November 2010

Monthly Archives

  • When Should a Software or SaaS Company BUY a Patent!

    First of all, I am not a patent attorney, but I know when to strategically use them (and I stayed at a Holiday Inn last night). A recent news story got my attention, as I think it is a great example of when to buy a SaaS patent.

    You may have heard of Groupon. If you haven’t, then read about it because it is a very interesting business model. But the angle for you is to learn about how (from my perspective) they are using patents to beat new startups trying to compete with them.

    Think of it this way; their business model and site is relatively easy to replicate, as essentially they have a great idea of how to bring coupon buying to local markets. The problem is they are widely successful, and so copycats are coming into their market really fast (maybe faster than Groupon can setup new sites in local markets). So Groupon in essence, has a real ‘execution risk’ to their business model…this is where patents come in.

    It looks like Groupon really thought ahead and bought a patent issued in 2001 that covers some of what they do today (i.e. they did not file for the patent, or discover the invention). They are now using it to fight off copycat sites. Pretty smart!

    So remember this: if you have a real ‘execution risk’ to your business model, and even if you don’t have a patent or you are not sure you invented anything new,

  • Your Software EULA/SaaS Contract

    How to Get Sued Over Your Software EULA/SaaS Contract, and Lose!

    Ok as a EULA Attorney I thought that would grab your attention. Well, there is a recent court case you should be aware of where the software company lost big time (over its Software EULA (applies to SAAS Contracts too)), and now owes the customer around $240 million for a software/services deal gone bad (here is the actual response from the jury).

    How does this happen? Well, let’s take a look as there are some tidbits for every software or SAAS company.

    First things first, the case: Dillards (the customer) sued i2 (later acquired by JDA Software) over a failed software and services implementation (even though Dillards still uses the software; figure that one out). Without going through a long detailed overview of the case, Dillards believed the i2 software was not working as promised and took it up with i2. Obviously, the parties could not work it out, and the case went to trial in Dallas, Texas in 2010. Long story short, i2 lost and Dillards won around a $246 million judgment on around a $10 million software and services order (yep, 24 times the amount of the sale). So how does this happen, as there was a contract with a limitation of liability, and i2 had attorneys working on the contract. Let’s dig a little deeper and see what you can learn from a case like this.

    1) Don’t Overcommit and Underperform. You probably …

  • Can a Third-Party Access or Use Your Software?

    This question may come from time to time as part of your SAAS contact or software EULA review or negotiations, so as a software lawyer I thought I would address it. Here goes.

    If you have a software product or a SAAS service you should think about whether third-parties (you know people like in the picture to the left) you don’t have a contract with can use or access your software, or is it only accessible by your customer (and their employees of course).

    A recently reported court case addressed this issue, so I thought I would share the result and provide some takeaways. Without going into the details of the case —which I know you really would like to skip–the court held that when the customer granted use to a third-party they violated the license agreement. Oh and by the way, the third-party was even using the software for the benefit of the customer, and the court even said no way.

    So what can a software or SAAS company learn from this case?

    1) Depends on the Your Value Prop. Some software or SAAS companies really care whether a third-party uses or accesses their technology, and others really don’t.

    – For example, if you measure usage on say the # of transactions, maybe you don’t care if a third-party accesses your software (for the benefit of your customer) as they will use more transactions under your customer’s account, but if you are concerned