Your friendly neighborhood technology legal counsel here: One of the greatest aspects of our firm is the fact that we, as attorneys, get to partner with our clients to assist in the development of their dreams. Additionally, while we focus on being the general counsel for all business types and sizes, one of my personal areas of passion is seeing new technology based clients develop and partnering with them to see their success.
One such emerging company that I'm happy to say we are partnering with is Den of Deliverabilty (www.denofdeliverability.com) ("DoD"). DoD is a start-up for which we've done SaaS legal consulting. They are focused on assisting their clients in getting their e-mail messages to the end user and drawing the distinction between "ham" (mail that people requested and want to receive) and "spam" (unsolicited commercial electronic mail). This process can be much more arduous that one might initial think, but luckily, DoD can help any business maximize their marketability through the proper use of commercial electronic messaging.
I'm very excited to see this company take off. They have great ideas and really cool software components that I think are going to be essential to any business. And just for fun legal disclaimer (what do you expect, I'm a lawyer) as I mentioned, I, and this firm, have done legal work for them, but we are not otherwise compensated by them.
So if you think this is something that your business might benefit from, check these guys out.
Posted Tuesday, January 26, 2010 by
William Boncosky
For SaaS companies, the customer agreement is critical. Why? A SaaS relationship is not a 1-time purchase of software to be installed. The SaaS customer agreement is a document which will govern (what you hope will be) a long-term relationship with your client. It must cover the software license aspect of the relationship, the ongoing maintenance, upgrading and use of the software and - often overlooked - the professional services to be provided by the SaaS company to the client. The standard software license agreement is simply not sufficient. And please do all you can to talk your REALLY BIG client from insisting that you use a form purchase agreement.
I recommend a "Subscription Agreement" for the use of the software. This makes it clear what you are providing to the client - not a license to use software but access to a service during the subscription period. The SaaS client must also consider the relationship professional services play and the nature of the SaaS service being provided. Each will require customization of your SaaS customer agreement.
SaaS legal consulting requires a novel approach to client agreements. Knowledge of ASP law, SaaS litigation issues, cloud computing law, etc. is just a start. Make sure you discuss the unique nature of your SaaS service with a experienced SaaS law counsel so that you put the best agreement possible in front of your clients.
I recommend a "Subscription Agreement" for the use of the software. This makes it clear what you are providing to the client - not a license to use software but access to a service during the subscription period. The SaaS client must also consider the relationship professional services play and the nature of the SaaS service being provided. Each will require customization of your SaaS customer agreement.
SaaS legal consulting requires a novel approach to client agreements. Knowledge of ASP law, SaaS litigation issues, cloud computing law, etc. is just a start. Make sure you discuss the unique nature of your SaaS service with a experienced SaaS law counsel so that you put the best agreement possible in front of your clients.
Posted Monday, December 14, 2009 by
David Castor
There are several scope of license issues to work through when handling license agreement negotiations. In my SaaS law (SaaS legal consulting) practice I often see licensees wanting to open the scope of the license to its “affiliates”.
For many larger SaaS customers this makes sense as these businesses often operate as families of companies rather than single operating entities. The customer may need to open the license to its other companies in order to properly use the software. Just last week I was negotiating a Software License and Services Agreement with a Fortune 100 company that has over 50 companies in its U.S. operations alone. They needed SaaS user seats for most of these companies.
The problem with the term “affiliates” is that it is not precise and may mean different things to different parties. Some contract terms have clear legal meanings. For example, “subsidiaries” commonly means companies which are owned and controlled by another company. “Parent” commonly means the company that owns the subsidiary. “Joint venture” commonly means a contractual relationship between two companies to engage jointly in a particular operation.
“Affiliates” does not have a common meaning for most contractual purposes. At the highest level the term points to a working or organizational relationship between two companies, but it is unclear how related the two companies have to be in order for them to be considered affiliates. For example, are joint ventures affiliates? Are management companies or consulting companies affiliates?
The term is defined differently in Federal and State laws and by legal dictionaries.
