SaaS Agreement vs. Software EULA. Which Template Do I Need?

Short answer: if the customer primarily reaches your software through a browser, you need a SaaS subscription agreement; if the customer primarily downloads and installs your software, you need an EULA. The form follows the primary item provided, not what you call your company.

As a SaaS lawyer, I sometimes run into the issue of “Do I need a Software as a Service Subscription Services Agreement (SaaS Agreement) or Software EULA?” In other words, what should I start with (software EULA template, or SaaS license agreement template). It is pretty easy, as it all depends on the primary item provided. If the answer is SaaS, our SaaS contract practice and our SaaS agreement template checklist cover what that document needs.

Why the Distinction Actually Matters.

This is not a labeling exercise. The two documents are built on different legal foundations. An EULA is fundamentally a copyright license. You own the software, and you are granting the user permission to use a copy under conditions. A SaaS agreement is fundamentally a services contract. Nobody gets a copy of anything; they get access to a service you operate. That difference drives everything downstream: how you handle title and IP, what your warranties cover (a working service vs. conforming code), how termination works (shut off access vs. revoke a license and demand destruction of copies), and how data, uptime, and security obligations get written. Start with the wrong template and you spend the rest of the deal patching a document built for the other business model.

If a company is trying to define their model in their end user agreement and is unsure of the form to start with, they should figure out if there is any software downloaded by users, or if they are only providing software-as-a-service through a browser. While many companies have hybrids, I think it should be viewed as what the company is primarily providing.

The “Primarily Provided” Test.

• If they are primarily providing software through a browser, but there is some software downloaded (think GoToMeeting or Webex), then they would need a Subscription Services Agreement, as they really are in the SaaS business.
• However, if they are primarily providing software which will be downloaded, but there are some services provided (maybe support, maintenance, training, or some services through the web), then they would need an EULA, as they are licensing their software.
• Also, some models may be more of a true hybrid, with a SaaS agreement for their online subscription service, and then a EULA for the software that will be downloaded and used with the subscription service.

Every software based company should figure out which form of end user agreement they need, as their customers will be asked about it, and they need to have it right.

Once you have made that core decision, several drafting threads follow. Microsoft’s Windows 8 EULA showed that even a notoriously legalistic document can be made readable. See Microsoft’s Plain English EULA: A Better Way to Draft. When the drafting goes wrong, a vendor can lose at summary judgment over its own EULA. How to Get Sued Over Your Software EULA/SaaS Contract, and Lose walks through the Dillards v. i2 $246M judgment. For larger deals, Enterprise License Agreements: How to Design Yours covers the flexibility, pricing, and administration dimensions enterprise customers expect. If your software exposes an API, 2 Reasons Why You Need an API License Agreement covers why you cannot rely on the main EULA.

For foundational concepts: What is a Software License, and How is it Measured? covers the underlying grant; Can You Change Your Software Contracts Unilaterally? walks through the Blockbuster Beacon case that voided an arbitration clause; Restrictions In License Agreements covers what the Blizzard and IBM cases say about novel restrictions; and Reverse Engineering Software for Interoperability covers when copyright law permits reverse engineering despite contractual prohibitions.

Disclaimer:

This post is for informational and educational purposes only, and is not legal advice.