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What is Software as a Service (SaaS) and how do SaaS agreements work?

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IP Commercialisation

Software as a service (SaaS) is a growing for of business

But what is SaaS, and how do SaaS agreements work?

An image of some hands typing on a keyboard, possibly drafting a SaaS agreement!

Photo by Zan on Unsplash

Words by Dr Martin Douglas Hendry




Software as a Service (SaaS) is a model of software delivery where software is typically provided over the Internet on a subscription basis.

SaaS is an increasingly popular method of delivering software to businesses and consumers as it is often more cost-effective and flexible than traditional software licensing arrangements.

This blog will provide an overview of SaaS agreements, including their key components and how they work in the context of UK law.



Understanding SaaS Agreements


A SaaS agreement is a contract between a SaaS provider and a customer that sets out the terms and conditions of the use of the software.

SaaS agreements are typically provided in the form of a click-through agreement or a written contract. The key components of a SaaS agreement include the description of the services to be provided, the subscription terms and pricing, service level agreements (SLAs), intellectual property rights, data protection and security, termination and cancellation provisions, and liability and indemnification.

One of the main differences between a SaaS agreement and a traditional software license agreement is that SaaS agreements are subscription-based and provide customers with ongoing access to software rather than a one-time license to use it.

SaaS agreements typically also have lower up-front costs than traditional software licensing agreements.



Key Provisions in a SaaS Agreement


Description of services: The description of services sets out the scope of the software being provided and any limitations on its use. It should also provide details of any support or maintenance services that will be provided.

Subscription terms and pricing: The subscription terms and pricing section outlines the fees that the customer will pay for the SaaS service and the payment terms. This section should also outline any price changes that may occur during the subscription period.

Service level agreements (SLAs): SLAs specify the levels of service that the SaaS provider will deliver, including uptime guarantees and response times for support requests.

Intellectual property rights: This section sets out the intellectual property rights associated with the software being provided. It should include provisions relating to ownership of any intellectual property developed during the subscription period.

Data protection and security: This section should outline the measures that the SaaS provider will take to ensure that customer data is protected and secure. It should also provide details of the SaaS provider's data protection policies and procedures.

Termination and cancellation provisions: The termination and cancellation provisions outline the circumstances under which the agreement can be terminated and the procedures for doing so. This section should also set out the consequences of termination for both the customer and the SaaS provider.

Liability and indemnification: The liability and indemnification section sets out the liability of the SaaS provider and the customer in the event of any damages or losses arising from the use of the software. It should also provide details of any indemnification provisions.



Compliance with UK Law


SaaS providers must comply with various UK laws and regulations, including data protection requirements under GDPR as enshrrined in UK law, consumer protection laws, and intellectual property laws. SaaS agreements should be drafted with these requirements in mind to ensure that the SaaS provider is compliant with the relevant laws and regulations.



Negotiating SaaS Agreements


Negotiating a SaaS agreement can be a complex process, and it is important to seek legal advice to ensure that the agreement is fair and meets the needs of the customer. Some key negotiation points to consider include pricing, SLAs, data protection and security, and liability and indemnification.





SaaS agreements are an important tool for businesses looking to access software on a subscription basis. Understanding the key components of a SaaS agreement and how they work is essential for businesses to ensure that they are getting the best deal and that their rights are protected. SaaS providers must also ensure that they comply with UK laws and regulations to avoid any legal issues.

By understanding the key provisions in a SaaS agreement and negotiating the terms that best meet their needs, businesses can take full advantage of the benefits of SaaS and improve their operations. However, it is important to remember that SaaS agreements are legally binding contracts, and it is important to seek legal advice before entering into any agreement to ensure that all parties are clear on their rights and responsibilities.

In conclusion, SaaS agreements are becoming increasingly popular in the UK and offer many benefits for businesses. Understanding the key provisions in a SaaS agreement, negotiating the terms that best meet your needs, and ensuring compliance with UK laws and regulations are all important aspects of making the most of SaaS. With proper planning and legal guidance, businesses can take advantage of the cost savings and flexibility offered by SaaS while ensuring that their interests are protected.


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Look at our other guides that relate to this topic here.

The Role of IP law in International Business

The Role of IP Law in Business Acquisitions and Mergers

The Impact of Brexit on UK intellectual property law



Virtuoso Legal is a team of intellectual property specialists based in Leeds and London - operating worldwide. Virtuoso Legal's team of IP experts have successfully tried cases in the IPEC, High Court, Court of Appeals and United Kingdom Supreme Court. In addition, the team assist companies in creating, commercialising and protecting the big ideas that make their business unique. The firm and its professionals are ranked yearly in legal directories such as the Legal 500 and Chambers and Partners, cementing their status as a Top 2% law firm in the world.

DISCLAIMER: The content within this post is for educational purposes only. Virtuoso Legal does not take any responsibility for those that use this information and waives any liability for any resulting effect on your personal or commercial circumstances. If you are experiencing an issue and need advice, we strongly encourage you to contact a solicitor to identify your best course of action.

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