Last updated on 01 July 2022 by Leah Hamilton (Qualified Solicitor. Writer at TermsFeed)
Digital products have a number of special characteristics that need to be taken into consideration when you're selling them to your customers.
A digital product - such as a song download or an app download - cannot be returned.
And many digital products (or digital apps) allow interaction between users and collect user information when the user engages with the product.
This is what a SaaS app does: it collects data from users, but it requires a subscription from its customers, unlike a digital product/app that generally don't require ongoing subscriptions.
As a result, the nature of selling digital products creates unique legal considerations that need to be covered by your legal agreements.
A Returns and Refunds Policy is important for any situation in which you are selling goods and services, regardless of whether or not they are digital. This kind of policy can affect your customer retention.
However, digital products can't usually be returned, as they are downloadable, licensed, or accessed on a subscription basis.
This means that the primary way for your customers to deal with any problems is to ask for a refund, or for them to cancel their subscription altogether.
In some cases, digital products can be repaired, such as by releasing a software patch to fix any bugs. These things all need to be covered in your refunds policy, as well as specifically noting that your digital products are not returnable.
Here's an example from the Return Policy of McGraw Hill Education in relation to some of their digital products:
You can see that McGraw-Hill Education explicitly state that digital products are not eligible for returns, but can be refunded or exchanged within 10 days.
When you consider the refund period for your digital products (e.g. 10 days), think about what the product is and how much time a customer might need to be able to assess the product and its compatibility, functionality, and quality.
For example, a product that has a full demo advertised on your website would have a shorter refund period (because the customer has already been able to see a full demo) than a product that is more complex and requires compatibility with other programs or products.
If you're giving customers refunds, you may want to budget for this in your financial accounts, as well as considering any chargeback fees you may be subject from your bank or payment processor.
Digital products such as mobile apps, downloads, interactive websites, and platforms, or SaaS apps all have unique privacy considerations by virtue of being downloaded from or connected to the internet.
Privacy is becoming increasingly important to users, as high-profile privacy breaches are being more commonly publicized by the media.
With a digital product that stores customer information, you need to inform your customer what information you collect about them, what you use it for, and whether you are sharing that information with any third parties.
This includes any cloud storage providers that you may be using, such as Amazon AWS.
Next, you should ensure you have covered how you will keep private information safe, as well as any specific security measures that apply to a digital product.
One example is SSL protection for any of your web addresses that your customers use, and limiting the amount of data you need from your customers. If you don't need the information for the functioning of your product, don't collect it.
Most privacy information around the world requires that you keep customer information safe and secure, so outlining the specific ways you do this is an important step towards meeting that requirement.
Your licensing terms should set out what the license grants access to, any costs, the length of the license, and any other license conditions your users must comply with.
DRM is when a digital product is physically secured by restricting its use outside the terms of the license. For example, you could limit the use of a digital product to a certain number of uses, within a defined time period, or to a specific type of device (e.g. iPhone only).
Here's an example of a DRM term from a digital product from the Terms and Conditions of LexisNexis Digital Library:
Due to the unique nature of digital products, these type of clauses are important to include in your legal agreements.
This article is not a substitute for professional legal advice. This article does not create an attorney-client relationship, nor is it a solicitation to offer legal advice.
01 July 2022