Does a SaaS needs to offer a license grant?

Question

I run a SaaS service (https://pdfshift.io) and I've recently received an email from a potential user that is worried about any IP infringement between them and their client when using our service.

This is their request:

We are concerned about infringement of intellectual property. If for example, a third-party approaches us and claims that our use of your proprietary API infringes that third-parties' rights, there is nothing in your Terms of Service that protects us. Typically, in Terms of Service for Saas products there is some form of license grant as well as reps and warranties by the Licensor. I'm not sure what to answer to that. From my reading (https://www.techcontracts.com/2018/06/01/dont-use-licenses-saas-contracts/), as a SaaS, I shouldn't provide a licence, but I'm not sure.

Here are my Terms of Service.

I must say that I'm a bit lost about what to say here. I saw that some recommends to not have license when being a service because they don't get a copy of the software (https://www.techcontracts.com/2018/06/01/dont-use-licenses-saas-contracts/), but I'm hoping you'll have more details about what to respond.

Thank you in advance.

Update: I've added this clauses to my terms:

Licensee Provisions Note: Licensee is PDFShift whereas, Licensor is the user using PDFShift.

— Licensor will defend, indemnify, and hold harmless licensee for third party intellectual property infringement.

— If Licensee’s continued use of the Software is restricted or prohibited as a result of any such infringement, Licensor shall, at Licensee’s option and at no charge to Licensee: i. secure for Licensee the right to continue using the Software ii. modify or replace the infringing components of the Software so that they are non-infringing iii. refund to Licensee all amounts paid by Licensee for the Software — Exclusions— Licensor will not be obligated to indemnify Licensee to the extent of the infringement claim based upon (i) use of the Software in breach of this Agreement (ii) any modification of the Software made by Licensee (other than at Licensor’s direction)

— Defense of Third-Party Suits— Licensee will notify Licensor of third party suits promptly. If licensee tenders claim to Licensor, Licensor will have right and obligation to defend such claim. Once Licensor assumes defense of a Claim, it will be conclusively presumed that Licensor is obligated to indemnify Licensee. No settlement of a Claim will be binding on Licensee without Licensee’s prior written consent.

Answer 1

First and foremost - ask your lawyer

I'm not looking at or commenting on your terms of service because that's legal advice and you need your lawyer to do that.

Intelectual property

Copyright can't be infringed by the user because, as you say, they make no copies. If you infringe someone's copyright, that's between you and them and cannot involve your users.

However, copyright is not the only form of IP.

It's possible to patent algorithms \with details varying by jurisdiction. If you illegally use a patented algorithm in your service then your users are illegally using a patented algorithm. From this perspective, the user's request is immediately reasonable.