Incorporating Intellectual Property Rights In SaaS Agreements

By: Heather Bowen

Businesses need a number of different commercial contracts to operate effectively. Savvy business leaders often seek to move forward and drive success by using information technology software provided under Software as a Service (SaaS) agreements. SaaS software is licensed by providers to customers on a subscription basis. SaaS providers maintain and host the software themselves (or through a third party vendor) and grant the customer access to the software via the internet.

SaaS agreements may be used to deliver both B2B (business-to-business) and B2C (business-to-consumer) SaaS products. These agreements are similar to other technology contracts, and they specify which features will be offered through the SaaS service. Typically included in such agreements are a variety of negotiable provisions, including, but not limited to, provisions addressing intellectual property rights, data privacy, limitations and caps on liability, disclaimers of warranties, choice of law, and choice of forum for resolving disputes. This article will particularly focus on the intellectual property landscape as it relates to SaaS agreements.

There are many types of intellectual property, including trademarks, copyrights, and patents. A trademark protects a word, phrase, symbol, slogan, and/or design that identifies and distinguishes the source of the goods and/or services of one owner from the goods and/or services of others. A copyright protects original artistic or literary works that are fixed in a tangible medium of expression, and includes, for example, books, photos, music, fine art, videos, films, recordings, and architecture – as well as software. A so-called “utility” patent protects new and useful processes, machines, and compositions, and a distinct type of patent protects ornamental designs.

A provider can minimize the risk associated with the license by specifically identifying the intellectual property rights being licensed and by clearly stating whether or not a customer is permitted to transfer any of the licensed rights. Indeed, a well-drafted SaaS agreement can simplify the negotiation process. 

Typically, such an agreement should contain a specific provision under which the customer acknowledges that the provider retains ownership of its intellectual property rights in the software, services, and systems to be provided.  That acknowledgement might take the form of a provision stating that the customer is being granted a license to use its intellectual property rights (e.g., . source code and logos), but that ownership of the software, documentation, and other intellectual property provided as part of the service remains exclusively in the provider. Further, the agreement should (1) specifically enumerate the limitations of the license and (2) state that any use of the intellectual property in a manner inconsistent with those limitations is unauthorized and constitutes a breach of the agreement.

Similarly, other provisions in SaaS agreements should state that the services are being provided only by way of the provider’s platform and that the customer is not permitted to host the software on its own platform. A provider can prevent ambiguity when drafting intellectual property provisions in SaaS agreements by including a clear statement that it is providing the service exclusively by granting the customer access to the provider’s own servers. The language of the agreement should avoid stating or implying that the provider will merely deliver software to the customer.

Incorporating well-crafted intellectual property provisions in SaaS agreements can be challenging. The most successful providers protect their companies by working with legal professionals who can tailor the SaaS agreements based on the company’s and customer’s specific needs and requirements.