• Startups
  • February 07, 2022

Software as a Service (SaaS): Legal Considerations

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Although the number of people registering as self-employed dropped in 2021 due to the Coronavirus pandemic, people registering as self-employed has grown a whopping 93.9% over the past 20 years. 

Furthermore, in 2021, there were 5.58 million private businesses in the UK and 99.9% were SMEs with less than 250 employees. 

A key driver in the growth of self-employment is the increasing use of SaaS. But although SaaS has provided for greater flexibility and helped us to embrace mobile work environments as opposed to needing a fixed business location, SaaS comes with significant legal issues that can easily be underestimated by SME owners.

Before looking at the legal issues, let’s examine what SaaS is. 

What is SaaS?

SaaS stands for Software as a Service and is essentially where software is supplied as a subscription or on a pay-per-use basis. 

The software sits in the ‘cloud’ hosted by the provider and is accessed by the user via the internet. 

SaaS can include email, payroll and accounting, HR systems, CRMs, and other databases. 


>> Watch our video How to comply with GDPR

What are the legal issues related to SaaS services?

There are several legal considerations both suppliers and consumers need to be aware of when negotiating a SaaS agreement, including (but not limited to):

  • How are data protection matters, not only concerning the processing of the SME customer’s personal data but also that of the SME’s consumers and suppliers, going to be managed. Under Article 28 of the UK GDPR, if a data controller outsources the processing of personal data it must use “only processors providing sufficient guarantees to implement appropriate technical and organisational measures in such a manner that processing will meet the requirements of this Regulation and ensure the protection of the rights of the data subject.” 
It is important, therefore, to set out your data protection and privacy compliance policies and procedures in the SaaS contract.
  • SaaS providers need to safeguard their intellectual property (IP) and ensure the contract protects their IP from being transferred or used in a way that could compromise its integrity. 
Questions about intellectual property protection? Book a free 15-minute consultation with one of our expert lawyers.
  • When it comes to security the SaaS contract must have specific provisions related to the mechanisms and procedures for protecting the customer’s data as well as the process to be followed in the event of a data breach.
  • A clause to limit the SaaS provider’s liability should be included in the agreement to protect it if the service levels (which will also be set out in the contract) are not met.


>> Download our Software as Service (SaaS) Agreement for free

Wrapping up

SaaS has transformed the way we work, allowing for agility and cost-savings unimaginable as little as a decade ago. 

Like most new developments, however, the legal issues related to SaaS products are untested, with progress rapidly outpacing case law and legislation which SMEs rely on to provide legal certainty. 

Both parties to a SaaS agreement should therefore invest in expert legal advice to ensure their interests are protected.


Get legal assistance from LawBite

If you have any SaaS legal issues or concerns do not hesitate to contact us.

Our GDPR and data protection can help you ensure you are complying with the data protection law, you are protecting your intellectual property and you have all the right contracts in place to protect your business.


Additional useful information

In closing

Nothing in this article constitutes legal advice on which you should rely. The article is provided for general information purposes only. Professional legal advice should always be sought before taking any action relating to or relying on the content of this article. Our Platform Terms of Use apply to this article.



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