Software-as-a-service – Legal nature: Shifting the existing paradigm of copyright law

Today's business environment is no longer defined exclusively by bricks and mortar. Business models of software distribution are constantly evolving as new technologies develop. Traditional retail versions of software products are mostly replaced with digital distribution of copies of software products. However, these ways of software distribution are by no means exhaustive. Functionality of software is not necessarily tied with provision of the copy of the relevant program to the user. Instead he can receive access to it via the Internet without the need to install software onto his computer. This type of business model received the name “Software-as-a-Service” (SaaS) or, sometimes “Cloud Computing”. The legal nature of relations arising between the user and provider of distant access to such software is subject to considerable debate in Russia. The main problem is that at first glance it resembles the features of various types of contracts, recognized in the Civil Code of Russia, although not falling completely within any of them. At the same time the type of agreement chosen by the parties defines the legal framework, which governs relevant relations and relevant tax consequences. This article aims to analyze the nature of existing relations between the user and SaaS-provider and to define whether it can be characterized as a license, service, lease or some kind of sui generis contract. Based on the analysis the author comes to a conclusion that as delivery of copies of software becomes less and less relevant for the software industry, due to the new business models implemented by vendors, the rights to use the particular copy of software around which the traditional copyright regime has been built, become more and more superseded with the right to access such software. Thus traditional contractual models developed for IP distribution (license agreements, assignment agreements) and, more generally, the legal framework of existing copyright law that is centered on the core idea of the “use” of the copy, are no longer adequate regulators in the digital era where remote access to objects of copyright will soon start to dominate.