What are Software Subscription Agreements?

Many software companies are beginning to create software offerings that are available “in the cloud”. In other words, their users do not have to go to the store and purchase a CD to install the software, rather, they can access the software by logging into a web application. This type of software offering is typically referred to as “Software as a Service” or “Saas”.

One of the advantages of SaaS is that the software provider can typically charge license fees per registered user. There are many types of pricing models, but a subscription method, where the registered user pays per month has recently grown in popularity.

To steer clear of the more archaic licensing language in their agreements, many software companies are not creating online click-wrap agreements that are presented to the user upon registration, whereby the user agrees to a Software Subscription Agreement. The agreement attempts to use the wording of “subscriptions” and “subscription fees” rather than “license” and “license fees”.

In reality, the effect is quite similar. The contract should still contain (among other things):

  1. a statement as to the ownership of the software (and related IP);
  2. a non-exclusive license grant to the registered user;
  3. restrictions on the license that is granted; and
  4. appropriate disclaimers relating to the software.

In addition, depending on the nature of the SaaS offering, the Subscription Agreement may also contain provisions dealing with:

  • Whether support is to be provided;
  • User generated content;
  • Licensing that user generated content;
  • Privacy considerations; and
  • What happens to any data upon termination.

Ultimately, like software licensing agreements, Subscription Agreements need to be customized on a case-by-case basis.