June 2014

These Words are ‘Dangerous’ in Any SaaS or Software Agreement.

 

 

I have seen wording like this in SaaS or software agreement orders or templates, and it has always bothered me. A case from 2014 addressed this issue head on, so I thought I would share the outcome of the case with you (and some suggestions to avoid this messy legal issue).

Summary of the Facts: The following language was included in a software agreement.

 “To be valid, this agreement must be signed within 30 days of. . . “

Every SaaS or software company has probably seen (or used) language like this when trying to get a deal closed. Usually companies use this kind of language when trying to tell a customer that the offer will expire if the deal is not done by x date (a good sales practice). Well that may be the business objective, but courts look at this issue differently.

What courts often do (and this court actually did), is say that this language is a ‘condition precedent’ to the execution of the contract. What this means is that if the condition is not met, then there is no contact (even if both parties sign the contract after the 30 day period). This is where people get confused. They think that as the contract was signed by the parties, this means the 30 day language does not apply and is irrelevant. Well, as this court said, it that language does apply and therefore …

On May 9, 2014, the appellate court handed down its 69-page decision in the Oracle vs Google API copyright case. The court ruled in favor of Oracle, but did push down to the lower court some remaining issues (which I will not bore you with right now…even though it is super interesting to software attorneys). I know you don’t want to read all of the case, so as a software licensing attorney I thought I should share a few takeaways for software and SaaS based companies. So here goes.

 Thin Slicing.

One overall theme I clearly got from reading the case, is that courts do not think all software is equal or the same. Said another way, courts will look very closely at the actual code (how it was created, how it works, what functions it performs, etc) and the same for the alleged infringing code.  The courts are going to slice things very thin, and it’s hard to come up with many general rules, as it really does depend on the technical details. Translated into plain English, these cases are very fact specific and can become super expensive to litigate.

Functions (and Short Phrases) May be Copyrighted.

The court made it pretty clear that because something performs a function (or is a short phrase), it does not necessarily mean that it is uncopyrightable.  Also, even if an element is functional (like ‘File,’ ‘Print,’ ‘Quit’), the code that implements the function may be copyrightable as it will …