September 2010

Monthly Archives

  • Sales Tax on SaaS. What I Learned, and You Should Know!

    I was presenting at the OpenView CFO Forum in Boston (on SAAS contracts) last week to their portfolio companies, and at the conference I learned quite a lot from the Grant Thornton tax presenters about the current state of confusion of the applicability of SAAS sales tax. GT wrote a short article on it, so I thought it was worth sharing on my blog, as their article was on point and timely (plus I thought I would provide my 2 cents worth).

    My takeaways from the article are:

    1) Current State: Most states have not specifically addressed taxation of software-as-a-service transactions, and so you have to shoehorn it into their existing rules (i.e. it is messy and a grey area).  You understand, as your hosting company is in x state, you are in y state and your customer is in z state.

    2) Form of Agreement Matters: The form of agreement you use matters (is it a ‘software license agreement,’ ‘subscription services agreement,’  ‘professional services agreement,’ or something in between), but of course so does the substance of the services you are providing.

    3) Proposed Federal Legislation: There is no answer yet, but there is a bill going through Congress which could help provide some clarity and predictability on taxation of SAAS. Here is the latest on the bill (at least on one website).

    Take a read of the short Grant Thornton article, as I think they nailed the current state of things–even if there is no clear …

  • What is Up with Signing Contracts Online?

    So what is up with signing contracts online? Well, what is up is that it is becoming mainstream really fast, and is a great way to speed up the process of having written contracts signed (e.g. your SaaC contract template). You can now skip the faxes going back and forth, mailing of SaaS contract template for signature in duplicate, etc.

    So here are some thoughts:

    1) Give it a Try. Maybe try it first for NDAs/Confidentiality Agreements, Reseller Agreements, EULA, Employment Agreements, and other more routine contracts (probably not the right thing for your signature when you sell your company).

    2) Different from Clickwrap Agreements. These type of electronic or online signatures are fundamentally different from the online or electronic clickwrap type agreements (you know, the click to agree agreements we all agree to). These online signatures are supposed to take the place of your written signature on a written contract.

    3) All the Vendors Seem the Same. It looks like there are 3 main vendors, EchoSign, DocuSign and RightSignature. They all look the same to me, so maybe pick the one with the right: (a) workflow process, (b) price point, (c) features, and (d) easiest interface.

    So give it a try, as it could help your employees become more productive while ensuring you get your contracts signed. Just a thought from a software attorney on how to become more efficient in getting your SaaS contract templates signed. .

    Disclaimer: This is provided for

  • 3 Things To Consider In Your Software Referral Agreement

    While there are many different issues to include in a software or software services referral agreement (SAAS referral agreement), here are a few practical things to consider:

    1) What is In and Out. What types of referrals will  you pay on, and what types won’t you? Don’t forget excluding transactions that are already in flight or that don’t close within x amount of time. What about extensions of the transaction? Be super clear on all these issues, as this is the key part of the agreement (quite frankly most of the disputes I see are related to these issue).

    2) Payment/Reporting.  Do you want to pay after each transaction, or on a monthly/quarterly basis under a report? Also, don’t forget to address credits and returns, and that you have to be paid first (before you pay them).

    3) Simplicity/Plain English. Keep this agreement simple, and short, as you want to make sure (a) your partner understands the agreement, and (b) your internal sales/channel teams understand it too. Any confusion between these two groups on referrals could create a lot of disagreements.

    Just a few thoughts from a software attorney.



    This is provided for educational and informational purposes only, and is not legal advice. Talk to your attorney for legal advice, as they should consider the pertinent facts and applicable law before providing any advice.

  • If Google Can Do It, Why Can’t You!

    Why aren’t your policies written so they can be easily consumed by your customers and employees?  Look, if Google, one of the largest and most sophisticated technology companies in the world can simplify their policies (in this case their Privacy Policy) then why can’t you (see this post by their Associate General Counsel regarding updating their Privacy Policy and Making it Simpler).  Yes you read it right, Google’s lawyers are trying to make their Privacy Policy easy to read, transparent and simple.

    So let’s brainstorm.

    What policies can you simplify today? Privacy Policy, Customer Support Policy, Licensing Policies, HR Policies, Sales Policies……keep thinking of more as you probably have others.

    The key thing to remember is it can be done, but you have to ask for it (maybe demand it) from your attorneys (it does not come naturally to most attorneys) or whoever is drafting these polices.

    Think…. bullet points, highlighting, short sentences, bold, plain English, Icons, FAQ,  etc. (Google did).

    The big guys are doing this and maybe you should too!

    Disclaimer: This is provided for educational and informational purposes only, and is not legal advice. Talk to your attorney for legal advice, as they should consider the pertinent facts and applicable law before providing any advice.

  • What Can You Learn From the Justice Department Suing Oracle?

    Quick background: Oracle was sued on July 29, 2010 by the Department of Justice alleging that Oracle overcharged the government when it licensed its software.

    • How does this work? Well, when a company wants to sell a significant volume of software to the government they file what is called a CSP-1 (Commercial Sales Practices Format chart) as part of getting on a government Schedule. On this form the vendor describes their pricing, products, services, etc., by tier of buyers (direct, channel, etc.) and most importantly their discount practices. The government wants to know that no one is receiving better pricing for a similar transaction.
    • This Case. What happened in the Oracle case (at least as alleged in the complaint) is that Oracle overcharged the government by selling software to various agencies at higher prices than it was selling the software to commercial customers.  A whistleblower (i.e. insider) brought the initial case under seal and the government investigated (which took a few years). FYI: The whistleblower can receive up to 30 or so percent of the award, so there is a very strong incentive to bring these cases.
    • What could the award be? Lets look at some similar cases: Oracle paid $98.5 million in 2006 on behalf of PeopleSoft, EMC reached a settlement to pay $87.5 million, and Net App reached a $128 million settlement in 2009.

    So what can you learn from this?

    1) Commercial Practices Sales Charts are really important, and someone needs to take …