:
Michael L. Whitener Principal VistaLaw International LLC
Softletter’s SaaS UniversityDallas, TX
Jan 26-28, 2010
Nine
Legal Issues
In SaaS Deals
Nine Burning Legal Issues
➤ Cloud computing is the “new new thing” – but are the legal issues all that “new new”?
➤ Legal industry thrives on controversy, and so “discovers” new legal hazards to advise on
➤ SaaS NOT a legal minefield
➤ But there are a few traps for the unwary
Ambulance Chasing and the Cloud
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Nine Burning Legal Issues
➤ The Issue:
➤ Safeguarding customer data
➤ Prevention of data commingling
➤ Recovery of data in event of system failure or SaaSprovider demise
1. Data Security
➤ The Solution:
➤ Describe what security measures are being implemented
➤ Don’t guarantee security. You’re not Fort Knox
Nine Burning Legal Issues
➤ The Issue:
➤ Scope of services covered
➤ Performance standards: uptime, response times
➤ Remedies
2. Service Level Agreements
➤ The Solution:
➤ One option: provide no SLA
➤ Careful crafting of performance standards and exceptions
➤ Limit remedies to credits only
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➤ The Issues:
➤ “Try and buy”
➤ Authorized users
3. Pricing Flexibility
➤ The Solutions:
➤ If free trial is offered, make clear (1) how long it lasts, (2) what will trigger cancellation, and (3) any restrictions during free period
➤ Consider pricing via “bands” of users
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➤ The Issue:
➤ Lack of clarity re who is responsible for integration/configuration, training, support, etc.
4. Integration
➤ The Solution:
➤ Agreement must be explicit as to whether various services are bundled with basic subscription or premium add-ons
➤ Consider charging on “time and materials” basis
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➤ The Issue:
➤ Customer reluctance to accept updated versions of service offerings
5. Updates and Upgrades
➤ The Solution:
➤ Agreement should specify that the customer MUST accept all updates, bug fixes, upgrades, etc.
➤ Not practical for SaaS vendor to maintain multiple versions of application to cater to customer whims
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➤ The Issue:
➤ Vendor willingness to indemnify customers to the max
➤ Lack of overall liability cap
6. Indemnities
➤ The Solution:
➤ Limit indemnity to breach of confidentiality, IP infringement
➤ Cap liability at multiple of fees paid (and avoid carve-outs)
➤ Consider customer indemnities
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➤ The Issue:
➤ Vendor goes belly up
7. Worse Case Scenario
➤ The Solution:
➤ Rollover arrangement
➤ Software escrow
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➤ The Issue:
➤ Shifting accounting rules re when SaaS revenue can be recognized
➤ Serious legal consequences for getting it wrong
8. Revenue Recognition
➤ The Solution:
➤ Understand the “Four Horsemen” of revenue recognition
➤ Make sure your accountant is up to date on rules
(Taleo example)
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➤ The Issue:
➤ Zombie alliances
9. Reseller Relationships
➤ The Solution:
➤ Put teeth into channel partnership agreements
➤ Avoid channel conflicts
➤ Follow best practices in compensating channel partners
➤ Include termination provisions in agreements
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Other Possible Legal Issues
➤ Jurisdiction
➤ Terms of Service
➤ Taxes
➤ Going Overseas
Nine Burning Legal Issues
Prepared by:
Michael L. Whitener PrincipalVistaLaw International LLCEmail: [email protected]
International Square1875 I Street, N.W., 5th FloorWashington, D.C. 20006Office: 202-429-5526 Mobile: 703-992-3662
www.vistalaw.com