Q&A With SaaS Attorney Chip Cooper: Do I Need a SaaS Agreement, or Will a Typical Software License Agreement Suffice?

As a SaaS attorney, I’ve been asked a lot of questions about SaaS agreements and SaaS reseller agreements. This Q&A is based on actual conversations as a SaaS attorney with clients.

Q: Which agreement is appropriate for my SaaS business – a SaaS Agreement based on a subscription model, or will a typical software license agreement suffice.

First, let’s begin with a definition of a license agreement. It’s really simple – a license agreement is merely a legal document that gives permission to do something. Implicit in this definition is that the person granting the license, the licensor, has the legally protected right to give or not give permission

If we apply this definition to software, we need to ask the question: what intellectual property rights are embodied in the software? The answer is, at the very least, there would be copyrights.

The owner of copyrights has certain exclusive rights that make up ownership (including the rights to copy and distribute, for example). These rights may be parceled out to others or retained by the copyright owner – or parceled out in part and retained in part.

So, in the traditional software licensing model, where the licensor provides physical possession of a copy of the software to the licensee, specific rights are granted (i.e. licensed) in the license agreement. You know the drill: “Licensor hereby grants to licensee a non-exclusive right and license to load the software on …” . With this language the licensor gives permission to the licensee to use the software in terms of specific rights that the licensor as copyright owner has exclusive rights to.

The SaaS model is different from the traditional software licensing model. With the SaaS model, possession of the software is retained by the software vendor and loaded on the vendor’s server. Users access the SaaS vendor’s server with ID’s and passwords for purposes of logging in to use the software which is provided as an online service. Hence, software-as-a-service, or SaaS.

The SaaS agreement is different from the license agreement because it reflects the difference in business models between physical deliver of software as distinguished from SaaS. Instead of a license grant clause, the typical SaaS agreement grants rights to access and use a defined online service. SaaS agreements are typically for a limited term (often characterized as a subscription term). There are other issues that are different, including privacy, data security, performance and uptime guarantees (typically referred to as SLAs or Service Level Agreements), disaster recover, and data back-ups.

So, the bottom line is, if you are marketing a SaaS service, you need a SaaS agreement rather than a traditional license agreement.

Go to our SaaS lawyer page.

Copyright © 2011 Chip Cooper

This article is provided for educational and informative purposes only. This information does not constitute legal advice, and should not be construed as such.

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