The Banking Act of 1933, for instance, contains a very broad definition as any organization that a bank owns or controls by stock holdings, or which the bank's shareholders own, or whose officers are also directors of the bank. This definition is probably much broader than most licensees intend and most licensors are willing to accept.
The IRS defines the term much more narrowly (for purposes of consolidated tax returns) as a group of companies whose parent or other inclusive corporation owns at least 80% of voting stock. This definition may be more narrow than the licensee intends.
The Investment Company Act defines “affiliates” as a company in which there is any direct or indirect ownership of 5% or more of the outstanding voting securities. I am not sure if any licensee or licensor is intending that precise scope when using the term.
Black’s Law Dictionary defines the term broadly as a corporation that is related to another corporation by shareholdings or other means of control. By that definition a management or consulting company could arguably be considered an affiliate.
The Ninth Circuit court recently adopted the Black’s Law Dictionary definition as it applies to the TCPA (an opt-in privacy law related to telephone marketing), but interestingly, the court also determined that because there was no direct contractual relationship between the two companies, they were not affiliates. Thus, the court apparently also needs to see a contractual relationship between the businesses for them to be affiliates.
Finally, a note for Indiana technology companies – Indiana Code 23 (the Indiana business statute) does not define “affiliate” and Indiana courts have not yet addressed the definition in a business structure context.
You see the point. The term is messy – which is why it should be avoided. The point of contracts is to be clear and avoid ambiguity. This term can create ambiguity and lead to unnecessary disputes down the line.
For many larger SaaS customers this makes sense as these businesses often operate as families of companies rather than single operating entities. The customer may need to open the license to its other companies in order to properly use the software. Just last week I was negotiating a Software License and Services Agreement with a Fortune 100 company that has over 50 companies in its U.S. operations alone. They needed SaaS user seats for most of these companies.
The problem with the term “affiliates” is that it is not precise and may mean different things to different parties. Some contract terms have clear legal meanings. For example, “subsidiaries” commonly means companies which are owned and controlled by another company. “Parent” commonly means the company that owns the subsidiary. “Joint venture” commonly means a contractual relationship between two companies to engage jointly in a particular operation.
“Affiliates” does not have a common meaning for most contractual purposes. At the highest level the term points to a working or organizational relationship between two companies, but it is unclear how related the two companies have to be in order for them to be considered affiliates. For example, are joint ventures affiliates? Are management companies or consulting companies affiliates?
The term is defined differently in Federal and State laws and by legal dictionaries.
The Banking Act of 1933, for instance, contains a very broad definition as any organization that a bank owns or controls by stock holdings, or which the bank's shareholders own, or whose officers are also directors of the bank. This definition is probably much broader than most licensees intend and most licensors are willing to accept.
The IRS defines the term much more narrowly (for purposes of consolidated tax returns) as a group of companies whose parent or other inclusive corporation owns at least 80% of voting stock. This definition may be more narrow than the licensee intends.
The Investment Company Act defines “affiliates” as a company in which there is any direct or indirect ownership of 5% or more of the outstanding voting securities. I am not sure if any licensee or licensor is intending that precise scope when using the term.
Black’s Law Dictionary defines the term broadly as a corporation that is related to another corporation by shareholdings or other means of control. By that definition a management or consulting company could arguably be considered an affiliate.
The Ninth Circuit court recently adopted the Black’s Law Dictionary definition as it applies to the TCPA (an opt-in privacy law related to telephone marketing), but interestingly, the court also determined that because there was no direct contractual relationship between the two companies, they were not affiliates. Thus, the court apparently also needs to see a contractual relationship between the businesses for them to be affiliates.
Finally, a note for Indiana technology companies – Indiana Code 23 (the Indiana business statute) does not define “affiliate” and Indiana courts have not yet addressed the definition in a business structure context.
You see the point. The term is messy – which is why it should be avoided. The point of contracts is to be clear and avoid ambiguity. This term can create ambiguity and lead to unnecessary disputes down the line.
