Tag: GDPR

SaaS Agreements – Terms and Conditions – Data Processing Agreement

UK SaaS suppliers currently have limited obligations to SaaS customers when processing personal data as part of their SaaS services. Under the General Data Protection Regulation (GDPR) many new data processing obligations are imposed on SaaS suppliers. In particular, the obligation for SaaS suppliers to enter into a written data processing agreement with SaaS customers and subcontractors.

GDPR applies to UK SaaS Suppliers despite Brexit

Regardless of when and how Brexit takes place, the GDPR will apply to SaaS suppliers located within the UK if:

  • They offer goods or services to SaaS customers located within the EU (i.e. in any of the remaining 27 EU Member States); or
  • They monitor the behaviour of EU data subjects;

Even though UK SaaS suppliers will no longer be located within the EU themselves after a Brexit.

GDPR applies to non-EU SaaS Suppliers

The GDPR automatically applies to all SaaS suppliers located outside of the EU i.e. in the USA, if:

  • They offer goods or services to SaaS customers located within the EU; or
  • They monitor the behaviour of EU data subjects;

Even though the SaaS supplier is not located within the EU.

Written Data Processing Agreement

Under the GDPR SaaS suppliers and SaaS customers must include detailed data processing obligations in a written data processing agreement. This can form part of the SaaS Agreement or be a separate schedule or agreement.

SaaS Suppliers should be aware that they need to enter into written data processing agreements not just with all SaaS customers, but also with all entities or persons who process personal data on their behalf, such as:

  • All subcontractors i.e. data centres, penetration testing providers;
  • All subsidiaries i.e. providing customer support, software maintenance and support.

Fines for Breach

Data subjects can claim damages directly from SaaS suppliers who breach:

  • Any obligations under the GDPR; or
  • Any lawful instructions of a SaaS customer.

In addition data protection authorities can fine SaaS suppliers or SaaS customers up to 4% of annual global turnover or 20m Euros (whichever is higher) for breaches of the GDPR.

Preparing for Change

To ensure compliance with the new obligations placed on SaaS suppliers (data processors) under the GDPR, SaaS suppliers should taking the following steps:

  • Review existing data protection policies and procedures for compliance with the GDPR;
  • Adapt existing privacy, security and data breach policies to comply with the new rules before the 25th of May 2018;
  • Create a written data processing agreement which reflects the above polices and which is compliant with the GDPR;
  • Review existing SaaS agreements to check limitations on liabilities and indemnities for data protection breaches;
  • Identify any subcontractors and subsidiaries who process personal data;
  • Audit compliance of subcontractors and subsidiaries with new policies and procedures; and
  • Add written data processing agreements to all existing agreements with SaaS customers, subcontractors and subsidiaries.

Help

Irene Bodle is an IT lawyer specialising in SaaS, with over 15 years experience in dealing with SaaS, cloud computing and IT law issues. If you require assistance with any SaaS agreements, cloud computing concerns or any other IT legal issues please contact me at:

irene.bodle@bodlelaw.com
www.bodlelaw.com

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SaaS Agreements – Data Protection – New obligations for SaaS Customers

From the 25th of May 2018 the EU General Data Protection Regulation (GDPR) will come into force and change UK data protection law. The GDPR will place further more onerous obligations on SaaS customers (data controllers) in relation to all data processing. SaaS customers need to amend the terms of their existing SaaS agreements and privacy policies and implement the changes into internal policies and procedures in order to comply with the upcoming changes in UK data protection law.

Data Subject Rights

Data subjects will have more extensive rights to access, rectify and object to the storage and processing of their personal data. New rights to delete, restrict processing, rights in relation to profiling and the right to data portability will be introduced. SaaS customers will also be required to provide a lot more information to data subjects about processing activities than in the past i.e. in their privacy policies.

Fines

Data subjects will be able to take direct action against SaaS customers and claim damages resulting from breaches by SaaS customers of their obligations under the GDPR.

In addition data protection authorities will be able to fine SaaS customers up to 4% of annual global turnover for some breaches.

Preparing for the Changes

SaaS customers should review the terms of their existing SaaS agreements and privacy policies to ensure that they comply with the new rules before the GDPR comes into force.

SaaS customers should ensure that existing and future agreements with any subcontractors (data processors) impose the same data processing obligations on further subcontractors (sub-processors), as the SaaS customer could be liable to the data subject for any breaches of the new rules caused by any subcontractors.

SaaS customers should ensure their insurance cover and the terms of their SaaS agreement with all SaaS suppliers include indemnities and limitations on liability relating to personal data that are sufficient to cover the higher level of fines and claims made directly by data subjects.

