Enterprise-level agreements for SaaS companies may include that granting a „license” for the software – even if it is only designed as an intellectual property license for use of the software in a SaaS environment – would allow the provider to find itself in an involuntary position in the event of insolvency. In particular, since the provider has designed the access as a license in accordance with section 365(s) of the Bankruptcy Act, it may be required to continue to allow access to the software. This is particularly likely if the vendor has simply converted its software license into a service agreement, given that many software licenses contain explicit provisions that allow a licensee to retain its rights in the event of insolvency. The reason this error could be quite far-reaching is that the bankrupt company might not only need to maintain access to the software, but it continues to provide third-party cloud services to maintain that access. The obligation in principle of the provider of the contract is to make its software accessible to the customer via Internet as a Service. A license to use this software is granted to the customer, subject to a series of restrictions and prohibitions that can be adapted on a case-by-case basis. This agreement governs the provision of software as-a (SaaS) services to customers via the Internet. Some experts argue that a „license to use” SaaS only means permission to use and does not grant a copyright license. But why take the risk, given that a SaaS contract with the word „license” could harm the provider in at least four ways? In other words, the customer receives a service in a SaaS agreement, not software. The provider only uses software to provide the service. I often call the transaction „subscription” – just to give it a convenient name – instead of a „license”.
This is based on the fact that the software must be installed or downloaded locally on the licensee`s computer, network or platform. Why would a SaaS provider prefer to license over authorized access to the software? One of the reasons for this is that in case of unauthorized access, the provider cannot invoke an IP violation unless a license has been granted beforehand. In view of these results, there are potential advantages of rejecting a traditional licence in favour of mere consent to the provision of the „services” allowing users to access the software and offer this software to users via the Internet. In the event of bankruptcy, a provider may cease to perform contractual obligations, including ongoing SaaS services. It is possible that a court may compel a supplier to continue to provide contractual services, but only if they are covered by an intellectual property license. This is because Section 365(s) of the Insolvency Act protects the customer`s right to continue using „licensed intellectual property”. It does not protect contractual services. Security and data management are important for SaaS agreements. The customer`s sensitive data is located with the software on the vendor`s computers and not locally on the customer`s computers. This is why most SaaS contracts contain a clause on how data protection is handled.
Even in the absence of a software license agreement, the provider has the potential to obtain a valid right: if you license SaaS, you may be confused by the other important differences with on-premise software. For example, SaaS contracts do not need maintenance clauses that require the vendor to repair the customer`s copy of the software. On the contrary, saaS contracts need service level agreements (SLAs) that recognize that the vendor is hosting the software and calls it to keep the system running. . . .