the source code is, as it may not be the supplier i.e. the holding company of the supplier. State whether or not the customer can enter into an agreement with a third party to hold the source code in escrow. Include the name of the escrow agent and who will be responsible for the costs of the escrow agreement and any annual renewals.
Irene Bodle is an IT lawyer specialising in SaaS, with over 14 years experience dealing with SaaS, cloud computing matters and IT law issues. If you require assistance with any SaaS agreements, cloud computing matters or any other IT legal issues please contact me at:
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