saas u - nine burning legal issues

:

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

Nine Burning Legal Issues

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

Nine Burning Legal Issues

➤ 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

Nine Burning Legal Issues

➤ 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

Nine Burning Legal Issues

➤ 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

Nine Burning Legal Issues

➤ 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)

Nine Burning Legal Issues

➤ 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: mwhitener@vistalaw.com

International Square1875 I Street, N.W., 5th FloorWashington, D.C. 20006Office: 202-429-5526 Mobile: 703-992-3662

www.vistalaw.com