Help

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 other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Data Protection – New Obligations for SaaS Suppliers

From the 25th of May 2018 the EU General Data Protection Regulation (GDPR) will come into force and change existing UK data protection laws. The GDPR will place direct obligations on SaaS suppliers (data processors) in relation to data processing activities. In addition SaaS customers (data controllers) and their clients (data subjects) will be able to enforce breaches of the new rules directly against SaaS suppliers. SaaS suppliers need to amend the terms of their existing SaaS agreements in order to comply with the upcoming changes in data protection law.

Written Data Processing Terms

SaaS suppliers will need to include the following minimum terms in a written data processing agreement with all SaaS customers:

  • The duration, nature and purpose of the data processing;
  • The types of data being processed;
  • The obligations and rights of the SaaS customer.

The written data processing terms must state that:

  • Personal data will only processed in accordance with documented instructions from the SaaS customer;
  • The SaaS supplier will assist the SaaS customer in complying with its own obligations as a data controller;
  • The SaaS supplier is obliged to inform the SaaS customer if it believes an instruction to give personal data to the SaaS customer breaches the GDPR or any other EU or Member State law.

Record Keeping

Unless one of the exceptions applies, the main one being that the SaaS supplier has less than 250 employees, SaaS suppliers must keep records of all categories of processing activities that they carry out.

The following details must be recorded:

  • Information about the SaaS customer and any other data processors;
  • Names of relevant data protection officers (DPOs);
  • The categories of data processing carried out;
  • Any transfers to third countries; and
  • The general technical and organisational security measures used by the SaaS supplier.

If requested by a supervisory authority, SaaS suppliers must provide such records.

Subcontracting

SaaS suppliers will need to obtain prior written consent to the subcontracting of any data processing activities. Although SaaS suppliers can include a general consent to subcontracting in their SaaS agreement, SaaS suppliers will still be obliged to inform SaaS customers before adding or replacing any sub-processors in order to give SaaS customers time to object to a change.

Breach Notification

SaaS suppliers will be required to notify SaaS customers of any breach of their obligations, without undue delay, after becoming aware of the breach.

Data Protection Officers

SaaS suppliers will be obliged to appoint a data protection officer (DPO) in some specific circumstances: for example where the SaaS supplier is processing special data (sensitive data) or if required to do so under a Member State law.

The contact details of any DPO appointed must be published and communicated to the applicable supervisory authority.

Deletion or Return of Data

SaaS suppliers must allow SaaS customers to choose between deletion or return of all personal data on termination or expiry of the SaaS agreement (unless applicable mandatory law requires storage). SaaS customers will be entitled to check compliance with this requirement.

Transfers outside the EEA

Although SaaS suppliers are required to follow a SaaS customer’s instructions with regard to data processing, SaaS suppliers may only transfer personal data outside of the EEA if the SaaS supplier or SaaS customer has provided appropriate safeguards. For example by the use of EU model clauses or Binding Corporate Rules (BCRs).

Fines and Compensation

Data subjects will be able to take action against SaaS suppliers directly and claim damages for the SaaS supplier’s breach of:

  • Any obligations under the GDPR; or
  • Any lawful instructions from the SaaS customer.

SaaS suppliers will be potentially liable to both the SaaS customer and data subjects for the same breach.

In addition data protection authorities will be able to fine SaaS suppliers up to 4% of annual global turnover for some breaches.

Preparing for Changes

SaaS suppliers need to review the terms of their existing SaaS agreements and their internal procedures to ensure that they comply with the new rules on the use of subcontractors, data security requirements, appointment of DPOs and having in place appropriate organisational and technical measures.

SaaS suppliers should ensure that existing and future agreements with their sub-processors impose the same data processing obligations on all subcontractors, as the SaaS supplier will be liable to the SaaS customer and data subjects for any breaches of the new rules caused by any subcontractors.

SaaS suppliers should ensure that their insurance cover and SaaS agreement indemnities and limitations on liability relating to use or personal data are sufficient to cover the higher levels of fines and direct claims for damages by data subjects.

Help

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 other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Data Protection – Cyber Insurance

Currently most SaaS suppliers and SaaS customers do not take out specific cyber insurance and rely upon the provisions of a general insurance policy to cover liabilities in the event of a claim for a cyber incident or a data breach. This is partly due to the fact that few insurers offer adequate cyber insurance policies and SaaS customers and SaaS suppliers often fail to consider the need for a specialist policy of insurance to ensure that they are covered in the event of a claim being denied under a general insurance policy.

General Insurance

Many insurers may not have anticipated providing cover against cyber risks under their general insurance policies and it is likely that disputes will arise as to whether or not a cyber claim is covered when a SaaS supplier or SaaS customer makes a claim. Taking out cyber insurance could reduce this risk.

