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Five Things To Consider When Drafting SaaS Agreements

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31.Jan, 2018 0 SaaS Law

SaaS agreements lawyer

We get it. For most folks, discussions about terms of service, subscription, or licensing agreements don’t exactly qualify as “engaging.” But for SaaS based businesses, they’re a foundational building block that can make or break a company.

Now, you may be thinking: Nobody reads agreements before clicking ‘I agree’; blind acceptance of website, app, and SaaS terms is so ubiquitous even South Park weighed in on the issue! And sure, there is some truth to that; regardless, if you own a SaaS-based business these agreements are of paramount importance. Without proper terms in place, businesses can quickly find themselves on the losing end of a legal conflict, saddled with liability — not to mention substantial financial penalties.

With that in mind, let’s take a few minutes to go over five basic elements that should be included in any SaaS agreement. Please note, however, that this is an overview. Structural and jurisdictional details matter when drafting terms, which is why it’s always best to have a SaaS lawyer draft documents tailor-made for your business.

Five Points To Include In A SaaS Agreement

Overall, the ideal SaaS contract defines services, allows for a certain degree of flexibility, and limits corporate liability. Additionally, certain topics must be covered. Let’s review.

SaaS Contract Fundamentals: Data Ownership

Who owns the data — the SaaS provider or the end-user? Does the SaaS provider have a right to access that data for any reason, including profit-bearing, behavioral advertising opportunities? What about third-party vendors? Can they access any information? What IF a third-party vendor gets a hold of customer information and sells it; who can be held responsible for the vendor’s wrongdoing?

All of these questions should be addressed in a properly drafted SAAS agreement. Skilled lawyers can also pinpoint potential issues tied to your niche, jurisdiction, and service offerings, and then build custom protections into your documents.

SaaS Contract Fundamentals: Permitted Use

Most software as a service programs use a subscription or licensing revenue model. If permitted use parameters aren’t clearly defined in the agreement, then you stand to lose a whole lot of money. Be warned: Free SaaS contracts found online typically do not include strong use clauses, and by using them, you’re likely leaving profits on the table.

SaaS Contract Fundamentals: Code / Use Modifications

As a vendor, do you want someone else messing with your software’s functionality? If your client requires code customization, must they use your team or can they bring in outside programmers to alter your software? All of these possibilities must be addressed in SaaS agreements.

Additionally, it’s wise to include language protecting your intellectual property, to deter hackers or competitors  from knocking off your software, and to give you a legal leg to stand on in the event of an IP dispute.

SaaS Contract Fundamentals: Storage, Privacy, and Safety Concerns

Something that differentiates SaaS platforms from other localized options is that SaaS programs typically store information in “the cloud.” This must be clearly delineated in user agreements. From a public relations and legal perspective, it’s important to provide clients with information  about any data security measures you’ve implemented. Virus protection matters and statutory requirements imposed by certain laws like HIPPA, the GDPR, and COPPA (to name just a few), should also be addressed.

SaaS Contract Fundamentals: Liability Disclaimer

Contracts almost always include liability disclaimers — a.k.a., verbiage absolving businesses of blame in certain situations — which reduces the possibility of landing in court and helps to minimize damages.

This is another area where using free contracts, found online, can do you a huge disservice, because many of those templates don’t account for liability shifts, which may dump unreasonable fault on your lap.

Connect With A SaaS Agreement Attorney

Do you have questions about your SAAS agreement? Do you need to have a customized agreement drafted?

Our team has helped countless businesses and individuals create comprehensive, highly customized software as service agreements. We work with individual entrepreneurs and Fortune 500 companies alike. Give us a ring, or shoot us a message; let’s talk about how we can help you protect your business today!

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