The Building Blocks of Your Software Company’s Terms and Conditions
By: Maks Ewendt
Terms and conditions follow us everywhere we go. While that overexposure may (understandably) desensitize us to their importance and effective use, it remains imperative to include the applicable Ts and Cs and to facilitate their acceptance to protect your business. Just the phrase “Terms and Conditions” alone evokes a slight dozing off, which is why we unsuccessfully try to jazz it up by calling them “Ts and Cs.” For the purposes of this article, we’ll just lump everything together as “Terms” for brevity.In the modern eco-system of public websites, freemium solutions, and solutions provided via SaaS and downloadable applications, it can be difficult to track how all of these respective terms can be related. This article intends to explain how these terms are intermingled and can even be built upon one another, while also helping you determine how your company’s assets can be protected by prescribing their use accordingly.
Foundation - These terms will apply to any and everyone throughout their interaction with your company.Website Terms of Use - The biggest brick your terms will be built upon will govern the use of your website by the general public. These terms apply to anyone that may have found your company via a search engine or clicked on a hyperlink to one of your landing pages from another site. Even for visitors that aren’t clients or users, there are certain restrictions your company should consider for its website. These restrictions may include prohibiting people from copying and pasting your content as their own, using your logos/trademarks/graphics to make it look as if they’re associated with you, or hyperlinking to your company’s website from a webpage that you don’t want to be associated with. Website Terms of Use also typically include disclaimers including that your company is not liable for any links to third-party websites that may be damaging, and that any information on your website is for marketing purposes only and cannot be relied upon for any particular use.
Since these terms apply to all visitors and include the least amount of culpability, including a hyperlink at the bottom of your website and agreeing by continued use should be sufficient.
Privacy Policy - Gulp. If the Website Terms of Use is the biggest brick, then the Privacy Policy is the keystone for all of your various terms. Technically, each of your terms agreements should include your company’s privacy policy. However, rather than include this policy time and time again in each agreement, the accepted practice is to write the Privacy Policy once and to incorporate it into every terms agreement moving forward. Therefore, the Privacy Policy needs to be able to apply to those visitors just accessing the website as well as the various user types of the solution that may be transmitting different levels of personal information through the solution.
Privacy Policies differ from terms agreements in that they tend to be less about restrictions and more about what your company may or will do with the information it receives. This is where you share the kind of data your company may collect, how it collects that data, and what it may do with that data. State regulations regarding privacy may also require your company to share the rights the data subjects have and how your company complies with them. Privacy Policies can also be tricky because while the terms themselves may be easy to draft, the important (and difficult) part is to make sure your company can do everything it’s committing to in those terms. Since the Privacy Policy is incorporated into other terms agreements, including the Website Terms of Use and the terms discussed below, a hyperlink to them can also live at the bottom of your website and they will be accepted along with the various other terms.
First Floor - These terms will apply to everyone who has taken the next step to engage with your company’s solution(s) and therefore require a little extra definition. Depending on how your solution is delivered, the following may apply:End User License Agreement (EULA) - The EULA will apply to any user of your solution, and will include items such as use restrictions, user obligations, company obligations, warranties (if any), limitations of liability, and indemnification. Due to the increase of culpability on behalf of the user, the EULA usually requires a clear and active step by the user to agree to such terms. This usually manifests in a “click to accept” or “click to agree” dialogue box with a hyperlink to the EULA terms and the Privacy Policy so the user can click into each agreement and read both sets of terms thoroughly before checking the box, as we all do. EULAs can be included in, or independent of, any purchase activity, so these baseline terms are presented to all users. If the user will also be the purchaser for your solution, the EULA can be included in the terms types below.Software Sales Agreement - You’re probably not using these, but I’m including it to highlight a point. Software is rarely, if ever, sold.
To sell software would be to transfer all rights in that software from the seller to the buyer. Think of it like an author selling a book. Once that book is sold, the buyer can do whatever they want with it, including reselling it to whomever they’d like at whatever price they choose, ripping off the cover to use in their child’s middle school art project, or cutting out certain words to hastily tape into a letter they intend to send to a celebrity; nothing you want a purchaser to do the equivalent of with your software solution. Therefore, software is usually sold through a “license” if the solution will be provided to the purchaser via a restricted download or physical drive, or through a “grant of access” if the solution is being provided via software-as-a-service (SaaS).Software License Agreement - The software license agreement will build upon the Website Terms of Use and Privacy Policy by including the terms and conditions by which a paying customer may use the software solution. The license type will be defined here, including whether it’s exclusive or non-exclusive, any limitation in purpose or use, it may be sublicensed to other parties, or it’s restricted by geography or revocation.
Fees will also be outlined, which inherently includes payment terms, authorized users, renewals (if any), termination, and refunds. Since a software license usually accompanies some type of delivery method of the software, it should also include how the software will be returned or deleted upon the license expiration or termination. Depending on the business model, the EULA terms may also be listed here or just incorporated by reference. As the culpability of the purchaser increases, including payment terms, License Agreements typically require at least a click to accept, if not a forced to scroll through the terms mechanism or a written agreement.SaaS Grant of Access - Software provided as a service will have terms similar to a software license agreement, but since there is no transfer of software as with the model above, there is no license to grant the purchaser. Instead, the purchaser is granted access to the SaaS platform subject to the terms. While the structure of the Grant of Access will have a lot in common with the license agreement, the Grant of Access terms will be tailored to the technology capabilities of SaaS solutions which will permeate throughout the agreement. A Grant of Access can be provided as a written agreement, but it’s more likely that the terms will be agreed to via a click to accept.
The Eaves - Depending on the architecture of the software solution, there may be terms in addition to those drafted by your company that need to be incorporated or agreed to. A few of the most common additional term types are below.
Third-Party Terms - If your company’s solution includes the use of a third party’s solution, such as a credit card processor or database, then you may be required to include THEIR terms into YOUR terms. The overarching concept is that if a user may have access to a third party’s solution through your own, without previously agreeing to or being made aware of that third-party’s terms, then it’s your responsibility to take care of that for them. While it may seem arduous, the flip side is that you would want a third party to make sure their users were aware of and agreed to your terms, so turnabout is fair play. Third-party terms may be included as an exhibit or a hyperlink within your solution’s terms, agreeable when the customer agrees to your terms.
Passthrough terms - Similar to third-party terms, passthrough terms are included on behalf of another party, typically a reseller. As a value added reseller (VAR), your company may incorporate another solution from a reseller into your final deliverable. That reseller solution may be subject to additional terms, although limited in their applicability depending on the extent the reseller solution is being leveraged. Passthrough terms are typically included in a dedicated section or exhibit of the license agreement or grant of access since they may be different from the third-party’s standard terms.
Open Source Terms - A specific type of third-party term to consider is the use of open source software. The requirements and limitations of open source licenses vary, so it’s important to read through and understand their terms before including open source software in your solution. Common hurdles for using open source software are prohibitions of sales of open source components and ensuring that any modification of open source code includes the appropriate copyleft provisions. Open Source Terms are typically included as hyperlinks in the software license or grant of access, however, if a number of open source components are used, it may be more effective to include one hyperlink to a landing page that houses all open source license links.While the landscape of Ts and Cs for everything your business has going on can be daunting, taking the time to create a blueprint for how they all can work together (and build upon one another) can save your business time and money by efficiently protecting its assets. As your business grows and evolves, it’s important to periodically review your plethora of terms and conditions to make sure they’re still applicable and that no loopholes were created along the way.
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