Should you offer mutual indemnification when selling a SaaS product?

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JASON LEMKIN

I have a pretty different view than the lawyers and many others.

Folks will push you to draw up lengthy contracts that say you assume none of the risks of the software you are selling.

If you have a big, strong brand and limited competition, and can afford to drag out contracting processes — yes, I guess do that.

But does this make any sense for a SaaS startup to do?

  • If your product infringes patents of others, who should be responsible — you or the customer? Whose job is it to even figure this out — you the vendor, or should the customer first have to do 100+ hours of legal diligence (as a huge price) to decide to buy your product?
  • And at a practical level, you the vendor are going to get sued by a patent troll or anyone else, no matter what the contract says. And your biggest customers will also be sued by those same patent trolls, no matter what the contract says.
  • I say, do what’s right and assume the risks you should assume.

This will also dramatically streamline the sales process.

Get your P.O. and customer contract down to one page or less, especially for more transactional deals. And assume almost all the risks. You’re the one providing the service, after all. And likely one that isn’t very expensive or worth the customer’s trouble to assume those risks.

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Published on December 26, 2017
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