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Software as a Service Agreement

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Software as a Service Agreements

What should be in a SaaS Agreement?

Broadly a Saas Agreement should have clauses that deal with the following:

  1. the software – a clear licence to use the software and what you can use the software for
  2. what you can not use the software for
  3. the licence fee amount and when it is payable
  4. how the agreement can be terminated
  5. what support, if any, is included in your plan and details of that support
  6. limitation of liability – as the owner of the software you want to limit your legal exposure to the people that use your software
  7. IP indemnity – generally the creator of the software would offer an indemnity to users of the software protecting the users from any sort of IP infringement (if the software is found to infringe a third party’s software).
  8. Other clauses.

As you can see there are plenty of things to think about when you put in place a software as a service licence agreement. We know because we have drafted and reviewed plenty of them.

If you need yours drafted call the contract experts – the Contract Company

What clauses should be in a Software as a Service Licence Agreement?

Some of the clauses that should be in a software as a service licence agreement are:

  • The duration of the licence period – Because you’re not selling off the IP forever, but rather just giving someone the right to use your IP, the licence agreement needs to state how long the licence period is for. Some licence agreements are perpetual, which means that the licence term is ongoing unless something happens to end the agreement. Having a licence for a limited period allows the licence terms to be re-negotiated at the end of the term, which can be good for the licensor.
  • Exclusivity or non-exclusivity – If you’re the licensor, do you want to be able to licence the IP to multiple parties? Or are you happy to licence the IP exclusively to one party? If you want to be able to licence your IP to multiple parties then the licence agreement should be non-exclusive.
  • Revocable or irrevocable – Revocable licence agreements can be terminated by the licensor, irrevocable agreements cannot. However irrevocable agreements can still be terminated in certain circumstances, such as if there is a breach of the agreement. What constitutes a breach of the agreement should be stipulated in the agreement itself, so that there is no doubt as to when a termination can occur.
  • Licence fee – How much is the licensee paying for the privilege of using your IP? When is the fee payable? Are there additional fees for things like maintenance and support? Consider whether you want a termination fee to apply if the licence is ended early.
  • IP ownership of modifications – Will the licensee be making modifications to your IP or using it as the basis for creating their own product? If so, it is a good idea to consider who will own the new IP that is created using the original IP described in the licence agreement.
  • Sub-licensing – Does the licensee need to licence the IP to other parties? If so, the licence agreement should include a term about sub-licensing. Generally sub-licensing is prohibited in most licence agreements (in order to protect the licensor – i.e. the party that owns the IP and is giving the licence).
  • Terms of use – Should the licensee be limited by how or where they can use the IP for the term of the licence? Most government contracts grant the government very broad rights to use IP, but those rights are still negotiable.
  • Termination – Under what circumstances can the licensor and licensee end the agreement? What will happen when the agreement is terminated? How much notice should be given?

There is plenty to think about in any licence agreement, we know that from experience as we have look at hundreds of them!

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