Want to learn more about drafting, negotiating, and understanding intellectual property and technology contracts and have 10 minutes to spare? Grab your morning coffee or afternoon tea and dig into our Tech Contract Quick Bytes—small servings of technical contract insights expertly prepared by our seasoned attorneys. This month we’re talking about reviewing IP provisions in SaaS contracts.
It is important for businesses and organizations to review intellectual property (IP) provisions in their software-as-a-service (SaaS) contracts with potential vendors. SaaS contracts are often vendor-driven forms, and vendors generally include broad ownership terms to ensure they maintain ownership and control over their SaaS tools.
A review of the scope of these ownership terms is therefore needed to identify overly broad ownership language that may unintentionally capture materials, information, or content that the client-side business or organization believes it should retain or own. Below are some considerations to evaluate before contracting for a SaaS tool.
Understanding the Use Case: Why IP Ownership Depends on How You Use the SaaS Tool
To effectively review any IP provision, an understanding of how the business or organization plans to use the SaaS tool is needed. A business or organization seeking to contract for a new SaaS tool should consider whether:
- The tool will be used to generate customized deliverables and work product (e.g., reports, content, data, etc.)
- These deliverables and work product can (or should) be used separately and apart from the SaaS tool
- Use of the deliverables and work product following termination of the SaaS contract is needed
Since many SaaS vendors will claim ownership of deliverables and provide a limited license to the customer, the business or organization may need to adjust the terms of the SaaS contract to ensure it acquires either ownership of or a perpetual license to the customized deliverables or work product.
SaaS Vendor Obligations for IP Assignment and Support
If the business or organization will be receiving ownership in the deliverables or work product through its use of a SaaS tool, then language currently assigning the IP rights to the business or organization is needed, in addition to language obligating the vendor to assist in securing and perfecting the business’s or organization’s rights in the deliverables or work product.
But businesses and organizations should consider whether any artificial intelligence (AI) is used by the SaaS tool. If so, ownership in the deliverables and work product may not be fully protected by IP rights (e.g., copyright law) and instead may be more narrowly protected by contractual rights.
Managing Third-Party Materials in SaaS Deliverables
Third-party materials might be incorporated into deliverables or a work product without the knowledge or permission of the customer. If so, the right to use such third-party materials may need to be obtained. For this reason, businesses and organizations should review the SaaS contract to ensure there is a provision requiring prior notice to the customer of any third-party materials that will be incorporated. If the SaaS vendor fails to provide the notice, it is important that language is included that otherwise obligates the vendor to obtain all necessary rights and permissions for the customer to use the third-party materials at the vendor’s cost and expense.
Protecting Uploaded IP Assets in SaaS Agreements
Businesses and organizations should also consider whether any key IP assets (e.g., content, data, or other information) will be uploaded to the SaaS tool. If so, the business or organization should ensure that these assets are carved out or excepted from the broad ownership provisions in the SaaS contract. Otherwise, the vendor may obtain ownership of or broad rights to use these assets. And including restrictions on the vendor’s use of any user-uploaded content (e.g., especially any third-party content) may help ward off claims of third-party infringement or privacy violations that stem from a vendor’s use of these assets.
If you or your company would like to discuss drafting strategies regarding IP ownership terms, please contact A.J. Zottola or Ben Myers.
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