20 Notice and Opportunity to Cure Unauthorized Use

Desired Outcome

If the publisher believes your Authorized Users are making unauthorized use, the issue then arises as to whether you are afforded an opportunity to cure (or attempt to cure) the alleged breach—and how the publisher should put you on notice of the alleged breach, and what happens if you fail to cure it. The “default” rules under contract law may imply an opportunity to cure in some cases, though you can avoid uncertainty about whether such a right exists by simply explicitly drafting a “Notice [of breach] and Opportunity to Cure” provision. Typically what you’ll ask for is an opportunity to cure the alleged breach within a specified time period like 30 days after the publisher notifies you or you otherwise learn of the breach. After that point, if you have not cured, the publisher can move forward with early termination.

“Cure” provisions may be construed strictly, so exercise diligence in drafting and negotiating. For example, if there is a “cure” provision that is more specific than what rights might exist otherwise under default contract rules, then the cure provision should control. And if that cure provision clearly says that the publisher retains discretion as to whether to allow a cure opportunity or instead simply elect for termination, then you have not adequately guaranteed yourself a chance to fix the alleged breach. ^[1]

What it means

If one party believes there has been a breach of the agreement, does the other party have a right to cure (or attempt to cure) the alleged breach? The “default” rules under contract law may imply an opportunity to cure in some cases, though you can avoid uncertainty about whether such a right exists by simply explicitly drafting a “Notice [of Breach] and Opportunity to Cure” provision.

The existence of a specific cure provision can override any default rights under contract law, so care is needed in drafting. Consider the case of Machine Project, Inc. v. Pan American World Airways, Inc., in which the following Notice & Cure provision was at issue^[2]:

4.B.ii…provides that in the event MPI does not meet the minimum performance requirement, defendant may provide the opportunity to cure or terminate the Agreement on 30–days’ notice

The court found that this provision gave the defendant discretion as to whether to allow an effort to cure or to simply terminate—meaning that MPI (the plaintiff) did not have an automatic right to cure, and the defendant asserting breach could instead have chosen to terminate early at its election.

Overall, though, few litigants come to court admitting a breach but arguing that they should have been given an opportunity to cure the breach. They more regularly come before the court defending themselves against allegations of the breach to begin with.^[3]

What happens once an effort at cure is made? Let’s say a publisher has licensed to you a data platform and alleges that your university has breached usage restrictions. Perhaps the publisher doesn’t want to continue maintaining the data platform, however, and thinks it is suddenly in luck when your university breaches usage restrictions. The publisher says, “A-ha! We get to discontinue service and maintenance of the platform!” If your university cures its alleged breach before the notice period expires, can the publisher stop performing? Generally speaking, no. Based on common law and the Restatement of Contracts (2d), if adequate cure has been made as to all materially adverse effects prior to the expiration of the cure grace period, the complaining party’s right to withhold its own performance is extinguished. ^[4]

Desired Language

From CDL Model License:

Notification and Cure of Unauthorized Use.  In the event the Licensee has notice of an unauthorized use of the Licensed Materials and cannot promptly remedy it, the Licensee shall promptly notify the Licensor. In the event the Licensor has notice of unauthorized use of the Licensed Materials, the Licensor will promptly notify Licensee.

In the case of unauthorized use which is causing serious and immediate material harm to the Licensor, Licensor may temporarily suspend such offending individual Authorized User’s access to the Licensed Materials (e.g. by blocking an individual user’s IP address), provided that Licensor immediately notifies the Licensee of any such suspension, including the reason for the block and any supporting details.  Such temporary suspensions will be of the shortest duration possible sufficient to terminate the alleged unauthorized activity and prevent its resumption.  Any unauthorized use that is considered a breach of obligations under this Agreement shall be subject to [EARLY TERMINATION SECTION], below, including the cure period.

Tips and tricks

Clarity on the triggering event

Try to avoid uncertainty regarding what events trigger the running of the period in which a cure can be made. Some good ways to do this are by:

• Requiring parties to give notice of breach according to the acceptable means of notification set forth elsewhere in the agreement. (This way, a publisher can’t suggest your cure opportunity expired if what they did was notify an employee who was not the proper contact specified in the agreement.)
• Being clear about what types of breaches, or breaches of which clauses, constitute a triggering event. (This way, if you want to avoid the agreement being terminated for an insignificant usage breach, you can clearly limit termination to only “material” events that you enumerate.)

Clarity on meaning of “cure”

How will you know if your efforts to cure the breach are contractually sufficient? What does it mean to “cure” a breach? In essence, curing is essentially replacement performance that serves as an adequate substitute. The model law known as Uniform Computer Information Transactions Act (UCITA) offers the following definition:

Cure requires the completion of acts that put the aggrieved party in essentially the position that would have ensued on conforming performance. Cure requires a party to perform the contract obligation and to compensate fully for loss. Monetary compensation may be required, but money is a cure only if provided in addition to full performance…. Cure does not occur merely because one party announces its intention to cure, even if that intention is held in good faith. Cure only occurs when or if the proposed compensatory and conforming actions are completed.

^[5].

But some breaches are hard if not impossible to cure. For instance if the agreement prohibits your scholars from training third-party generative AI with licensed content and they do it anyway and release that third-party generative AI tool to the world, in limited instances the licensed content may have been “memorized” by the tool. ^[6] Can the AI tool ever be sufficiently “scrubbed” of the licensed content? To avoid uncertainty, you may wish to specify which usage clauses are subject to the opportunity to cure and be specific about what constitutes an adequate cure.

Avoid unreasonably-short cure periods

This is less a legal issue and more one of practicality but: Some publishers (typically ones that don’t regularly deal with academic users) insist on really short cure periods that are virtually impossible to operate within. For instance, a publisher may assert the right to terminate if cure isn’t made within five days of notice having been provided. It may take five days at your university before the right person can even start taking action after receiving a notice. Going into the negotiation process, have a sense of what kind of cure period is actually doable for your institution and infrastructure.

Risk and importance

Failure to build in an opportunity to cure for unauthorized use is not necessarily fatal, because (as noted above) some agreements imply the right to cure. But it’s far better to be safe than sorry: If you don’t build in an opportunity to cure, you risk the publisher terminating the license early for, say, excessive downloads by an Authorized User, when you could easily have cured by simply contacting that individual user and limiting their access.