25 Quality Updates, Defects/Problems

Desired Result

The goal of these clauses is to ensure the licensor is held accountable for providing a reliable, up-to-date, and responsive service. This protects the licensee by setting clear expectations of service quality and establishing a standard against which any deviations or delinquencies can be both identified and measured.

Essentials of the Law

These licensor obligations have evolved in license agreements to address customer expectations and mitigate potential litigation risks. These terms define the core services provided in exchange for the license fee, making them integral to the agreement. Over time, they have influenced industry standards, particularly as content transitioned to electronic formats, by establishing benchmarks for quality and service. Unlike provisions influenced by external legal frameworks (e.g., copyright law), these terms focus on setting clear mutual obligations under contract law, ensuring both parties understand and agree on the services provided.

Desired Language

Example clauses:

“Quality of Service.  Licensor shall use reasonable efforts to ensure that the Licensor’s server or servers have sufficient capacity and rate of connectivity to provide the Licensee and its Authorized Users with a quality of service comparable to current standards in the on-line information provision industry in the Licensee’s locale. Licensor shall use reasonable efforts to provide continuous service seven (7) days a week with an average of 98% up-time per month. The 2% down-time includes periodic unavailability due to server maintenance; software installation or testing; loading or making available additional Licensed Materials as they become available; and unavailability because of service or equipment failure outside the control of Licensor (including problems with public or private telecommunications services, or Internet nodes or facilities). Licensor may schedule brief unavailability periods but will do so only where (1) it has given at least forty-eight (48) hour notice to Licensee, and (2) in ways and at times that minimize inconvenience to Licensee and its Authorized Users, regardless of when notice has been given.” (CDL Model License 2016)

“Updates. Licensor will provide regular system and project updates to Licensee as they become available.” (CDL Model License 2016)

“Problems with Licensed Materials. If the Licensed Materials fail to operate, display, load, or render in conformance with the terms of this Agreement, Licensee shall immediately notify Licensor, and Licensor shall promptly use best efforts to restore access to the Licensed Materials as soon as possible. In the event that the non-conformity materially affects the Licensee’s or Authorized Users’ use of the Licensed Materials, and Licensor fails to repair the nonconformity within five (5) business days, Licensor shall reimburse Licensee for such problems in an amount that is proportional to the total Fees owed by Licensee under this Agreement.” (CDL Model License 2016)

Tricks & Traps

The trick here is knowing the acceptable industry standard when reviewing a vendor stipulated percent down-time. Typically, one percent (1%) or two percent (2%) is considered acceptable, which translates to an up-time of ninety-nine percent (99%) or ninety-eight percent (98%), respectively. Therefore, references to ‘continuous service’ pertains to the up-time, while the unavailability of content is represented by the down-time. Depending on the proposed license, be prepared to find either or both terms. For example, a licensor might state that its content or service will be “available 99% of the time every calendar month.”

It is unrealistic to assume the licensor will provide perfect service or be held to the highest standard. Service quality percentages close to perfection are challenging even for the most conscientious licensors, so it is practical to anticipate occasional service interruptions. If the contract specifies measurable service levels, such as a guaranteed percentage of uptime (e.g., 99%), failure to meet that threshold (e.g., 95%) constitutes a breach. In contrast, if the contract includes less precise language, such as adhering to “reasonable” or “industry-standard” service levels, then the standard of care concept becomes relevant.

The term “reasonable efforts” may be more appropriate where compliance cannot be quantified, such as restoring access after unforeseen issues, rather than in measurable commitments like uptime percentages. This distinction highlights the importance of clearly defining obligations to ensure both parties understand the scope of the licensor’s duties and the criteria for evaluating compliance, particularly in the context of a legal dispute.

Importance & Risk

The importance of these terms lies in clearly defining the licensor’s obligations to ensure both operational effectiveness and efficiency. By adhering to industry standards, these terms promote consistency, reliability, and accountability, reducing the risk of misunderstandings or service failures. Establishing mutual agreement on performance benchmarks minimizes the likelihood of disputes and ensures measurable expectations are in place.

From a risk perspective, clearly articulated terms provide legal protection by setting enforceable standards and recourse mechanisms in cases of non-compliance. This clarity mitigates risks related to service quality, operational disruptions, and ambiguity in responsibilities, ensuring both parties are protected and aligned in their expectations.