Professional Indemnity Insurance

Commonly PI insurance covers directors insurance, property risk and some limited cyber cover. However as cyber risks are becoming more common for SaaS suppliers and SaaS customers there is an increasing need to specifically protect against cyber risks i.e. hacking, DNS attacks, phishing etc.

Future Need for Cyber Insurance

Cyber insurance is often seen as too expensive by SaaS suppliers and SaaS customers and they actively chose not to purchase such additional insurance cover.

From the 25th of May 2018, when the new Data Protection Regulation (GDPR) comes into effect there will be a substantial increase in the risk of a cyber claim for a data breach. It is important to be aware that the GDPR applies to all SaaS customers and SaaS suppliers in the EU and any non-EU located SaaS customers and SaaS suppliers offering goods or services in the EU or who monitor the behaviour of EU data subjects. Accordingly the GDPR will apply to UK SaaS customers and SaaS suppliers regardless of if, and when, there is a “Brexit”.

GDPR Fines

The GDPR imposes more onerous obligations on both data processors and data controllers. In particular, the fines which can be applied by any EU data protection authority for breach of the GDPR will increase substantially. Fines of up to €20 million or 4% of global annual turnover for the preceding financial year can be imposed.

Summary

SaaS suppliers and SaaS customers need to consider now the need to increase existing insurance cover to encompass the above changes to data protection law, and when doing so, it could be prudent to consider taking out specialist cyber insurance.

Help

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 other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – Data Protection – General Data Protection Regulation (GDPR)

The General Data Protection Regulation (“GDPR”) will replace the existing EU Data Protection Directive and harmonise European data protection law from the 25th of May 2018. In the UK the GDPR will replace the Data Protection Act 1998 from the 25th of May 2018. This will have a significant effect on both SaaS suppliers and SaaS customers who will need to comply with the terms of the GDPR.

Harmonisation

SaaS suppliers and SaaS customers should be aware that the GDPR will not fully harmonise data protection law throughout Europe, as each EU country may introduce their own requirements in certain instances. However, SaaS suppliers and SaaS customers will need to start making organisational changes now to their data processing activities in order to comply with the new rules on consent, audit rights, data exports, increased administrative requirements and the new obligations of data processors.

Below is a summary of the main provisions of the GDPR that SaaS suppliers and customers need to be aware of.

New Data Processor Obligations

The GDPR applies to data controllers (SaaS customers) and data processors (SaaS suppliers) and in particular SaaS suppliers should be aware that some of the GDPR applies directly to data processors who will be subject to compliance obligations and sanctions for non-compliance.

Consent

SaaS suppliers and SaaS customers relying on consent to process personal data will need to show that the consent is:

  • freely given;
  • specific and informed; and
  • an “unambiguous indication” of a data subject’s wishes and expressed either by a statement or a clear affirmative action (i.e. ticking a consent box when visiting a website).

Consent must be purpose limited i.e. related to explicitly specified purposes.

The default age for giving valid consent and using online services is 16, however each EU country will be able to reduce this to 13.

Penalties

The maximum penalty for a breach of the GDPR will be substantially higher than under current legislation. Fines can be imposed on SaaS suppliers or SaaS customers. Fines of up to 4% of annual global turnover or up to 20m Euros (whichever is higher) can be applied.

Applicable to Non-EU Entities

The GDPR will apply not just to EU SaaS customers and suppliers but also to non-EU SaaS customers and suppliers who:

  • offer goods or services to data subjects in the EU; or
  • monitor the behaviour of EU citizens to the extent that the behaviour takes place in the EU.

Enforcement – One Stop Shop

SaaS suppliers and SaaS customers will be regulated by a single regulator in the place of their main establishment, which shall be their main administrative location in the EU. Data subjects will be able to make complaints to regulators in their own EU country.

Data Protection Officer

An independent data protection officer (“DPO”) must be appointed where an organisation’s core business involves processing personal data involving regular and systematic monitoring of data subjects or large amounts of sensitive personal data. Each EU country may enact national provisions imposing further requirements regarding the appointment of DPOs. This will be particularly relevant in Germany where this is already a legal requirement.

Notification

There is no requirement for a SaaS supplier or SaaS customer to notify local data protection authorities of any data processing activities but there is a requirement to keep records of data processing activities (subject to limited exceptions).

Breach Reporting

SaaS customers and SaaS suppliers must report breaches to the relevant local regulator without undue delay and, where feasible, within 72 hours of becoming aware of the breach. Data subjects must be informed of breaches without undue delay where the breach is likely to result in a high risk to the data subject’s rights and freedoms unless:

  • the data has been rendered unintelligible to any third party (for example by encryption);
  • the data controller has taken steps to ensure the high risk is unlikely to materialise; or
  • it would involve disproportionate effort to inform data subjects individually, in which case a public announcement can be made.

