Tech Startups: The Agreements I Need
19 October 2018
Software agreements are a complicated topic and mixing the complexity of tech with a whole load of legal jargon makes a slightly confused, highly intelligent and extremely complicated tech/legal hybrid baby. So, if you can bear with me, this blog will outline three different agreements that you may need to put in place to clearly define the scope of your services and to outline the rights and responsibilities of you and your customers.
1. Software Licence
Software purchased as a package is usually done so through a software licence, giving the customer certain rights to access, use and possibly distribute the software. As the supplier, the starting point will usually be through your standard terms, so you will need to ensure that these are drafted in a way that sufficiently protect your Intellectual property.
A software licence should determine what is being licenced, to whom, for how long and for what purposes. The licence could be for general use or could be restricted to certain users for certain purposes and usually answers questions relating to where and how the software can be installed and whether it can be copied, modified or redistributed.
Make sure that you are certain of your position because more often than not, customers are up for a negotiation, particularly if they have a strong bargaining position.
2. Software as a Service (SaaS)
Generally, a SaaS agreement is where the customer buys the right to use a particular software for a certain period on a subscription basis. SaaS can also be used to describe a service agreement for the use of a particular software application.
The key difference between SaaS and a software licence is that the major components of the software in a SaaS agreement remain on your server (as the supplier) rather than being installed or used on the customer’s environment. The software is usually accessed through the internet, and when the agreement/subscription comes to an end, the user is unable to access the software.
For example, the Microsoft disk (does anyone use disks anymore)? that you pop into your computer and then use to install all the wonderful offerings that Microsoft has to give with, is software that is licensed to you. If you can dig out that box you’ll find a software licence inside with all the terms that you (as the customer of Microsoft) agree to, when you install the application and then go wild with your spreadsheets on Excel, because we all know tech guys LOVE a spreadsheet. On the flip side, when you log into your Outlook or Gmail email account online, through your internet browser, you are accessing SaaS. When you agree to the terms and conditions when you register for an account, you are agreeing to a SaaS agreement. Makes sense, right? You’d think so but so many agreements which are clearly SaaS contain the wording of a software licence. So, first things first, and if nothing else, make sure you choose the right agreement.
3. Software Development Agreement
There are many different arrangements for software development and this type of agreement is mostly used for bespoke software solutions created to solve the customer’s problems or to meet their specific needs. Design and development processes can vary depending on the complexity of the project and these processes will need to be detailed in the agreement. Therefore, as the supplier, when drafting your software development agreement, there will be a lot of things you should be thinking about relating to specifications, milestones, deliverables, testing, installation and maintenance, as well as protecting your intellectual property.
Because the relationship is a contractual one, you can negotiate the rights and obligations of each party. However, the fundamental responsibility of you as the developer, will be to meet the milestones set out in the agreement and deliver the software by the date agreed. Therefore, the warranties (the promises you make) and the indemnities (agreeing to pick up the cost of any claim against the customer) that you are prepared to give are extremely important.
See, I promised you complicated legal jargon that no one really understands, and that’s exactly what you got.
I’m not trying to convince you that IT contracts are fun or even mildly interesting, but they are extremely important. They can be complex and need to be drafted in a way that adequately protect your interests. They are often negotiated so knowing your way around the legal/technical jargon can be a really good starting point for any IT start-up. Don’t be afraid to defend your position but, equally, if your standard terms and conditions are as reasonable as possible, you will spend less time in the boxing ring and more time making lots of tech/legal hybrid babies with happy customers.
Need help with your agreements? Contact the team at firstname.lastname@example.org and we’d be happy to help!