Data processors (SaaS suppliers) are required to inform data controllers (SaaS customers) of any breach without undue delay.

Impact Assessments

SaaS customers will be required to carry out data protection impact assessments (“DPIAs”) if their proposed activities are likely to result in a high risk for the rights and freedoms of individuals, in particular, through the use of new technologies and in cases of profiling.

Data Subject Rights

The following rights shall be granted to data subjects:

  • data portability;
  • the right to be forgotten;
  • the right to prevent profiling;
  • the right to object to processing;
  • the right to rectification and erasure.
  • subject access requests (“SARs”).

SARs must be responded to by the data controller (SaaS customer) without undue delay and, at the latest, within one month of receipt of the request. The data controller only has the right to charge a reasonable fee to cover administrative costs where the requests are “manifestly unfounded or excessive”.

Preparing for Change

Although the GDPR will not come into force until the 25th of May 2018, it is essential that SaaS customers and SaaS suppliers start to prepare for the changes now. For example, by appointing a data protection officer (where appropriate), devising a documentation system for recording data processing activities, reviewing how consent is obtained from data subjects, adding written data processing agreements to existing SaaS agreements and future SaaS agreements with relevant customers and amending existing privacy policies to comply with the GDPR rules.

Help

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 other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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SaaS Agreements – FAQs – Data Controller

It is important for a SaaS supplier to understand the legal obligations imposed upon a data controller when negotiating a SaaS agreement and data processing agreement (“DPA“) as the duties of a data controller are not the same as the duties of a data processor. In a SaaS relationship the SaaS customer is always the data controller and the SaaS supplier is always the data processor of the SaaS customer.

Who is a data controller

A data controller is defined in Article 4(7) of the GDPR as follows:

“the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data; where the purposes and means of such processing are determined by Union or Member State law, the controller or the specific criteria for its nomination may be provided for by Union or Member State law.”

The data controller always decides and controls the purposes for which personal data is to be collected and processed. A data processor acts on behalf of, and only on the instructions of the data controller.

Controller obligations under the GDPR

The GDPR sets out the following 7 data protection principles that a data controller must comply with.

  • Lawfulness, fairness and transparency;
  • Purpose limitation;
  • Data minimisation;
  • Accuracy;
  • Storage limitation;
  • Integrity and confidentiality (security);
  • Accountability.

Need for a Data Processing Agreement

Since the GDPR and the UK Data Protection Act 2018 came into force on the 25th of May 2018 the obligations of data controllers have become more onerous. It is now mandatory for the data processor and the data controller to enter into a written agreement – DPA, setting out each party’s obligations. The DPA must include specific minimum terms.

Liability for Personal Data

A SaaS customer will be liable to its clients/end users (whose personal data it is collecting and processing) for any breaches of the GDPR. As the SaaS supplier will be carrying out the processing on behalf of the SaaS customer, the terms of the SaaS agreement should include adequate clauses to protect the SaaS supplier and the SaaS customer against data protection breaches, bearing in mind the differing responsibilities of the data controller and the data processor.

Registration under the Data Protection Act

The UK Data Protection Act 2018 requires every data controller who is processing personal data to register with the UK Information Commissioners Office (“ICO“), unless an exemption applies. It is not just a SaaS supplier who must register. A SaaS customer must also register where it acts as a data controller, in addition to being a data processor. Failure to register is a criminal offence.

There is an annual fee for registration. Current fees are determined by the ICO and a self assessment tool on the ICO website can be used to help you determine whether or not you are a data controller who needs to pay the fee.

Subject Access Request

Data subjects (clients of the SaaS customer) have the right to make a subject access request to the data controller.

Information must be provided within strict time limits and at no cost to the data subject. The request is made to the data controller (the SaaS customer) and the SaaS customer is obliged under the GDPR to respond. However, it is often the SaaS supplier who actually needs to provide the information stored on its servers either to the SaaS customer or their clients, on the SaaS customer’s behalf.

General

When considering SaaS customer requests to change clauses relating to liability, indemnities, data and data protection in a SaaS agreement or DPA it is essential that a SaaS supplier understands the statutory obligations of the data controller and data processor and the implications of changing any terms of the SaaS agreement or DPA.

Help

Irene Bodle is an IT lawyer specialising in SaaS agreements and cloud computing with over 15 years experience in the IT sector. If you require assistance with any SaaS or cloud computing contracts or any other IT legal issues contact me:

irene.bodle@bodlelaw.com
www.bodlelaw.com

To register for my newsletter click here

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